Nevada
|
27-2767540
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
|
|
|
Page
|
PART I.
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
PART II.
|
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
PART III.
|
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
PART IV.
|
|
|
|
|
|
Item 15.
|
||
|
|
|
SIGNATURES
|
||
EXHIBIT INDEX
|
•
|
Surpassed $1 billion in lifetime global revenue generated from our gaming headset business.
|
•
|
Completely transitioned portfolio to new-generation headsets with eight Xbox One and six PlayStation®4 compatible headsets available at retail.
|
•
|
Introduced the first true multiplatform headset that works with PlayStation®4, Xbox One, PC, Mac and mobile/tablet devices.
|
•
|
ability to create a beam of sound and place it where it is intended
|
•
|
ability to deliver a beam of sound over longer distances
|
•
|
ability to penetrate other competing ambient sounds to more effectively communicate
|
•
|
ability to directly deliver left and right audio channels to each ear from across the room
|
•
|
products for individuals with hearing loss that enable better sound clarity without a body-worn device
|
•
|
products that create dedicated sound zones for use in retail and commercial environments
|
•
|
products that enable headphone-like surround sound without requiring 5 or 7 separate speakers
|
•
|
Console Headset Market Share Growth.
We have largely completed the transition of our headset portfolio from old generation to new generation with innovative console gaming headsets in every category. We believe that our brand's image among consumers is a competitive advantage and that our success is attributable to our emphasis on delivering the most innovative and advanced headsets.
|
•
|
continuing to deliver innovative, high quality console gaming headsets that incorporate advanced audio and wireless technology;
|
•
|
growing our gaming headset business in all areas including personal computer headsets;
|
•
|
maintaining our strategic relationships that provide our brand a larger presence with consumers and create opportunities for retailers to carry our products;
|
•
|
continuing to improve our cost position through increased global sourcing and expanded points of distribution.
|
•
|
HyperSound Healthcare Business Growth.
We have built the infrastructure to commercialize the HyperSound Clear 500P product for the hearing healthcare audio business, including channel relationships that give us access to 5,600+ prospective hearing health offices and retail locations in the United States. Our goal is to grow a substantial customer base, including internationally, through key channel partners and continued product development.
|
•
|
Accelerate International Expansion.
We have a strong gaming headset market position in North America, United Kingdom, Germany and Australia, and believe there are additional long-term growth opportunities in Latin America and Asia. In particular in China, where in connection with increased console sales following the Chinese government lifting its ban on video game consoles, we intend to begin our sales efforts of our officially-licensed Xbox One headsets under a Chinese language version of the Turtle Beach brand and logo, phonetically pronounced “Huan Jing” (translates as “Fantasy Space.”)
|
•
|
Expand Our Product Lines.
We intend to increase our sales by continuing to develop internally, or through potential acquisitions, products that we offer to our customers. We are investing the resources necessary to maintain and expand our technical capability to manufacture multiple product lines that incorporate the latest technologies.
|
|
|
December 31,
|
||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net Revenues
|
|
(in thousands)
|
||||||||||
Headset
|
|
$
|
161,835
|
|
|
$
|
185,469
|
|
|
$
|
178,470
|
|
HyperSound
(1)
|
|
912
|
|
|
707
|
|
|
—
|
|
|||
Total
|
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|||||||||
|
(in thousands)
|
|
|||||||||||||||
North America
|
$
|
117,526
|
|
72.2
|
%
|
|
$
|
123,908
|
|
66.6
|
%
|
|
$
|
123,224
|
|
69.0
|
%
|
United Kingdom
|
20,881
|
|
12.8
|
%
|
|
29,425
|
|
15.8
|
%
|
|
26,439
|
|
14.8
|
%
|
|||
Europe
|
17,329
|
|
10.6
|
%
|
|
24,082
|
|
12.9
|
%
|
|
18,565
|
|
10.4
|
%
|
|||
Other
|
7,011
|
|
4.4
|
%
|
|
8,761
|
|
4.7
|
%
|
|
10,242
|
|
5.8
|
%
|
|||
Total revenues
|
$
|
162,747
|
|
|
|
|
$
|
186,176
|
|
|
|
$
|
178,470
|
|
|
•
|
our ability to rapidly scale the number of offices that can productively sell the product;
|
•
|
our ability to generate additional new sales channels in the United States and Europe
|
•
|
our ability to maintain relationships with new customers that drive sales of our HyperSound products;
|
•
|
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 may lead to missed opportunities to increase our base of gamers, damage our relationships with retailers or harm our business.
|
•
|
The on-going console transition increases the likelihood that we could fail to accurately forecast demand for our new 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;
|
•
|
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;
|
•
|
difficulties encountered by our international distributors or us in staffing and managing foreign operations or international sales, including higher labor costs;
|
•
|
transportation delays and difficulties of managing international distribution channels;
|
•
|
longer payment cycles for, and greater difficulty collecting, accounts receivable,;
|
•
|
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.
|
•
|
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/or
|
•
|
redesign products or services that incorporate the disputed technology.
|
Location
|
State or Country
|
Principal Business Activity
|
Approx. Square Feet
|
Owned or Expiration Date of Lease
|
|
San Diego
|
CA
|
Corporate Headquarters
|
30,000
|
|
2020
|
Valhalla
|
NY
|
Administration
|
21,000
|
|
2019
|
Basingstoke
|
U.K.
|
Administration
|
6,850
|
|
2021
|
Poway
|
CA
|
Administration
|
2,830
|
|
2016
|
San Jose
|
CA
|
Research & Development
|
3,500
|
|
2018
|
Darlington
|
U.K.
|
Warehouse
|
120,000
|
|
2018
|
|
High
|
|
Low
|
||||
Fiscal Year 2015
|
|
|
|
||||
First Quarter
|
$
|
3.27
|
|
|
$
|
1.85
|
|
Second Quarter
|
3.29
|
|
|
1.75
|
|
||
Third Quarter
|
3.19
|
|
|
1.91
|
|
||
Fourth Quarter
|
3.72
|
|
|
1.86
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2015
(2)
|
|
2014
(1)
|
|
2013
|
|
2012
|
|
2011
|
||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||
Net Revenue
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
|
$
|
207,136
|
|
|
$
|
166,121
|
|
Cost of Revenue
|
122,056
|
|
|
135,509
|
|
|
128,141
|
|
|
132,795
|
|
|
96,536
|
|
|||||
Gross Profit
|
40,691
|
|
|
50,667
|
|
|
50,329
|
|
|
74,341
|
|
|
69,585
|
|
|||||
Gross Margin
|
25.0
|
%
|
|
27.2
|
%
|
|
28.2
|
%
|
|
35.9
|
%
|
|
41.9
|
%
|
|||||
Operating income (loss)
|
(74,399
|
)
|
|
(13,825
|
)
|
|
1,598
|
|
|
42,910
|
|
|
38,268
|
|
|||||
Operating Margin
|
(45.7
|
)%
|
|
(7.4
|
)%
|
|
0.9
|
%
|
|
20.7
|
%
|
|
23.0
|
%
|
|||||
Net income (loss)
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
|
$
|
26,460
|
|
|
$
|
21,554
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
0.13
|
|
|
$
|
1.70
|
|
Diluted
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
0.13
|
|
|
$
|
1.70
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|
12,700
|
|
|
12,700
|
|
|||||
Diluted
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|
12,700
|
|
|
12,700
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
7,114
|
|
|
7,908
|
|
|
6,509
|
|
|
5,219
|
|
|
15,942
|
|
|||||
Total Assets
|
173,851
|
|
|
246,968
|
|
|
127,307
|
|
|
134,195
|
|
|
105,165
|
|
|||||
Total Debt
|
66,197
|
|
|
44,555
|
|
|
64,578
|
|
|
74,250
|
|
|
37,200
|
|
|||||
Series B Redeemable Preferred Stock
|
16,145
|
|
|
14,916
|
|
|
13,713
|
|
|
12,703
|
|
|
13,648
|
|
|||||
Series A Convertible Preferred Stock
|
—
|
|
|
—
|
|
|
24,345
|
|
|
24,345
|
|
|
24,345
|
|
•
|
Turtle Beach is a worldwide leading provider of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers, tablets and mobile devices.
|
•
|
HyperSound technology is an innovative patent-protected sound technology that delivers immersive, directional audio offering unique potential benefits in a variety of commercial settings and consumer devices. The recent launch of the HyperSound Clear™ 500P product has transitioned the business to the hearing healthcare market, where we believe a large percentage of people with hearing loss could use the product to improve their listening experiences from sources such as TV, CD/DVD players and stereo systems.
|
•
|
Adjusted EBITDA
is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation (non-cash) and, certain special items that we believe are not representative of core operations.
|
•
|
Cash Margins
is defined as gross margin excluding depreciation and amortization, and stock-based compensation.
|
|
|
Year Ended
|
||||||||||
|
|
December 31,
|
||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||
|
|
(in thousands)
|
||||||||||
Net loss
|
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
Interest expense
|
|
5,099
|
|
|
7,209
|
|
|
6,626
|
|
|||
Depreciation and amortization
|
|
7,916
|
|
|
6,866
|
|
|
5,345
|
|
|||
Stock-based compensation
|
|
5,897
|
|
|
5,194
|
|
|
2,563
|
|
|||
Income tax expense (benefit)
|
|
2,393
|
|
|
(6,272
|
)
|
|
1,090
|
|
|||
Impairment charge
|
|
49,822
|
|
|
—
|
|
|
—
|
|
|||
Business transaction costs
|
|
—
|
|
|
3,744
|
|
|
3,864
|
|
|||
Restructuring charges
|
|
399
|
|
|
747
|
|
|
—
|
|
|||
Payments to founders
|
|
—
|
|
|
—
|
|
|
527
|
|
|||
Adjusted EBITDA
|
|
$
|
(11,381
|
)
|
|
$
|
2,002
|
|
|
$
|
13,852
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Net Revenue
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
Cost of Revenue
|
122,056
|
|
|
135,509
|
|
|
128,141
|
|
|||
Gross Profit
|
40,691
|
|
|
50,667
|
|
|
50,329
|
|
|||
Gross Margin
|
25.0
|
%
|
|
27.2
|
%
|
|
28.2
|
%
|
|||
|
|
|
|
|
|
||||||
Operating expenses
|
115,090
|
|
|
64,492
|
|
|
48,731
|
|
|||
Operating income (loss)
|
(74,399
|
)
|
|
(13,825
|
)
|
|
1,598
|
|
|||
Interest expense
|
5,099
|
|
|
7,209
|
|
|
6,626
|
|
|||
Other non-operating expense, net
|
1,016
|
|
|
724
|
|
|
45
|
|
|||
Gain on bargain purchase from acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|||
Loss before income tax expense (benefit)
|
(80,514
|
)
|
|
(21,758
|
)
|
|
(5,073
|
)
|
|||
Income tax expense (benefit)
|
2,393
|
|
|
(6,272
|
)
|
|
1,090
|
|
|||
Net loss
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Net Revenue
|
$
|
161,835
|
|
|
$
|
185,469
|
|
|
$
|
178,470
|
|
Gross Profit
|
42,832
|
|
|
50,550
|
|
|
50,329
|
|
|||
Gross Margin
|
26.5
|
%
|
|
27.3
|
%
|
|
28.2
|
%
|
|||
Cash Margin
(1)
|
27.5
|
%
|
|
27.5
|
%
|
|
28.3
|
%
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Selling and marketing
|
$
|
31,829
|
|
|
$
|
33,442
|
|
|
$
|
31,645
|
|
Research and development
|
11,556
|
|
|
9,400
|
|
|
4,873
|
|
|||
General and administrative
|
21,484
|
|
|
17,159
|
|
|
8,349
|
|
|||
Business transaction costs
|
—
|
|
|
3,744
|
|
|
3,864
|
|
|||
Goodwill impairment
|
49,822
|
|
|
—
|
|
|
—
|
|
|||
Restructuring charges
|
399
|
|
|
747
|
|
|
—
|
|
|||
Total operating expenses
|
$
|
115,090
|
|
|
$
|
64,492
|
|
|
$
|
48,731
|
|
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Cash and cash equivalents at beginning of period
|
$
|
7,908
|
|
|
$
|
6,509
|
|
|
$
|
5,219
|
|
Net cash provided by (used for) operating activities
|
(15,133
|
)
|
|
(14,834
|
)
|
|
18,290
|
|
|||
Net cash provided by (used for) investing activities
|
(6,693
|
)
|
|
557
|
|
|
(6,167
|
)
|
|||
Net cash provided by (used for) financing activities
|
21,134
|
|
|
15,969
|
|
|
(11,017
|
)
|
|||
Effect of foreign exchange on cash
|
(102
|
)
|
|
(293
|
)
|
|
184
|
|
|||
Cash and cash equivalents at end of period
|
$
|
7,114
|
|
|
$
|
7,908
|
|
|
$
|
6,509
|
|
|
|
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)
|
|
$
|
8,750
|
|
|
$
|
1,608
|
|
|
$
|
3,369
|
|
|
$
|
2,360
|
|
|
1,413
|
|
|
Series B Redeemable Preferred Stock (3)
|
|
51,928
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51,928
|
|
|||||
Long term debt (4)
|
|
68,079
|
|
|
37,267
|
|
|
7,705
|
|
|
23,107
|
|
|
—
|
|
|||||
Interest payments on long-term debt (5)
|
|
13,386
|
|
|
1,449
|
|
|
1,810
|
|
|
10,127
|
|
|
—
|
|
|||||
Total
|
|
$
|
142,143
|
|
|
$
|
40,324
|
|
|
$
|
12,884
|
|
|
$
|
35,594
|
|
|
$
|
53,341
|
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Page
|
|
|
Consolidated Financial Statements:
|
|
/s/ BDO USA, LLP
|
Stamford, Connecticut
|
March 30, 2016
|
/s/ FREED MAXICK CPAs, P.C.
|
Buffalo, New York
|
March 28, 2014, except for Note 10 and
|
Supplemental Schedule as to which the date is March 30, 2015
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
ASSETS
|
(in thousands, except par value and share amounts)
|
||||||
Current Assets:
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
7,114
|
|
|
$
|
7,908
|
|
Accounts receivable, less allowances for $13,829 and $9,806 in 2015 and 2014, respectively
|
57,192
|
|
|
61,059
|
|
||
Inventories
|
26,146
|
|
|
38,400
|
|
||
Deferred income taxes
|
—
|
|
|
4,930
|
|
||
Prepaid income taxes
|
260
|
|
|
1,482
|
|
||
Prepaid expenses and other current assets
|
4,191
|
|
|
3,818
|
|
||
Total Current Assets
|
94,903
|
|
|
117,597
|
|
||
Property and equipment, net
|
6,859
|
|
|
6,722
|
|
||
Goodwill
|
31,152
|
|
|
80,974
|
|
||
Intangible assets, net
|
37,956
|
|
|
39,726
|
|
||
Deferred income taxes
|
—
|
|
|
1,128
|
|
||
Other assets
|
2,981
|
|
|
821
|
|
||
Total Assets
|
$
|
173,851
|
|
|
$
|
246,968
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|||
Current Liabilities:
|
|
|
|
|
|||
Revolving credit facilities
|
$
|
32,453
|
|
|
$
|
36,863
|
|
Term loans
|
4,814
|
|
|
1,923
|
|
||
Accounts payable
|
17,680
|
|
|
35,546
|
|
||
Other current liabilities
|
14,236
|
|
|
14,525
|
|
||
Total Current Liabilities
|
69,183
|
|
|
88,857
|
|
||
Term loans, long-term portion
|
13,565
|
|
|
5,769
|
|
||
Series B redeemable preferred stock
|
16,145
|
|
|
14,916
|
|
||
Deferred income taxes
|
4
|
|
|
648
|
|
||
Subordinated notes - related party
|
15,365
|
|
|
—
|
|
||
Other liabilities
|
2,937
|
|
|
5,592
|
|
||
Total Liabilities
|
117,199
|
|
|
115,782
|
|
||
Commitments and Contingencies
|
|
|
|
|
|
||
Stockholders' Equity
|
|
|
|
|
|
||
Common stock, $0.001 par value - 100,000,000 and 50,000,000 shares authorized; 42,529,502 and 42,027,991 shares issued and outstanding as of December 31, 2015 and 2014, respectively
|
43
|
|
|
42
|
|
||
Additional paid-in capital
|
136,693
|
|
|
128,084
|
|
||
Retained earnings (accumulated deficit)
|
(79,618
|
)
|
|
3,289
|
|
||
Accumulated other comprehensive loss
|
(466
|
)
|
|
(229
|
)
|
||
Total Stockholders' Equity
|
56,652
|
|
|
131,186
|
|
||
Total Liabilities and Stockholders' Equity
|
$
|
173,851
|
|
|
$
|
246,968
|
|
|
Year Ended
|
||||||||||
|
December 31, 2015
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||
|
(in thousands, except share and per share data)
|
||||||||||
Net Revenue
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
Cost of Revenue
|
122,056
|
|
|
135,509
|
|
|
128,141
|
|
|||
Gross Profit
|
40,691
|
|
|
50,667
|
|
|
50,329
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Selling and marketing
|
31,829
|
|
|
33,442
|
|
|
31,645
|
|
|||
Research and development
|
11,556
|
|
|
9,400
|
|
|
4,873
|
|
|||
General and administrative
|
21,484
|
|
|
17,159
|
|
|
8,349
|
|
|||
Goodwill impairment
|
49,822
|
|
|
—
|
|
|
—
|
|
|||
Restructuring charges
|
399
|
|
|
747
|
|
|
—
|
|
|||
Business transaction costs
|
—
|
|
|
3,744
|
|
|
3,864
|
|
|||
Total operating expenses
|
115,090
|
|
|
64,492
|
|
|
48,731
|
|
|||
Operating income (loss)
|
(74,399
|
)
|
|
(13,825
|
)
|
|
1,598
|
|
|||
Interest expense
|
5,099
|
|
|
7,209
|
|
|
6,626
|
|
|||
Other non-operating expense, net
|
1,016
|
|
|
724
|
|
|
45
|
|
|||
Loss before income tax expense (benefit)
|
(80,514
|
)
|
|
(21,758
|
)
|
|
(5,073
|
)
|
|||
Income tax expense (benefit)
|
2,393
|
|
|
(6,272
|
)
|
|
1,090
|
|
|||
Net loss
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
|
|
|
|
|
|
||||||
Net loss per share :
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
Diluted
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
Weighted average number of shares:
|
|
|
|
|
|
||||||
Basic
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|||
Diluted
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|
Year Ended
|
||||||||||
|
December 31, 2015
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||
|
(in thousands)
|
||||||||||
Net loss
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss):
|
|
|
|
|
|
||||||
Foreign currency translation adjustment
|
(237
|
)
|
|
(334
|
)
|
|
184
|
|
|||
Other comprehensive income (loss)
|
(237
|
)
|
|
(334
|
)
|
|
184
|
|
|||
Comprehensive loss
|
$
|
(83,144
|
)
|
|
$
|
(15,820
|
)
|
|
$
|
(5,979
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
(in thousands)
|
||||||||||
Net loss
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
5,901
|
|
|
5,800
|
|
|
4,422
|
|
|||
Amortization of intangible assets
|
2,015
|
|
|
1,066
|
|
|
923
|
|
|||
Amortization of deferred financing costs
|
360
|
|
|
2,621
|
|
|
1,556
|
|
|||
Stock-based compensation
|
5,897
|
|
|
5,194
|
|
|
2,563
|
|
|||
Accrued interest on Series B redeemable preferred stock
|
1,230
|
|
|
1,203
|
|
|
1,010
|
|
|||
Paid in kind interest
|
947
|
|
|
1,138
|
|
|
342
|
|
|||
Deferred income taxes
|
5,414
|
|
|
(9,998
|
)
|
|
3,353
|
|
|||
Provision for (Reversal of) sales returns reserve
|
2,113
|
|
|
(2,111
|
)
|
|
(1,482
|
)
|
|||
Provision for (Reversal of) doubtful accounts
|
2
|
|
|
37
|
|
|
(235
|
)
|
|||
Provision for obsolete inventory
|
1,107
|
|
|
532
|
|
|
93
|
|
|||
Loss on disposal of property and equipment
|
76
|
|
|
9
|
|
|
108
|
|
|||
Loss on impairment of assets
|
49,822
|
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
1,752
|
|
|
(10,396
|
)
|
|
18,761
|
|
|||
Inventories
|
11,147
|
|
|
11,363
|
|
|
(9,030
|
)
|
|||
Accounts payable
|
(17,287
|
)
|
|
(10,552
|
)
|
|
19,946
|
|
|||
Due to shareholders
|
—
|
|
|
(3,125
|
)
|
|
(3,125
|
)
|
|||
Prepaid expenses and other assets
|
(712
|
)
|
|
(212
|
)
|
|
(1,778
|
)
|
|||
Income taxes payable
|
(1,700
|
)
|
|
4,704
|
|
|
(9,780
|
)
|
|||
Other liabilities
|
(310
|
)
|
|
3,379
|
|
|
(3,194
|
)
|
|||
Net cash provided by (used for) operating activities
|
(15,133
|
)
|
|
(14,834
|
)
|
|
18,290
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
||||||
Purchase of property and equipment
|
(6,693
|
)
|
|
(3,536
|
)
|
|
(6,167
|
)
|
|||
Cash acquired in business combinations
|
—
|
|
|
4,093
|
|
|
—
|
|
|||
Net cash provided by (used for) investing activities
|
(6,693
|
)
|
|
557
|
|
|
(6,167
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
||||||
Borrowings on revolving credit facilities
|
217,644
|
|
|
157,982
|
|
|
51,250
|
|
|||
Repayment of revolving credit facilities
|
(222,054
|
)
|
|
(160,855
|
)
|
|
(44,514
|
)
|
|||
Repayment of capital leases
|
(40
|
)
|
|
(34
|
)
|
|
—
|
|
|||
Borrowings on term loan
|
15,110
|
|
|
7,692
|
|
|
—
|
|
|||
Repayment of term loan
|
(4,423
|
)
|
|
(14,500
|
)
|
|
(26,750
|
)
|
|||
Repayment of subordinated notes
|
—
|
|
|
(18,481
|
)
|
|
—
|
|
|||
Proceeds from sale of common stock, net of issuance costs
|
—
|
|
|
37,230
|
|
|
—
|
|
|||
Proceeds from exercise of stock options
|
731
|
|
|
1,618
|
|
|
—
|
|
|||
Debt financing costs
|
(2,134
|
)
|
|
(1,683
|
)
|
|
(1,003
|
)
|
|||
Proceeds from issuance of subordinated notes
|
16,300
|
|
|
7,000
|
|
|
10,000
|
|
|||
Net cash provided by (used for) financing activities
|
21,134
|
|
|
15,969
|
|
|
(11,017
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(102
|
)
|
|
(293
|
)
|
|
184
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
(794
|
)
|
|
1,399
|
|
|
1,290
|
|
|||
Cash and cash equivalents - beginning of period
|
7,908
|
|
|
6,509
|
|
|
5,219
|
|
|||
Cash and cash equivalents - end of period
|
$
|
7,114
|
|
|
$
|
7,908
|
|
|
$
|
6,509
|
|
|
|
|
|
|
|
||||||
SUPPLEMENTAL DISCLOSURE OF INFORMATION
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
1,731
|
|
|
$
|
3,209
|
|
|
$
|
3,694
|
|
Cash paid for income taxes
|
$
|
16
|
|
|
$
|
554
|
|
|
$
|
8,224
|
|
Accrual for purchases of property and equipment
|
$
|
841
|
|
|
$
|
1,420
|
|
|
$
|
1,104
|
|
Value of shares issued to acquire HyperSound business
|
$
|
—
|
|
|
$
|
113,782
|
|
|
$
|
—
|
|
Conversion of Series A Preferred Stock
|
$
|
—
|
|
|
$
|
24,345
|
|
|
$
|
—
|
|
Issuance of warrants
|
$
|
1,983
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Series A Convertible Preferred Stock
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total
|
||||||||||||||||
|
Shares
|
Amount
|
|
Shares
|
Amount
|
|
|
|
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||||||
Balance at December 31, 2012
|
48,690
|
|
$
|
24,345
|
|
|
12,700
|
|
$
|
13
|
|
|
$
|
(56,594
|
)
|
|
$
|
24,938
|
|
|
$
|
(79
|
)
|
|
$
|
(31,722
|
)
|
Net loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(6,163
|
)
|
|
—
|
|
|
(6,163
|
)
|
||||||
Other comprehensive loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
184
|
|
||||||
Stock-based compensation
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2,563
|
|
|
—
|
|
|
—
|
|
|
2,563
|
|
||||||
Balance at December 31, 2013
|
48,690
|
|
24,345
|
|
|
12,700
|
|
13
|
|
|
(54,031
|
)
|
|
18,775
|
|
|
$
|
105
|
|
|
(35,138
|
)
|
|||||
Net loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(15,486
|
)
|
|
—
|
|
|
(15,486
|
)
|
||||||
Other comprehensive income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(334
|
)
|
|
(334
|
)
|
||||||
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
|
|
|
37,226
|
|
|
—
|
|
|
—
|
|
|
37,230
|
|
||||||
Stock options exercised
|
—
|
|
—
|
|
|
502
|
|
—
|
|
|
1,593
|
|
|
—
|
|
|
—
|
|
|
1,593
|
|
||||||
Stock-based compensation
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
5,194
|
|
|
—
|
|
|
—
|
|
|
5,194
|
|
||||||
Balance at December 31, 2014
|
—
|
|
—
|
|
|
42,028
|
|
42
|
|
|
128,084
|
|
|
3,289
|
|
|
$
|
(229
|
)
|
|
131,186
|
|
|||||
Net loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
(82,907
|
)
|
|
—
|
|
|
(82,907
|
)
|
||||||
Other comprehensive loss
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(237
|
)
|
|
(237
|
)
|
||||||
Stock options exercised
|
—
|
|
—
|
|
|
502
|
|
1
|
|
|
729
|
|
|
—
|
|
|
—
|
|
|
730
|
|
||||||
Issuance of warrants
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1,983
|
|
|
—
|
|
|
—
|
|
|
1,983
|
|
||||||
Stock-based compensation
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
5,897
|
|
|
|
|
—
|
|
|
5,897
|
|
|||||||
Balance at December 31, 2015
|
—
|
|
$
|
—
|
|
|
42,530
|
|
$
|
43
|
|
|
$
|
136,693
|
|
|
$
|
(79,618
|
)
|
|
$
|
(466
|
)
|
|
$
|
56,652
|
|
Cost of Revenue
|
|
Operating Expenses
|
Cost to manufacture products;
|
|
Payroll, bonus and benefit costs;
|
Freight costs associated with moving product from suppliers to distribution center and to customers;
|
|
Costs incurred in the research and development of new products and enhancements to existing products;
|
Costs associated with the movement of merchandise through customs;
|
|
Depreciation related to demonstration units;
|
Costs associated with material handling and warehousing;
|
|
Legal, finance, information systems and other corporate overhead costs;
|
Product royalty costs.
|
|
Sales commissions, advertising and marketing costs.
|
|
|
Estimated Life
|
Machinery and equipment
|
|
3 years
|
Software and software development
|
|
2-3 years
|
Furniture and fixtures
|
|
5 years
|
Tooling
|
|
2 years
|
Leasehold improvements
|
|
Term of lease or economic life of asset, if shorter
|
Demonstration units and convention booths
|
|
2 years
|
|
Year Ended
|
||||||
|
December 31,
|
||||||
|
2014
|
|
2013
|
||||
|
(in thousands)
|
||||||
Legal fees
|
$
|
786
|
|
|
$
|
1,452
|
|
Accounting fees
|
84
|
|
|
2,254
|
|
||
Advisory fees
|
2,219
|
|
|
—
|
|
||
Termination and severance
|
450
|
|
|
—
|
|
||
Other
|
205
|
|
|
158
|
|
||
Total Transaction Costs
|
$
|
3,744
|
|
|
$
|
3,864
|
|
|
(in thousands)
|
||
Cash and cash equivalents
|
$
|
4,093
|
|
Accounts receivable
|
47
|
|
|
Deferred tax asset
|
6,696
|
|
|
Other current assets
|
710
|
|
|
Property and equipment
|
206
|
|
|
Intangible assets:
|
|
||
In-process research and development (IPR&D)
|
27,100
|
|
|
Developed technology
|
8,880
|
|
|
Customer relationships
|
270
|
|
|
Trade name
|
170
|
|
|
Goodwill
|
80,974
|
|
|
Accounts payable and accrued liabilities
|
(1,769
|
)
|
|
Capital lease obligation
|
(120
|
)
|
|
Deferred tax liabilities
|
(13,475
|
)
|
|
Total Net Assets Acquired
|
$
|
113,782
|
|
•
|
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, 2015
|
|
December 31, 2014
|
||||||||||||
|
Reported
|
|
Fair Value
|
|
Reported
|
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Financial Assets and Liabilities:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
7,114
|
|
|
$
|
7,114
|
|
|
$
|
7,908
|
|
|
$
|
7,908
|
|
Credit Facility
|
32,453
|
|
|
32,453
|
|
|
36,863
|
|
|
36,863
|
|
||||
Term Loans
|
18,379
|
|
|
18,179
|
|
|
7,692
|
|
|
7,692
|
|
||||
Subordinated Debt
|
17,247
|
|
|
15,892
|
|
|
—
|
|
|
—
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Balance, beginning of period
|
$
|
4,155
|
|
|
$
|
6,266
|
|
|
$
|
7,748
|
|
Reserve accrual
|
17,108
|
|
|
13,042
|
|
|
20,146
|
|
|||
Recoveries and deductions, net
|
(14,995
|
)
|
|
(15,153
|
)
|
|
(21,628
|
)
|
|||
Balance, end of period
|
$
|
6,268
|
|
|
$
|
4,155
|
|
|
$
|
6,266
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(in thousands)
|
||||||
Raw materials
|
$
|
1,481
|
|
|
$
|
2,065
|
|
Finished goods
|
24,665
|
|
|
36,335
|
|
||
Total inventories
|
$
|
26,146
|
|
|
$
|
38,400
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(in thousands)
|
||||||
Machinery and equipment
|
$
|
1,238
|
|
|
$
|
599
|
|
Software and software development
|
1,022
|
|
|
847
|
|
||
Furniture and fixtures
|
284
|
|
|
226
|
|
||
Tooling
|
3,395
|
|
|
2,417
|
|
||
Leasehold improvements
|
1,255
|
|
|
104
|
|
||
Demonstration units and convention booths
|
16,531
|
|
|
13,702
|
|
||
Total property and equipment, gross
|
23,725
|
|
|
17,895
|
|
||
Less: accumulated depreciation and amortization
|
(16,866
|
)
|
|
(11,173
|
)
|
||
Total property and equipment, net
|
$
|
6,859
|
|
|
$
|
6,722
|
|
|
December 31, 2015
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
3,213
|
|
|
2,583
|
|
|
Non-compete agreements
|
177
|
|
|
177
|
|
|
—
|
|
|||
In-process Research and Development
|
27,100
|
|
|
1,018
|
|
|
26,082
|
|
|||
Developed technology
|
8,880
|
|
|
225
|
|
|
8,655
|
|
|||
Trade names
|
170
|
|
|
67
|
|
|
103
|
|
|||
Patent and trademarks
|
730
|
|
|
37
|
|
|
693
|
|
|||
Foreign Currency
|
(463
|
)
|
|
(303
|
)
|
|
(160
|
)
|
|||
Total Intangible Assets
|
$
|
42,390
|
|
|
$
|
4,434
|
|
|
$
|
37,956
|
|
|
December 31, 2014
|
||||||||||
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
|
(in thousands)
|
||||||||||
Customer relationships
|
$
|
5,796
|
|
|
$
|
2,458
|
|
|
3,338
|
|
|
Non-compete agreements
|
177
|
|
|
177
|
|
|
—
|
|
|||
In-process Research and Development
|
27,100
|
|
|
—
|
|
|
27,100
|
|
|||
Developed technology
|
8,880
|
|
|
104
|
|
|
8,776
|
|
|||
Trade names
|
170
|
|
|
33
|
|
|
137
|
|
|||
Patent and trademarks
|
439
|
|
|
—
|
|
|
439
|
|
|||
Foreign Currency
|
$
|
(205
|
)
|
|
$
|
(141
|
)
|
|
$
|
(64
|
)
|
Total Intangible Assets
|
$
|
42,357
|
|
|
$
|
2,631
|
|
|
$
|
39,726
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(in thousands)
|
||||||
Revolving credit facility, maturing March 2019
|
$
|
32,453
|
|
|
$
|
36,863
|
|
Term loans
|
18,379
|
|
|
7,692
|
|
||
Subordinated notes
|
15,365
|
|
|
—
|
|
||
Total outstanding debt
|
66,197
|
|
|
44,555
|
|
||
Less: current portion of revolving line of credit
|
(32,453
|
)
|
|
(36,863
|
)
|
||
Less: current portion of term loan
|
(4,814
|
)
|
|
(1,923
|
)
|
||
Total noncurrent portion of long-term debt
|
$
|
28,930
|
|
|
$
|
5,769
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Federal:
|
|
|
|
|
|
||||||
Current
|
$
|
(3,218
|
)
|
|
$
|
3,271
|
|
|
$
|
(2,456
|
)
|
Deferred
|
5,153
|
|
|
(9,424
|
)
|
|
3,574
|
|
|||
Total Federal
|
1,935
|
|
|
(6,153
|
)
|
|
1,118
|
|
|||
State and Local:
|
|
|
|
|
|
||||||
Current
|
197
|
|
|
455
|
|
|
54
|
|
|||
Deferred
|
663
|
|
|
(347
|
)
|
|
190
|
|
|||
Total State and Local
|
860
|
|
|
108
|
|
|
244
|
|
|||
Foreign
|
|
|
|
|
|
||||||
Current
|
—
|
|
|
—
|
|
|
233
|
|
|||
Deferred
|
(402
|
)
|
|
(227
|
)
|
|
(505
|
)
|
|||
Total Foreign
|
(402
|
)
|
|
(227
|
)
|
|
(272
|
)
|
|||
Total
|
$
|
2,393
|
|
|
$
|
(6,272
|
)
|
|
$
|
1,090
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
U.S. Operations
|
$
|
(78,643
|
)
|
|
$
|
(21,639
|
)
|
|
$
|
(6,026
|
)
|
Foreign Operations
|
(1,871
|
)
|
|
(119
|
)
|
|
953
|
|
|||
Income (loss) before income taxes
|
(80,514
|
)
|
|
(21,758
|
)
|
|
(5,073
|
)
|
|||
Federal statutory rate
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
|||
Provision for income taxes at federal statutory rate
|
(28,180
|
)
|
|
(7,615
|
)
|
|
(1,776
|
)
|
|||
State taxes, net of federal benefit
|
805
|
|
|
37
|
|
|
158
|
|
|||
Foreign tax rate differential
|
253
|
|
|
151
|
|
|
(282
|
)
|
|||
Research credits
|
—
|
|
|
(728
|
)
|
|
—
|
|
|||
Change in valuation allowance
|
8,528
|
|
|
—
|
|
|
—
|
|
|||
Impairment charge
|
17,438
|
|
|
—
|
|
|
—
|
|
|||
Acquisition costs
|
—
|
|
|
613
|
|
|
865
|
|
|||
Stock compensation
|
3,384
|
|
|
—
|
|
|
—
|
|
|||
Interest on Series B Preferred Stock
|
430
|
|
|
421
|
|
|
353
|
|
|||
Prior year adjustment
|
518
|
|
|
27
|
|
|
1,177
|
|
|||
Change in unrecognized tax benefits
|
(1,024
|
)
|
|
875
|
|
|
—
|
|
|||
Other
|
241
|
|
|
(53
|
)
|
|
595
|
|
|||
Provision (benefit) for income taxes
|
$
|
2,393
|
|
|
$
|
(6,272
|
)
|
|
$
|
1,090
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(in thousands)
|
||||||
Deferred Tax Assets:
|
|
|
|
||||
Allowance for doubtful accounts
|
$
|
38
|
|
|
$
|
73
|
|
Inventories
|
914
|
|
|
543
|
|
||
Employee benefits
|
2,360
|
|
|
3,895
|
|
||
Net operating loss
|
16,992
|
|
|
11,422
|
|
||
Unrecognized tax benefits
|
623
|
|
|
3,045
|
|
||
Other
|
1,672
|
|
|
677
|
|
||
|
22,599
|
|
|
19,655
|
|
||
Valuation allowance
|
(9,366
|
)
|
|
—
|
|
||
Total deferred tax assets
|
13,233
|
|
|
19,655
|
|
||
|
|
|
|
||||
Deferred Tax Liabilities:
|
|
|
|
||||
Depreciation and amortization
|
(151
|
)
|
|
(734
|
)
|
||
Intangible assets
|
(13,086
|
)
|
|
(13,511
|
)
|
||
Total deferred tax liabilities
|
(13,237
|
)
|
|
(14,245
|
)
|
||
Net deferred tax assets (liabilities)
|
$
|
(4
|
)
|
|
$
|
5,410
|
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(in thousands)
|
||||||
Gross unrecognized tax benefit, beginning of period
|
$
|
3,965
|
|
|
$
|
1,468
|
|
Additions based on tax positions related to the current year
|
—
|
|
|
2,497
|
|
||
Decreases based on tax positions in a prior period
|
(2,497
|
)
|
|
—
|
|
||
Gross unrecognized tax benefit, end of period
|
$
|
1,468
|
|
|
$
|
3,965
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands, expect per-share data)
|
||||||||||
Net loss
|
$
|
(82,907
|
)
|
|
$
|
(15,486
|
)
|
|
$
|
(6,163
|
)
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding — Basic
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|||
Plus incremental shares from assumed conversions:
|
|
|
|
|
|
||||||
Dilutive effect of stock options, warrants, unvested awards
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average common shares outstanding — Diluted
|
42,269
|
|
|
39,665
|
|
|
12,700
|
|
|||
|
|
|
|
|
|
||||||
Net loss per share :
|
|
|
|
|
|
||||||
Basic
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
Diluted
|
$
|
(1.96
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.49
|
)
|
|
Year Ended
|
|||||||
|
December 31,
|
|||||||
|
2015
|
|
2014
|
|
2013
|
|||
|
(in thousands)
|
|||||||
Stock options
|
6,260
|
|
|
6,081
|
|
|
3,961
|
|
Warrants
|
954
|
|
|
36
|
|
|
—
|
|
Unvested restricted stock awards
|
54
|
|
|
6
|
|
|
—
|
|
Total
|
7,268
|
|
|
6,123
|
|
|
3,961
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Cost of revenue
|
$
|
889
|
|
|
$
|
310
|
|
|
$
|
60
|
|
Selling and marketing
|
320
|
|
|
866
|
|
|
343
|
|
|||
Research and development
|
784
|
|
|
846
|
|
|
342
|
|
|||
General and administrative
|
3,904
|
|
|
3,172
|
|
|
1,818
|
|
|||
Total stock-based compensation
|
$
|
5,897
|
|
|
$
|
5,194
|
|
|
$
|
2,563
|
|
|
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, 2014
|
6,588,097
|
|
|
$
|
5.08
|
|
|
6.96
|
|
$
|
1,327,366
|
|
Option Exchange
|
(1,758,261
|
)
|
|
10.31
|
|
|
|
|
|
|||
Granted
|
2,480,152
|
|
|
2.02
|
|
|
|
|
|
|||
Exercised
|
(501,511
|
)
|
|
1.46
|
|
|
|
|
|
|||
Forfeited
|
(1,195,093
|
)
|
|
6.12
|
|
|
|
|
|
|||
Outstanding at December 31, 2015
|
5,613,384
|
|
|
$
|
2.19
|
|
|
7.89
|
|
$
|
628,833
|
|
Vested and expected to vest at December 31, 2015
|
5,408,277
|
|
|
$
|
2.29
|
|
|
7.84
|
|
$
|
606,304
|
|
Exercisable at December 31, 2015
|
2,255,162
|
|
|
$
|
2.25
|
|
|
6.39
|
|
$
|
287,058
|
|
|
Year Ended
|
||||
|
December 31,
|
||||
|
2015
|
|
2014
|
|
2013
|
|
(in thousands)
|
||||
Expected term (in years)
|
6.1
|
|
6.1
|
|
6.0
|
Risk-free interest rate
|
1.5% - 1.9%
|
|
1.8% - 2.0%
|
|
1.0% - 1.1%
|
Expected volatility
|
40.8% - 47.1%
|
|
47.5% - 49.8%
|
|
50.4% - 50.5%
|
Dividend rate
|
0%
|
|
0%
|
|
0%
|
|
Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|||
Nonvested restricted stock at December 31, 2014
|
6,396
|
|
|
$
|
15.63
|
|
Granted
|
65,502
|
|
|
2.29
|
|
|
Nonvested restricted stock at December 31, 2015
|
71,898
|
|
|
3.48
|
|
|
|
December 31,
|
||||||||||
|
|
2015
|
|
2014
|
|
2013
|
||||||
Net Revenues
|
|
(in thousands)
|
||||||||||
Headset
|
|
$
|
161,835
|
|
|
$
|
185,469
|
|
|
$
|
178,470
|
|
HyperSound
|
|
912
|
|
|
707
|
|
|
—
|
|
|||
Total
|
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
|
|
|
|
|
|
|
||||||
Operating Income (Loss)
|
|
|
|
|
|
|
||||||
Headset
|
|
$
|
(8,698
|
)
|
|
$
|
(311
|
)
|
|
$
|
1,598
|
|
HyperSound
|
|
(65,701
|
)
|
|
(13,514
|
)
|
|
—
|
|
|||
Total
|
|
$
|
(74,399
|
)
|
|
$
|
(13,825
|
)
|
|
$
|
1,598
|
|
Interest Expense
|
|
$
|
5,099
|
|
|
$
|
7,209
|
|
|
$
|
6,626
|
|
Other non-operating expense, net
|
|
$
|
1,016
|
|
|
$
|
724
|
|
|
$
|
45
|
|
Loss before income tax expense (benefit)
|
|
$
|
(80,514
|
)
|
|
$
|
(21,758
|
)
|
|
$
|
(5,073
|
)
|
|
December 31,
2015 |
|
December 31,
2014 |
||||
Total Assets
|
(in thousands)
|
||||||
Headset
|
$
|
62,361
|
|
|
$
|
82,798
|
|
HyperSound
|
111,490
|
|
|
164,170
|
|
||
Total
|
$
|
173,851
|
|
|
$
|
246,968
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
North America
|
$
|
117,526
|
|
|
$
|
123,908
|
|
|
$
|
123,224
|
|
United Kingdom
|
20,881
|
|
|
29,425
|
|
|
26,439
|
|
|||
Europe
|
17,329
|
|
|
24,082
|
|
|
18,565
|
|
|||
Other
|
7,011
|
|
|
8,761
|
|
|
10,242
|
|
|||
Total net revenue
|
$
|
162,747
|
|
|
$
|
186,176
|
|
|
$
|
178,470
|
|
|
(in thousands)
|
||
2016
|
$
|
1,608
|
|
2017
|
1,709
|
|
|
2018
|
1,660
|
|
|
2019
|
1,521
|
|
|
2020
|
839
|
|
|
Thereafter
|
1,413
|
|
|
Total
|
$
|
8,750
|
|
|
Year Ended
|
||||||||||
|
December 31,
|
||||||||||
|
2015
|
|
2014
|
|
2013
|
||||||
|
(in thousands)
|
||||||||||
Warranty, beginning of period
|
$
|
493
|
|
|
$
|
139
|
|
|
$
|
165
|
|
Warranty costs accrued
|
693
|
|
|
850
|
|
|
614
|
|
|||
Settlements of warranty claims
|
(606
|
)
|
|
(496
|
)
|
|
(640
|
)
|
|||
Warranty, end of period
|
$
|
580
|
|
|
$
|
493
|
|
|
$
|
139
|
|
Fiscal 2015
|
Quarter
|
||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
(1)
|
||||||||
|
(in thousands, except per share data)
|
||||||||||||||
Net Revenue
|
$
|
19,689
|
|
|
$
|
22,612
|
|
|
$
|
35,887
|
|
|
$
|
84,559
|
|
Gross Margin
|
3,116
|
|
|
3,402
|
|
|
9,564
|
|
|
24,609
|
|
||||
Net Income (Loss)
|
(10,593
|
)
|
|
(9,898
|
)
|
|
(15,880
|
)
|
|
(46,536
|
)
|
||||
Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.25
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(1.09
|
)
|
Diluted
|
$
|
(0.25
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(1.09
|
)
|
Fiscal 2014
|
Quarter
|
||||||||||||||
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||
|
(in thousands, except per share data)
|
||||||||||||||
Net Revenue
|
$
|
38,288
|
|
|
$
|
22,296
|
|
|
$
|
33,325
|
|
|
$
|
92,267
|
|
Gross Margin
|
12,276
|
|
|
4,831
|
|
|
7,749
|
|
|
25,811
|
|
||||
Net Income (Loss)
|
(2,906
|
)
|
|
(9,302
|
)
|
|
(5,638
|
)
|
|
2,360
|
|
||||
Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.09
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
0.06
|
|
Diluted
|
$
|
(0.09
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
0.06
|
|
a.
|
List of documents filed as part of this Annual Report:
|
1.
|
The following Consolidated Financial Statements of the Company are filed as part of this Annual Report:
|
2.
|
All schedules have been omitted because they are not applicable, not required or the information has been otherwise supplied in the financial statements or notes thereto.
|
3.
|
The exhibits listed in the Exhibit Index attached hereto are filed as part of this Annual Report and incorporated herein by reference
|
b.
|
The exhibits listed in the Exhibit Index attached hereto are filed as part of this Annual Report and incorporated herein by reference.
|
c.
|
Not applicable.
|
|
|
|
TURTLE BEACH CORPORATION
|
|
|
|
|
Date:
|
March 30, 2016
|
By:
|
/S/ JOHN T. HANSON
|
|
|
|
John T. Hanson
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
(Principal Financial Officer)
|
|
|
|
Date:
|
March 30, 2016
|
/s/ JUERGEN STARK
|
|
|
Juergen Stark, Chief Executive Officer, President and Director
|
|
|
(Principal Executive Officer)
|
|
|
|
Date:
|
March 30, 2016
|
/S/ JOHN T. HANSON
|
|
|
John T. Hanson, Chief Financial Officer, Treasurer and Secretary
|
|
|
(Principal Financial and Accounting Officer)
|
Date:
|
March 30, 2016
|
/S/ RONALD DOORNINK
|
|
|
Ronald Doornink, Non-Executive Chairman of the Board and Director
|
Date:
|
March 30, 2016
|
/S/ LAUREEN DeBUONO
|
|
|
Laureen DeBuono, Director
|
Date:
|
March 30, 2016
|
/S/ KENNETH A. FOX
|
|
|
Kenneth A.Fox, Director
|
Date:
|
March 30, 2016
|
/S/ WILLIAM E. KEITEL
|
|
|
William E. Keitel, Director
|
Date:
|
March 30, 2016
|
/S/ ANDREW WOLFE
|
|
|
Andrew Wolfe, Director
|
2.1*
|
Agreement and Plan of Merger, dated August 5, 2013, among the Company, Merger Sub and VTBH (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K originally filed with the SEC on August 5, 2013).
|
|
|
3.1
|
Articles of Incorporation of Turtle Beach Corporation, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q originally filed with the SEC on August 11, 2014).
|
|
|
3.2
|
Bylaws, as amended, of Turtle Beach Corporation (Incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q originally filed with the SEC on August 11, 2014).
|
|
|
3.3
|
Third Amended and Restated Certificate of Incorporation of VTBH (Incorporated by reference to Exhibit B to Exhibit 2.1 to the Company’s Current Report on Form 8-K originally filed with the Securities and Exchange Commission on August 5, 2013).
|
|
|
4.1
|
Stockholder Agreement dated August 5, 2013 among Turtle Beach Corporation and certain of our shareholders. (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2013).
|
|
|
4.2
|
Amendment No. 1 to the Stockholder Agreement, dated July 10, 2014, by and among the Company and the shareholders party thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 10, 2014).
|
|
|
4.3
|
Form of Turtle Beach Corporation stock certificate. (Incorporated by reference to Exhibit 4.1 to the Company's Form 10/A filed with the Securities and Exchange Commission on July 27, 2010.)
|
|
|
4.4
|
Warrant, issued to SG VTB Holdings, LLC, dated July 22, 2015 (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
4.5
|
Warrant, issued to SG VTB Holdings, LLC, dated November 16, 2016 (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015).
|
|
|
4.6
|
Warrant, issued to the Doornink Revocable Living Trust, originally executed December 17, 1996, as amended and restated August 6, 2013, dated July 22, 2015 (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.1
|
Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2014).
|
|
|
10.2
|
Amendment No. 2, dated December 26, 2014, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner. (Incorporated by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2015)
|
|
|
10.3
|
Amendment No. 3 to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner.(Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015).
|
|
|
10.4**
|
Amendment No. 4, dated April 22, 2015, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner.
|
|
|
10.5
|
Amendment No. 5, dated July 22, 2015, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.6
|
Amendment No. 6, dated November 2, 2015, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2015).
|
|
|
10.7
|
Amendment No. 7, dated December 1, 2015, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2015).
|
|
|
10.8
|
Amendment No. 8, dated February 1, 2016, to Loan, Security and Guarantee Agreement, dated as of March 31, 2014, among Parametric Sound Corporation and Voyetra Turtle Beach, Inc. as US Borrowers and UK Guarantors, Turtle Beach Europe Limited as UK Borrower, PSC Licensing Corp. and VTB Holdings, Inc. as a US Guarantor and a UK Guarantor, and Bank of America, N.A., as Agent, Sole Lead Arranger and Sole Bookrunner (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1, 2016).
|
|
|
10.9
|
Letter, dated June 17, 2015, from Bank of America N.A to the Company (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 22, 2015).
|
|
|
10.10
|
Term Loan, Guaranty and Security Agreement, dated July 22, 2015, by and among the Company, Voyetra Turtle Beach, Inc. Turtle Beach Europe Limited, VTB Holdings, Inc., Crystal Financial LLC, as agent sole lead arranger and sole bookrunner and the other parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.11
|
Amendment No. 1, dated November 2, 2015, to Term Loan, Guaranty and Security Agreement, dated July 22, 2015, by and among the Company, Voyetra Turtle Beach, Inc. Turtle Beach Europe Limited, VTB Holdings, Inc., Crystal Financial LLC, as agent sole lead arranger and sole bookrunner and the other parties thereto (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2015).
|
|
|
10.12
|
Amendment No. 2, dated December 1, 2015, to Term Loan, Guaranty and Security Agreement, dated July 22, 2015, by and among the Company, Voyetra Turtle Beach, Inc. Turtle Beach Europe Limited, VTB Holdings, Inc., Crystal Financial LLC, as agent sole lead arranger and sole bookrunner and the other parties thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2015).
|
|
|
10.13
|
Amendment No. 3, dated February 1, 2016, to Term Loan, Guaranty and Security Agreement, dated July 22, 2015, by and among the Company, Voyetra Turtle Beach, Inc. Turtle Beach Europe Limited, VTB Holdings, Inc., Crystal Financial LLC, as agent sole lead arranger and sole bookrunner and the other parties thereto (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1, 2016).
|
|
|
10.14
|
Amended and Restated Subordinated Promissory Note, dated July 22, 2015, originally dated April 23, 2015, by and between Turtle Beach Corporation and SG VTB Holdings, LLC (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.15
|
Amended and Restated Subordinated Promissory Note, dated July 22, 2015, originally dated May 13, 2015, by and between Turtle Beach Corporation and SG VTB Holdings, LLC (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.16
|
Amended and Restated Subordinated Promissory Note, dated July 22, 2015, originally dated June 17, 2015, by and between Turtle Beach Corporation and SG VTB Holdings, LLC (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.17
|
Amended and Restated Subordinated Promissory Note, dated July 22, 2015, originally dated May 13, 2015, by and between Turtle Beach Corporation and the Doornink Revocable Living Trust, originally executed December 17, 1996, as amended and restated August 6, 2013 (Incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2015).
|
|
|
10.18
|
Subordinated Promissory Note, dated November 16, 2015, by and between the Company and SG VTB Holdings, LLC (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015).
|
|
|
10.19
|
Third Lien Continuing Guaranty, dated as of November 16, 2015, by and among the Company, Voyetra Turtle Beach, Inc. and VTB Holdings, Inc. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015).
|
|
|
10.20
|
Third Lien Security Agreement, dated as of November 16, 2015, by and among the Company, Voyetra Turtle Beach, Inc. and VTB Holdings, Inc. (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015).
|
|
|
10.21
|
Subordination Agreement, dated as of November 16, 2015, by and among Bank of America, N.A., Crystal Financial LLC, SG VTB Holdings, LLC, the Company, Voyetra Turtle Beach, Inc., Turtle Beach Europe Limited, and VTB Holdings, Inc. (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 20, 2015).
|
|
|
10.22
|
Common Stock Purchase Agreement, dated as of February 1, 2016, by and between the Company and SG VTB Holdings, LLC (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1, 2016).
|
|
|
10.23†
|
Turtle Beach Corporation 2013 Stock-Based Incentive Compensation Plan (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q originally filed with the SEC on August 6, 2015).
|
|
|
10.24†
|
Turtle Beach Corporation Annual Incentive Bonus Plan (Incorporated by reference to Annex F to the Company’s Definitive Proxy Statement on Schedule 14A originally filed with the SEC on December 3, 2013).
|
|
|
10.25†^**
|
Master Services Agreement, dated October 6, 2015, between the Company and Hon Hai Precision Industry Co. Ltd.
|
|
|
10.26†
|
VTB Holdings, Inc. 2011 Phantom Equity Appreciation Plan (Incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.27†
|
Offer Letter, dated as of August 13, 2012, between Voyetra Turtle Beach, Inc. and Juergen Stark (Incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.28†**
|
Stock Option Agreement, dated as of May 29, 2015, by and between the Company and Juergen Stark.
|
|
|
10.29†
|
Offer Letter, dated as of September 16, 2013, by and between Voyetra Turtle Beach, Inc. and John Hanson (Incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.30†**
|
Offer Letter, dated as of November 24, 2015, by and between the Company and Joseph Cleary.
|
|
|
10.31†
|
Stock Award Agreement, dated as of June 21, 2011, by and between VTB Holdings, Inc. and Ronald Doornink (Incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.32†
|
First Amendment to Stock Award Agreement, dated as of February 26, 2013, by and between VTB Holdings, Inc. and Ronald Doornink (Incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.33†
|
Consulting Agreement, dated as of October 12, 2010, by and between Voyetra Turtle Beach, Inc. and Ronald Doornink (Incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.34†
|
Termination of Consulting Agreement and Continued Service on the Board of Directors, dated as of February 26, 2013, by and between Voyetra Turtle Beach, Inc. and Ronald Doornink (Incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.35†
|
Performance Bonus Agreement, dated as of October 12, 2010, by and among the Company, Carmine J. Bonnano and Frederick J. Romano (Incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.36†
|
Employment Agreement, dated as of October 12, 2010, by and between Voyetra Turtle Beach, Inc. and Carmine J. Bonnano (Incorporated by reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.37†
|
Severance Agreement, dated as of August 2, 2012, by and between Voyetra Turtle Beach, Inc. and Carmine J. Bonnano (Incorporated by reference to Exhibit 10.22 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.38†
|
Employment Agreement, dated as of October 12, 2010, by and between Voyetra Turtle Beach, Inc. and Frederick J. Romano (Incorporated by reference to Exhibit 10.23 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.39†
|
Severance Agreement, dated as of August 2, 2012, by and between Voyetra Turtle Beach, Inc. and Frederick J. Romano (Incorporated by reference to Exhibit 10.24 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.40†
|
Offer Letter, dated as of October 21, 2013, by and between Voyetra Turtle Beach, Inc. and Frederick J. Romano (Incorporated by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May12, 2014).
|
|
|
10.41†
|
Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2015).
|
|
|
10.42†
|
Form of Turtle Beach Corporation Non-Employee Director Restricted Stock Award (Incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2015).
|
|
|
10.43†
|
Form of Turtle Beach Corporation Non-Employee Director Incentive Stock Option Agreement
|
|
|
10.44†**
|
Form of Turtle Beach Corporation Non-Qualified Stock Option Agreement
|
|
|
10.45†
|
Form of Turtle Beach Corporation Incentive Stock Option Agreement (Incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2015).
|
|
|
21**
|
Subsidiaries of the Company
|
|
|
23.1**
|
Consent of BDO USA, LLP.
|
|
|
23.2**
|
Consent of Freed Maxick CPAs, P.C.
|
|
|
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**
|
|
|
*
|
All exhibits and schedules to the Agreement and Plan of Merger have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish the omitted exhibits and schedules to the SEC upon request by the SEC.
|
**
|
Filed herewith.
|
***
|
Furnished herewith.
|
†
|
Management contract or compensatory plan.
|
^
|
Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
|
|
|
|
|
|
|
|
|
||||||||
Description
|
Balance - Begin
|
|
Additions
|
|
Deductions / Other
|
|
Balance - End
|
||||||||
Year Ended December 31, 2015:
|
(in thousands)
|
||||||||||||||
Allowance for sales returns
|
$
|
4,155
|
|
|
$
|
17,108
|
|
|
$
|
(14,995
|
)
|
|
$
|
6,268
|
|
Allowance for cash discounts
|
5,451
|
|
|
$
|
17,904
|
|
|
$
|
(15,896
|
)
|
|
7,459
|
|
||
Allowance for doubtful accounts
|
200
|
|
|
$
|
157
|
|
|
$
|
(255
|
)
|
|
102
|
|
||
|
|
|
|
|
|
|
$
|
13,829
|
|
||||||
Year Ended December 31, 2014:
|
|
|
|
|
|
|
|
||||||||
Allowance for sales returns
|
$
|
6,266
|
|
|
$
|
13,042
|
|
|
$
|
(15,153
|
)
|
|
$
|
4,155
|
|
Allowance for cash discounts
|
2,489
|
|
|
18,488
|
|
|
(15,526
|
)
|
|
5,451
|
|
||||
Allowance for doubtful accounts
|
225
|
|
|
$
|
37
|
|
|
$
|
(62
|
)
|
|
200
|
|
||
|
|
|
|
|
|
|
|
$
|
9,806
|
|
|||||
Year Ended December 31, 2013:
|
|
|
|
|
|
|
|
||||||||
Allowance for sales returns
|
$
|
7,748
|
|
|
$
|
20,146
|
|
|
$
|
(21,628
|
)
|
|
$
|
6,266
|
|
Allowance for cash discounts
|
6,196
|
|
|
15,347
|
|
|
(19,054
|
)
|
|
2,489
|
|
||||
Allowance for doubtful accounts
|
460
|
|
|
125
|
|
|
(360
|
)
|
|
225
|
|
||||
|
|
|
|
|
|
|
$
|
8,980
|
|
(a)
|
EACH OBLIGOR HEREBY IRREVOCABLY RELEASES AND FOREVER DISCHARGES AGENT, LENDERS AND THEIR AFFILIATES, AND EACH SUCH PERSON’S RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, ATTORNEYS AND REPRESENTATIVES (EACH, A
“RELEASED PERSON”)
OF AND FROM ALL DAMAGES, LOSSES, CLAIMS, DEMANDS, LIABILITIES, OBLIGATIONS, ACTIONS OR CAUSES OF ACTION WHATSOEVER (EACH A
“CLAIM”)
THAT SUCH OBLIGOR MAY NOW HAVE OR CLAIM TO HAVE AGAINST ANY RELEASED PERSON ON THE DATE OF THIS AMENDMENT, WHETHER KNOWN OR UNKNOWN, OF EVERY NATURE AND EXTENT WHATSOEVER, FOR OR BECAUSE OF ANY MATTER OR THING DONE, OMITTED OR SUFFERED TO BE DONE OR OMITTED BY ANY OF THE RELEASED PERSONS THAT BOTH (1) OCCURRED PRIOR TO OR ON THE DATE OF THIS AMENDMENT AND (2) IS ON ACCOUNT OF OR IN ANY WAY CONCERNING, ARISING OUT OF OR FOUNDED UPON THE LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT.
|
(b)
|
EACH OBLIGOR INTENDS THE ABOVE RELEASE TO COVER, ENCOMPASS, RELEASE, AND EXTINGUISH, INTER ALIA, ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION THAT MIGHT OTHERWISE BE RESERVED BY THE CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
|
(c)
|
EACH OBLIGOR ACKNOWLEDGES THAT IT MAY HEREAFTER DISCOVER FACTS DIFFERENT FROM OR IN ADDITION TO THOSE NOW KNOWN OR BELIEVED TO BE TRUE WITH RESPECT TO SUCH CLAIMS, DEMANDS, OR CAUSES OF ACTION, AND AGREES THAT THIS AMENDMENT AND THE ABOVE RELEASE ARE AND WILL REMAIN EFFECTIVE IN ALL RESPECTS NOTWITHSTANDING ANY SUCH DIFFERENCES OR ADDITIONAL FACTS.
|
1.
|
Definitions
|
1.1
|
“
Affiliate
” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For the purpose of this definition, the term “control” (including with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
|
1.2
|
“
Business day
” means any day except Saturday, Sunday or any other day on which commercial banks located in New York or the location of the applicable Foxconn facility in which the Products are being produced are authorized or required by Law to be closed for business.
|
1.3
|
"
Confidential
Information
" means any and all confidential and proprietary information, including both technical and non-technical information, exchanged among the Parties at any time, before or after the date of this Agreement, whether verbally or in writing or by other means, and including: (a) copyright, trade secret and proprietary information; (b) techniques, algorithms, firmware and software programs related to the current or future proposed business, products and service of a Party; (c) information concerning research, engineering, industrial design and styling; (d) financial information, procurement requirements, purchasing information, customer lists, business forecasts, sales and merchandising information, marketing plans and marketing information; and (e) the terms and conditions of this Agreement.
|
1.4
|
“
Components
” means materials, sub-assemblies, intermediate assemblies, sub-components, components or other parts used in manufacture of or incorporated into the Products.
|
1.5
|
“
Frozen Window
” means, [*****].
|
1.6
|
“
Governmental Authority
” means any transnational, domestic or foreign federal, state or local, governmental authority, department, court, board or other regulatory authority, agency, self-regulatory organization or official, including any political subdivision thereof.
|
1.7
|
“
IPRs
” means any and all intellectual and industrial property and other proprietary rights, arising in any jurisdiction, whether registered or unregistered, including such rights in: (a) patents, patent applications, inventions and other industrial property rights, including all applications, registrations, extensions, renewals, continuations, continuations-in-part, combinations, divisions and reissues of the foregoing, (b) non-public technical or business information, Know-How, trade secrets, ideas, confidential information and rights to limit the use or disclosure thereof by any person, in each case whether or not patentable including business and technical information, inventions and discoveries, (c) works of authorship, whether or not copyrightable, including writings, databases, computer software programs and documentation; (d) copyrights, mask works, registrations or applications for registration of copyrights or mask work rights, and any renewals or extensions thereof; (e) moral rights; and (f) all rights of any kind in databases,
|
1.8
|
“
Know-How
” means information, practical knowledge, techniques, and skill required to manufacture a given Product or technology, and any training in any of the foregoing or physical embodiments thereof.
|
1.9
|
“
Person
” means a natural person, firm, corporation, partnership, association, limited liability company, union, trust or estate or any other entity or organization whether or not having separate legal existence, including any Governmental Authority.
|
1.10
|
“
Product
” means the products manufactured by Foxconn hereunder, each of which will meet cosmetic, technical and performance specifications set forth in one or more Specification of Product (“
Product SoP
”) to be prepared and agreed to by the parties with respect to each such product.
|
1.11
|
“
Purchase Order
” or “
PO
” means a purchase order in the form attached hereto as Schedule A issued to Foxconn by TB either by fax or email.
|
1.12
|
“
Services
” means any services provided by Foxconn in connection with the manufacturing and delivery of Products specified in a PO, which may include one or more of the following: (a) procuring Components or tooling; (b) manufacturing, testing, performing quality control, assembling and providing other related production services; (c) procuring cables and accessories, printed materials and other Components required for the packaging of Products as finished retail goods; or (d) obtaining required regulatory certifications and approvals.
|
1.13
|
“
Specifications
” means the design, functional and performance specifications provided by TB (including, without limitation, Bill of Materials (“
BOM
”), operating parameters, industrial design and styling, electrical specifications, testing procedures other quality requirements or metrics for Products) in connection with the design, production, manufacture and testing of each Product.
|
1.14
|
“
Vendor
” means a third party provider who is contracted by Foxconn to assist in the design, production or manufacture of Products or to provide any Services.
|
1.15
|
“
BOM Cost
” means the material cost for a component, which may be [*****].
|
1.16
|
“Guided Turnkey (“GTK”) Components
” means components that Foxconn purchases from a Vendor designated by TB pursuant to TB negotiated pricing and/or terms and conditions.
|
1.17
|
“Turnkey (“TK”) Components”
means components that Foxconn may open source. Supplier details must still be provided to TB on the quote template and any changes reported immediately to TB.
|
2.
|
Pricing, Payment and Delivery
|
2.1
|
General Purchasing Terms
:
The prices for Services and Products shall be as may be agreed from time to time by Foxconn and TB in accordance with Section 2.2 hereof. TB shall not be liable for any amounts, fees or costs to Foxconn except pursuant to a valid PO issued by TB and accepted by Foxconn on the terms and conditions of this Agreement, or as otherwise specified in this Agreement. Unless otherwise specified in the PO, the price specified in such PO shall be the total gross amount payable in respect of the Products and Services ordered thereunder, inclusive of all charges and amounts whatsoever, including packaging, boxing and processing
|
2.2
|
Price for TB Products:
The price for the headset Products will be calculated on a [*****] basis, including [*****]. The price for the HyperSound Products will be calculated on a [*****] basis, including [*****]. In connection with each Product, Foxconn shall provide a proposed price quote and [*****] for each Product in accordance with the form of Quote Template provided by TB or as mutually agreed to in writing (the “
Price Quote
”), including [*****]. Foxconn may not change any Components or otherwise deviate from the line items included in the Quote Template without TB’s prior written approval. The Price Quote for a Product will remain in effect for [*****] or such other period as the Parties may agree upon from time to time. [*****]
|
2.3
|
Continuous Cost Reductions
:
Foxconn will use commercially reasonable efforts to continually reduce manufacturing costs related to the Products, including those Component, labor and overhead costs. Foxconn will assign personnel to review such costs on a monthly basis and propose reductions, if any such cost reduction opportunities are identified, to TB in writing, which will be incorporated into the Price Quote if accepted by TB and reflected on the Quote Template. Savings will be reviewed by TB and discussion of gain sharing will be at TB’s discretion. Once profit percentage reaches [*****], then profit dollars will remain constant at the amount calculated on the locked quote and will not be affected by these TB-accepted cost reductions.
|
2.4
|
Purchase Orders and Acceptance
:
Each PO shall have a unique order number and specify a single part-number and quantity with a single line item, required date and delivery terms. Foxconn shall, within [*****] of receipt of a PO from TB, acknowledge receipt of such PO. Foxconn must respond to said PO within [*****] by: (a) agreeing to provide the Products and/or Services specified therein by indicating its acceptance by email or such other method as the Parties may agree upon (b) rejecting such PO by indicating its rejection by email or such other method as the Parties may agree upon; or (c) rejecting such PO, and proposing changes to the PO, by indicating its rejection and including a detailed counterproposal by email or such other method as the Parties may agree upon; provided, [*****] No terms and conditions in any counterproposal by Foxconn shall be deemed accepted by TB until incorporated in a revised PO issued by TB to Foxconn in accordance with this Agreement. The Parties agree that the only method for validly rejecting or proposing changes to a PO shall in accordance with the procedures set forth in this Section 2.4. Any other form of response, including any different, additional or contrary terms contained in any Foxconn or TB form or pre-printed response, shall be disregarded. TB may withdraw a PO at any time prior to Foxconn’s acceptance. Notwithstanding anything to the contrary, Foxconn agrees, during the term of this Agreement, to manufacture all of TB’s requirements for TB Products as ordered by TB at the price determined in accordance with this Section 2 unless otherwise agreed to in writing.
|
2.5
|
Change Orders
:
Subject to the terms below, TB may change the shipping instructions, extend the delivery date as to all or part of any order, or cancel all or part of an order set forth in any accepted PO by providing written notice to Foxconn prior to the delivery shipment date specified on the PO (a “
Change
Order
”).
|
1)
|
Extending Delivery Date
.
Prior to the start of the Frozen Window, [*****]. For the purposes of calculating the number of units the delivery date of which may be extended, no distinction shall be made between Products of different types ordered in a single PO and TB may allocate the permitted percentage of units to be rescheduled among different Product types in its discretion.
|
2)
|
Cancellation
:
Prior to the start of the Frozen Window, TB may provide a Change Order cancelling an order for Products [*****]. Following such a cancellation, Foxconn will be entitled to [*****].
|
2.6
|
Non-Recurring Engineering Activities:
TB may order engineering services from Foxconn for the design and development of Products, including but not limited to the product development phase of new products, product certification, tooling and samples. Manufacturing costs shall not include any Non-Recurring Engineering (“
NRE
”) activities and NRE charges shall be quoted separately from the Price Quote and shall be paid in accordance to the regular payments terms of this Agreement. Any IPR developed in connection with such NRE activities shall constitute TB IPR and Foxconn shall deliver any documentation related thereto to TB upon the completion of any NRE activities (or earlier upon TB’s request), provided that TB has fully paid for the NRE charges. Engineering resources shall be listed by title, discipline or other discrete methodology and the level of support shall be agreed to as part of the quotation process. TB’s engineering team shall agree in writing to any deliverables for NRE support. The Parties shall negotiate in good faith and execute an “
Engineering Services Agreement
” reflecting the foregoing within [*****] of the execution of this Agreement.
|
2.7
|
Extraordinary Expenses
:
Foxconn will deliver a summary of all extraordinary expenses incurred by Foxconn in accordance with the terms hereof that are not included in the Agreed Price by the [*****] of the following month. [*****].
|
2.8
|
Delivery
:
Foxconn shall comply with TB’s billing and delivery instructions on the respective PO or as otherwise communicated to Foxconn in writing. Foxconn shall deliver the Products ordered by TB to such location specified, and on the date specified, in the PO. Foxconn shall execute and deliver a bill of sale or any other document that may be reasonably requested by TB in order to convey good title to TB at the time of delivery. TB is not required to accept any Non-Conforming Products, notwithstanding any usage of trade or common practices to the contrary. For the avoidance of doubt, the acceptance of Products for delivery by a common carrier or shipper does not constitute TB’s acceptance of such Products and acceptance of Products by TB shall not preclude any other remedy by TB in respect of defective or Non-Conforming Products or otherwise for breach of this Agreement. In the event that Foxconn delivers fewer Products than ordered by TB, TB will accept the lesser quantity and receive a credit for the Product shortfall. To the extent TB incurs additional costs due to improperly marked or routed Products, TB shall be entitled to request a Credit Note on such costs from Foxconn.
|
2.9
|
Delivery Date
:
Foxconn shall deliver the Products to TB on the date indicated by TB in the relevant PO. If Foxconn fails to make timely deliveries of the Products meeting the requirements set forth in this Agreement, [*****]. Foxconn shall ensure that [*****]. If Foxconn fails or has reason to believe it will fail to make deliveries at the specified time, Foxconn shall promptly notify TB and employ accelerated measures such as [*****].
|
2.10
|
Import/Export Requirements
:
Foxconn shall 1) comply with all import and export laws and regulations and maintain appropriate import and export documentation, 2) provide an appropriate certification stating the country of origin for Products sufficient to satisfy the requirements of the Governmental Authorities of the destination country or countries and any applicable customs or import/export regulations of such countries, including without limitation those of the United States, 3) ensure that Products and packaging of Products are marked with the country of origin, as required by applicable regulations of any jurisdiction or as otherwise reasonably requested by TB, 4) at TB's request, (a) make available for inspection and audit all import and export documentation for the Products and technology included in the Products; (b) assist TB in determining an appropriate Export Control Classification Number for all Products; and (c) provide export screening for all shipments of Products or Parts. Foxconn will not, directly or indirectly, export, re-export or transship any Products in violation of any applicable U.S. export control laws and regulations or any other applicable export control laws promulgated and administered by the government of any country having jurisdiction over the parties or the transactions contemplated herein and, at TB’s request for product importation into the USA, designate TB or its designated customer as the importer of record and if TB is not the importer of record, provide TB with
|
2.11
|
Engineering Changes
. TB shall be liable for any and all obsolete materials, work in process product, semi-finished goods, finished goods, material cost, cost of rework, test, upgrade, scrap, other handling charges, and any other costs that result from the implementation of any engineering changes.
|
2.12
|
Excess and Obsolescence:
TB shall be liable for any excess materials, parts, and work-in-process and finished goods prepared for manufacturing Products as required by TB (including with respect to any end-of-life products), provided that [*****]. Materials shall be deemed excess and/or obsolete if [*****].
|
3.
|
Materials Management
|
3.1
|
Forecasts:
TB will provide Foxconn a [*****] (each, a
“Forecast
”) for Products TB anticipates ordering.
|
3.2
|
Materials Liability:
TB will be liable in accordance with Section 2.12 for any and all Components ordered within material lead-time and minimum order quantity to support approved Forecasts and, subject to Section 3.8, any and all Components Foxconn purchases outside standard order lead-time provided that such order was placed by Foxconn at the direction of TB.
|
3.3
|
Component Supplier Ordering Plans:
Foxconn shall prepare and provide [*****] ordering plan for each applicable Component supplier. Each such ordering plan will contain the following data: [*****].
|
3.4
|
Sourcing of Non-Consigned Components:
Foxconn will buy all Components (other than Consigned Components) and materials from Vendors listed on the Approved Vendor List (“
AVL
”) provided by TB. Foxconn shall inform TB of any Vendors it intends to use in the manufacture of any TB Products or providing any Services to TB. In the event a Component or material is not covered under the AVL, Foxconn shall guarantee that Components and/or materials comply with TB quality requirements. Foxconn shall not employ any Vendor, or otherwise subcontract any aspect of the design, product, manufacturing or testing of TB Products or providing Services to TB, without TB’s prior express written consent.
|
3.5
|
Consigned Components
: TB shall retain all right, title and interest in Components furnished by TB to Foxconn (the “
Consigned Components
”), including all Consigned Components in Foxconn’s inventory and all Consigned Components in-transit to, and in-process at, a Foxconn facility. Foxconn assumes liability for Consigned Components in its possession against any non-manufacturing loss or damage Foxconn shall submit an inventory reconciliation of all Consigned Components on a monthly basis to TB. Within [*****] following TB’s written request, Foxconn will return all Consigned Components to TB, or to any other location specified by TB, at TB’s cost.
|
3.6
|
Management of equipment, molds, jigs and tools, etc.
:
Foxconn shall be responsible for the management and maintenance of equipment, molds, tooling, dies, jigs and tools, etc. and measuring instruments and testing apparatus, etc., necessary for production of the Products (hereinafter, the “
Production Materials
”). Foxconn shall provide reports regarding the status of Production Materials monthly. [*****] Foxconn shall not use TB-paid Production Materials or Consigned Components in the manufacture of any non-TB products or for any purpose other than fulfilling its responsibilities under this Agreement.
|
3.7
|
Scrap Material Disposal
:
Foxconn shall be responsible for all costs, taxies, duties and activities related to scrap material disposal if the cause for such scrap is attributed to Foxconn’s sole fault.
|
3.8
|
Inventory Carrying Costs
:
TB may from time to time request Foxconn to purchase materials outside standard Component lead-times (“
Advance Purchase Components
”). TB shall reimburse Foxconn for any inventory carrying costs resulting from Advance Purchase Components, excess Components to the extent resulting from changes by TB to its forecasts and obsolete Components to the extent resulting from engineering changes required by TB. Such inventory carrying costs shall : [*****]. Foxconn shall invoice TB on a monthly basis for the inventory carrying costs with a detailed calculation of such carrying costs. Upon request by TB, Foxconn shall provide any information necessary to TB to support how these inventory carrying costs are calculated and tracked.
|
4.
|
Quality Requirements
|
4.1
|
Manufacturing Process and Specifications
:
Foxconn shall manufacture all Products in accordance with the Specifications provided by TB. Additionally, all products manufactured for sale as FDA-regulated medical devices for HyperSound hearing systems shall comply with the separate quality agreement titled “[*****]. Foxconn shall not modify or deviate from any Specifications without TB’s prior written consent, provided, however, that Foxconn shall immediately notify TB of any design errors, defects, ambiguities, inconsistencies or omissions in any Specifications which may come to the attention of Foxconn. Additional manufacturing and quality testing processes for Products shall be mutually agreed upon and shall not be changed by Foxconn without TB’s prior written consent.
|
4.2
|
Product Regulations Conformity
:
Unless otherwise specified in the relevant Product SoP or agreed to by TB in writing and without limitation of any other product quality requirements, Products (including any labelling, packaging and inserts) shall adhere to the following requirement and regulations, as may be amended from time to time, and shall be labelled accordingly: [*****]. Additionally, each Product will include a unique serial number clearly labelled on the outside of final packaging, any inner cartons and carton packs. As of [*****], Foxconn will implement Unique Device Identifier (UDI) numbering in compliance with FDA’s UDI regulatory requirements for all products manufactured for sale as FDA-regulated medical devices. Foxconn will implement and utilize a serial number tracking system to track the use of specific Components in Products via bar code tracking.
|
4.3
|
Quality System and Quality Assurance:
Foxconn shall implement quality systems, which shall be subject to TB’s review and approval, standards to ensure process integrity, allow for early problem detection and minimize occurrence of product quality problems and warranty failures. This shall include, but not be limited to having adequate technical resources, formal process documentation, results recording, traceability of processing, monitoring manufacturing processes and supply chain service activities, failure analysis skills, capabilities and repair, improving material and procurement processes and implementation of corrective actions. Such quality assurance systems will be applied to both incoming parts and outgoing finished goods. [*****].
|
4.4
|
NPI Involvement
: Foxconn shall designate a team of key quality engineering personnel to be involved in the various NPI activities, such as the development of quality processes, the establishment of audit facilities and facilitation of the proto-build. Foxconn shall ensure that the resource allocation of the NPI team does not affect the manufacturing operations and processes and that any new product introductions do not have a negative impact on current product manufacturing operations and processes. For each NPI, Foxconn will create written test plans (each, a “
Test
Plan
”) to [*****].
|
4.5
|
Production Quality Management:
Foxconn will track and ensure performance metrics that measure the amount and type of [*****] in a manner satisfactory to TB. These measures might include, but are not limited to, [*****]. Foxconn will ensure an efficient system is in place to block and segregate non-conforming materials.
|
4.6
|
Incoming Quality:
Foxconn must implement processes and infrastructure to perform applicable incoming inspection/test on Components, including a quality assurance system to ensure [*****], within [*****] of the Effective Date of this Agreement. Foxconn shall implement a monitoring and reporting system satisfactory to TB in order to manage the quality of the supply chain, and is responsible for managing and resolving any Component quality issues, including, but not limited to, determining the nature of the issues, escalating issue, setting performance metrics and monitoring progress, and providing TB regular and timely updates.
|
4.7
|
Process Quality:
Foxconn shall ensure that the finished Products comply in all respects with the TB Specifications, including quality and reliability standards, by industry mutually agreed testing methods, which will be no less than what is generally utilized in the consumer electronics industry.
|
4.8
|
Outgoing Quality:
Foxconn must have internal processes and infrastructure in place to perform Product audits pursuant to a mutually-agreed sampling plan (the “
Sampling
Plan
”) to ensure only Products meeting all Specifications will be released from production and to perform finished goods inspection pursuant such Sampling Plan. Foxconn will have processes and infrastructure to perform [*****] outgoing inspection of each whole pallet configuration (such as labelling, unit quantity, and orientation) prior to container loading. Foxconn shall start at [*****]. If the quality is deemed by TB to be acceptable based on outgoing quality, TB Audits and Field failure analysis, Foxconn may reduce inspection levels to Level II with written agreement from TB. Foxconn shall ensure that the rate of failure of a particular Product (or series or family of Products) will never exceed [*****] of the Products delivered over a [*****] period due to a single root cause and/or single failure type and that there are effective processes to escalate, manage, contain and resolve issues in a timely way to minimize the exposure of such failure. In the event of failure, Foxconn needs to perform the rescreen/rework to minimize risk of defective units being shipped out as agreed to by Foxconn. TB can modify sampling rates as needed and deemed necessary to maintain outgoing quality levels.
|
4.9
|
Field Failure Analysis:
Foxconn shall support field failure analysis process as established in the SOW and drive product quality improvements, including by [*****].
|
4.10
|
Audit and Inspection Rights
:
TB shall have the right, at any time during the term of this Agreement, to audit Foxconn’s compliance with the terms of this Agreement (an “
Audit
”). TB may appoint one or more independent auditors subject to Foxconn approval and confidentiality obligations, not to be unreasonably withheld, conditioned or delayed (an “
Independent Auditor
”) to assist with an Audit.
|
1)
|
Books and Records Audit
:
The scope of an Audit may include [*****]. Foxconn shall and shall cause each of its Representatives to and request that each of its Vendors to, cooperate fully with any Audit. Foxconn shall further make its, and each of its Affiliates’, Vendors, employees, contractors, directors, officers and other representatives related to TB Products available for interview by TB and any Independent Auditor at reasonable times and places, and shall cause all such Persons to cooperate fully with any Audit, and shall promptly provide any records or other documents relating to this Agreement, the Product or the Services reasonably requested by TB or an Independent Auditor.
|
2)
|
Spot Testing
:
Upon prior notice to Foxconn, TB or its authorized representative(s) may conduct spot functional tests of the Products at Foxconn’s facility at which Products are being manufactured during Foxconn’s normal business hours. The Parties shall mutually agree upon the timing of such investigations, which shall be conducted in such a manner as not to unreasonably interfere with Foxconn’s operations.
|
3)
|
Manufacturing Quality Audits:
TB retains the right to inspect and audit all manufacturing operations and quality control processes involving their products to confirm the integrity and compliance by Foxconn with its quality system and the Specifications.
|
4)
|
Site Inspections
:
TB and any Independent Auditor will have the right to perform on-site inspections during normal business hours at Foxconn’s, or its Representative’s, premises and facilities, including review of production records related to Products. Foxconn will provide TB’s inspectors with reasonable assistance at no additional charge.
|
4.11
|
Working Conditions
:
Foxconn shall, and shall cause its Affiliates and Vendors to, comply with all applicable laws, regulations, and guidelines relating to employment, working conditions, occupational health and safety, and environmental compliance. Foxconn will maintain its membership in good standing with the Electronic Industry Citizenship Coalition (EICC). Additionally, Foxconn shall allow any counterparties of TB who may require social and environmental standards audits to be conducted at manufacturing facilities to conduct inspections of its facilities during normal business hours, with the presence of TB representatives if Foxconn so requests. TB will be responsible for the fees of the auditor in connection with any initial audits. Foxconn shall be responsible for any additional re-audit expenses relating to failure to pass audit requirements as well as any costs incurred by TB resulting from failure to pass social compliance and environmental standard audits.
|
5.
|
Intellectual Property and Proprietary Materials
|
5.1
|
Intellectual Property
:
All IPRs and other legal, moral, and equitable rights of any kind (including any physical and electronic embodiments of thereof, including BOMs, price analyses, design, documentation, graphic renderings, industrial design and styling sketches, diagrams, notes, software, firmware, computer files, memoranda, and any documents or materials generated from, including, or reflecting any such IPRs (collectively, the “
TB Proprietary Materials
”)) provided by TB or any of its Affiliates, employees, or agents to Foxconn or Foxconn Representatives (the “
TB IPRs
”) shall belong exclusively to TB and shall constitute Confidential Information of TB. Foxconn shall use such IPRs only as authorized in writing by TB and only to manufacture TB Products for TB and for no other purpose whatsoever. Within five (5) business days of the expiration or early termination of this Agreement or at TB’s request, all copies of TB Proprietary Materials under the
|
5.2
|
TB IPRs Developed by Foxconn
:
Any IPRs and other legal, moral and equitable rights of any kind conceived, reduced to practice, developed, authored or otherwise made by Foxconn or its Affiliates, Vendors, agents, directors or employees (collectively, the “
Foxconn
Representatives
”) in connection with or related to the Services, including as a result of any NRE activities (the “
Developed IPR
”), including the design and manufacture of the Product, shall constitute TB IPRs and belong exclusively to TB, provided that TB has fully paid for the actual documented NRE cost incurred by Foxconn in connection with such Developed IPR (the “
TB Developed IPR
”). The Parties acknowledge that
the TB Developed IPR is being created at the request of TB and shall be deemed a “work made for hire” as defined under U.S. copyright law for TB and exclusively owned by TB. To the extent any TB Developed IPR is deemed not to be a work made for hire made for TB, Foxconn hereby unconditionally and irrevocably assigns, on behalf of itself and the Foxconn Representatives, to TB all rights, title and interests in and to the TB Developed IPR. Foxconn shall cause the Foxconn Representatives to execute any additional documents and takes such actions as are necessary to register, record, and perfect TB’s right in the TB Developed IPR. Additionally, if any TB Developed IPR includes patentable rights, Foxconn shall give TB prompt written notice thereof and shall furnish TB with all relevant information, including but not limited to a complete written disclosure thereof, requested by TB with respect to such patentable rights. Foxconn represents, warrants and covenants that it will have in place with each Foxconn Representative a written agreement pursuant to which such Foxconn Representative assigns all rights, title and interests in and to the TB Developed IPR to Foxconn. Foxconn and the Foxconn Representatives shall have no further interest in the TB Developed IPR and shall not use any of the TB Developed IPR for any purpose whatsoever other than to perform Foxconn’s obligations under this Agreement. Foxconn shall immediately provide any documentation and materials relating to the TB Developed IPR to TB upon any request by TB.
|
5.3
|
License to Foxconn
:
TB hereby grants to Foxconn a limited, non-exclusive, revocable, royalty-free license, during the term of this Agreement, under TB IPRs related to the TB Product, solely to the extent necessary for Foxconn to perform the Services for TB under this Agreement. Foxconn may not sublicense any of its rights under the foregoing license except to its Affiliates and Vendors solely to the extent necessary for such Affiliates and Vendors to provide the Services for TB under this Agreement and only if such Vendors and Affiliates agree in writing with Foxconn to be subject to and comply with all applicable terms and conditions of this Agreement.
|
5.4
|
Protection of TB Proprietary Materials
:
Foxconn acknowledges TB's right, title and interest in and to TB IPRs and TB Proprietary Materials and will not at any time do or cause to be done any act or thing contesting or in any way impairing or intended to impair any part of such right, title or interest. If Foxconn becomes aware of any infringement of TB's IPRs, Foxconn shall immediately notify TB of such infringement and, at TB’s own cost and expense, cooperate with TB in the enforcement of TB's IPRs. Foxconn shall not, and shall cause the Foxconn
|
5.5
|
Information and Material:
Within five (5) business days after TB’s written request, Foxconn shall furnish to TB, at TB’s expense, the following for any and all Products:
|
6.
|
Product Warranty
|
6.1
|
Warranty
: Foxconn represents and warrants on an ongoing basis that: [*****]
|
6.2
|
Non-Conforming Products
:
In addition to any other remedies that TB may have, as to any Products which violate any representation or warranty of Foxconn (“
Non-Conforming Products
”), TB shall be entitled to a credit equal to [*****]. TB may use the services of the third party returns and refurbishment vendor to test returned Product and to provide reports documenting the quantity and nature of each defect and, if requested, will provide to Foxconn copies of such report and samples of such Non-Conforming Products for Foxconn’s review. Foxconn shall issue a Credit Note to TB for any Products mutually agreed to be Non-Conforming Products, including reasonable shipping, receiving and testing costs incurred by TB for such units. TB and will retain the defective product for use in its refurbishment operations.
|
6.3
|
Defective Product and Hazard Conditions
:
If either Party becomes aware of any information which reasonably supports a conclusion that a defect may exist in any Product, and such defect could cause (a) [*****] (hereinafter a "
Hazard
") or (b) [*****] (hereinafter a "
Defect
"), such Party shall immediately notify the other Party of the Hazard or Defect. Notice to the other Party shall precede notice to any governmental agency, unless otherwise r
equired
by
law.
Foxconn and TB shall promptly exchange all relevant data and, if practical, meet to review and discuss the information, tests and conclusions relating to the alleged Hazard or Defect. At any such meeting the Parties shall discuss the basis for any action, including a recall, and the origin or causation of the alleged Hazard or Defect,
provided
,
however
, that the TB shall have the right to make the ultimate decision regarding any recall or other method of addressing a Hazard or Defect. Foxconn shall cooperate with TB and provide reasonable assistance in facilitating such recall or other action at TB’s request. Foxconn shall be solely responsible for all costs resulting from such Hazards or Defects if such Products are Non-Conforming Products, including but not limited to the costs of effecting a recall and the related logistics, transportation and rework costs to TB. Each Party shall, on request, provide to the other reasonable assistance in (a) determining how best to deal with the Hazard or Defect and (b) preparing for and making any presentation before any governmental agency which may have jurisdiction over Hazards or Defects involving Products.
|
6.4
|
Warranty Costs
:
The Parties shall review on a [*****] basis the accrued warranty costs as compared to the costs for replaced product and refunds. The Parties shall negotiate in good faith the warranty costs for the Products.
|
7.
|
Additional Covenants of Foxconn
|
7.1
|
Exclusivity
:
Foxconn shall manufacture TB Products exclusively for TB, and shall not provide any TB Product to any other Person without TB’s prior written consent. Without limitation of the foregoing, Foxconn shall not, and shall cause each of its respective Affiliates not to, sell TB Products under a different label in any market without TB’s prior written consent.
|
7.2
|
Business Continuity Plan
: Foxconn shall develop and annually evaluate and test a formal business continuity plan (a “BCP”) detailing strategies for response to, and recovery from, a broad spectrum of potential disasters. TB shall have the right to review the BCP and results of its annual evaluation and testing. Foxconn is responsible for maintaining its facilities and operations according to applicable and prudent safety, security and fire protection standards and its BCP. Upon reasonable advance written notice from TB, Foxconn will allow TB and its designated representatives to visit and perform loss control audits of the facilities and operations during normal business hours and make reasonable recommendations for improvement to loss control processes. Foxconn shall review any such recommendations and implement any recommendations or alternative solutions upon which the Parties mutually agree.
|
7.3
|
Compliance with Law and Standards
: In performance of its obligations under this Agreement, both Parties agree to comply with all applicable laws, rules, regulations, orders and ordinances of the United States and any other state or country with jurisdiction over the Party or the Party’s activities in performance of its obligations hereunder, and Foxconn agrees to comply with (a) Product Specifications and (b) TB manufacturing, social and ethical standards.
|
7.4
|
Insurance
: Foxconn shall maintain insurance coverage in such amounts and coverage as reasonable and appropriate for the scope of its operations under this Agreement, including without limitation workers' compensation, comprehensive general liability insurance and product liability coverage, and shall name TB as an additional insured thereunder for issues not primarily arising from TB negligence or willful misconduct.
|
8.
|
Confidential Information, Liability and Indemnification
|
8.1
|
Confidential Information
:
Each Party shall, during the term of this Agreement and at all times thereafter, (x) hold all Confidential Information of the other Party in trust and in the strictest confidence, (y) not use, duplicate, reproduce, distribute, disclose, or otherwise disseminate such Confidential Information of the other Party without the other Party’s express written consent, except in the performance of its duties under this Agreement and (z) protect the Confidential Information from disclosure. Each Party shall take reasonable measures to maintain the confidentiality of the other Party’s Confidential Information. Each Party will immediately give notice to other Party of any unauthorized use or disclosure of Confidential Information. Each Party agrees to assist the other Party in remedying such unauthorized use or disclosure of Confidential Information. A disclosure of Confidential Information: (a) in response to a valid order by a court or other Governmental Authority, or (b) otherwise required by law, shall not be considered to be a breach of this Agreement or a waiver of confidentiality for other purposes; provided, however, that such Party shall: (i) provide prompt written notice thereof to the other to enable it to seek a protective order, confidential treatment or otherwise prevent such disclosure, (ii) cooperate in seeking such protective order or treatment and (iii) furnish only the portion of Confidential Information legally required to be disclosed and shall use its best efforts to ensure confidential treatment will be accorded such information.
|
8.2
|
Foxconn Indemnification
:
Foxconn agrees to defend, indemnify and hold harmless TB, its customers, and their respective directors, officers, employees, agents, customers and distributors from and against any and all claims, actions, demands, legal proceedings, liabilities, damages, judgments, settlements, reasonable costs and expenses, including, without limitation, attorneys’ reasonable fees and costs, arising out of or in connection with any alleged or actual: [*****] (collectively referred to as “Claims”).
|
8.3
|
TB Indemnification
:
TB agrees to defend, indemnify and hold harmless Foxconn, its customers, and their respective directors, officers, employees, agents, customers and distributors from and against any and all claims, actions, demands, legal proceedings, liabilities, damages, judgments,
|
9.
|
Termination and Term of Agreement
|
9.1
|
Term of Agreement
:
This Agreement shall begin on the Effective Date and continue for a period of [*****] from the date hereof (the “
Initial Term
”), unless earlier terminated under any of the following provisions:
|
1)
|
Breach:
Either Party may terminate this Agreement, effective [*****] after serving written notice, if the other Party commits a material breach of the terms hereof, unless, in the case of a breach capable of remedy: (a) specific action to cure the breach is taken within [*****] of the receipt by the defaulting Party of notice specifying the breach and requiring its remedy, (b) the breach is remedied in all material respects within [*****] of the receipt by the breaching Party of notice specifying the breach and (c) the breaching Party takes prompt and reasonable action to minimize the effect of such breach and to prevent future such breaches.
|
2)
|
Insolvency:
TB may terminate this Agreement upon [*****] notice if Foxconn (a) enters into bankruptcy, liquidation, or similar proceedings, (b) becomes insolvent or unable to pay its debts in the ordinary course of business or (c) ceases doing business.
|
3)
|
Convenience:
Following the Initial Term of this agreement, either party may terminate this Agreement without cause upon no less than [*****] prior written notice.
|
9.2
|
Extension
:
This Agreement will automatically renew for an extended term of [*****] at the expiration of the Initial Term or any extension thereof, unless either Foxconn or TB provides written notice of non-renewal at least [*****] prior to such expiration.
|
9.3
|
Surviving Termination
:
At least [*****] prior to the termination date of this Agreement, Foxconn will provide any documentation reasonably requested by TB to reconcile its Consigned Components and other inventory held by Foxconn and to carry on its activities with Vendors as provided in this Agreement, including Vendor contact information and purchasing records. For a period of [*****] following the termination date of this Agreement, Foxconn will provide TB with reasonable assistance and information to facilitate the return of Consigned Components and other inventory materials to TB and for the uninterrupted continuation of TB’s purchasing activities initiated under this Agreement. After the expiration or early termination of this Agreement in accordance with the terms hereof, this Agreement shall forthwith become null and void, and there shall be no further liability or obligation on the Parties; provided, however, that (i) this Section 9.3 and Sections 5, 6, 7.1, 8, and 10 shall survive termination of this Agreement, and (ii) each Party shall remain liable to the other Parties for any breach of this Agreement existing at the time of such termination or in respect of any PO accepted prior to termination.
|
10.
|
General
|
10.1
|
Governing Law and Dispute Resolution
:
This Agreement shall be construed in accordance with the laws of the state of California (without giving effect to any choice or conflict of law provision or rule that would cause the application of laws of any jurisdiction other than those of the state of California) and the Parties submit to the exclusive jurisdiction of the federal courts located in the Southern District of California. The Parties hereby irrevocably waive any and all claims and defenses either might otherwise have in any action or proceeding in any of such courts based upon any alleged lack of personal jurisdiction, improper venue, forum non conveniens or any similar claim or defense. The Parties agree that the United Nations Convention on Contracts for the International Sale of Goods (1980) is specifically excluded from application to this Agreement.
|
10.2
|
Notices
:
Any notice or other communication under this Agreement shall be in writing and shall be deemed to have been fully given or made when personally delivered, delivered by a reputable express courier service, or when sent by electronic mail to the addresses set forth below if sent between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day, or on the next business day if sent by electronic mail to the addresses set forth below if sent other than between 8:00 a.m. and 5:00 p.m. recipient’s local time on a business day, or three (3) calendar days after being mailed by registered or certified mail, postage prepaid, to the following addresses or such other addresses as a Party may provide by notice to the other Party from time to time:
|
For TB:
|
[*****]
|
10.3
|
Assignment
: Neither this Agreement, nor any rights or obligations contained therein, may be assigned or delegated by either Party without the prior written consent of the other Party, and any such purported assignment or delegation shall be void and of no effect. Subject to the foregoing, this Agreement will inure to the benefit of each Parties’ successors and assigns.
|
10.4
|
Amendments and Waivers
: No amendment, modification or waiver of any provision of this Agreement shall be effective unless set forth in a writing executed by an authorized representative of each Party. No failure or delay by any Party in exercising any right, power or remedy will operate as a waiver of any such right, power or remedy. No waiver of any provision of this Agreement shall constitute a continuing waiver or a waiver of any similar provision unless expressly set forth in a writing signed by an authorized representative of each Party.
|
10.5
|
Severability
: Should any provision herein
be deemed invalid or unenforceable, such provision will be amended to achieve as nearly as possible the same economic effect as the original provision and the remainder of this Agreement shall remain in full force.
|
10.6
|
Independent Parties
: The relationship created between Foxconn and TB under this Agreement shall be that of independent contractors. There is no relationship of agency, partnership, joint venture, employment or franchise between the Parties. Neither Party has the authority to bind the other or to incur any obligation on its behalf.
|
10.7
|
Specific Performance
: Each Party hereto agrees that its obligations hereunder are necessary and reasonable in order to protect the other Parties to this Agreement, and each Party expressly agrees and understands that monetary damages would inadequately compensate an injured Party for the breach of this Agreement, that this Agreement shall be specifically enforceable and that, in addition to any other remedies that may be available at law, in equity or otherwise, any breach or threatened breach of this Agreement shall be the proper subject of a temporary or permanent injunction or restraining order, without the necessity of proving actual damages or posting bond. Further, each Party hereto waives any claim or defense that there is an adequate remedy at law for such breach or threatened breach.
|
10.8
|
Interpretation
: When a reference is made in this Agreement to Sections, paragraphs or Schedules, such reference shall be to a Section, paragraph, or Schedule to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The terms defined in the singular have a
|
10.9
|
Entire Agreement
: This Agreement sets forth the entire agreement and understanding of the Parties relating to the subject matter contained herein, and merges all prior discussions and agreements, both oral and written, between the Parties.
|
TITLE:
|
Chief Accounting Officer
|
REPORTING TO:
|
John Hanson, CFO
|
START DATE:
|
TBD
|
COMPENSATION:
|
Your base salary will be $250,000 annually, paid in accordance with TB’s normal payroll practices (currently bi-weekly intervals of $9,615.38) and subject to applicable withholdings and deductions.
|
PREFORMANCE BONUS:
|
You will be eligible for a discretionary target annual Performance Bonus. Your target incentive is 30% of base salary. Your actual bonus will be based upon a variety of factors including company performance, pro-rated for partial years, and your achieving specified performance criteria to be established and approved with your manager. In the event that changes are made to any of the Bonus Plans, the changes will apply to you as they do other similarly situated employees of the Company.
Payment of your bonus will be delivered according to the regular annual incentive plan payout schedule. An annual bonus shall not be deemed earned by you until the Company has determined your entitlement to such bonus and only if you are employed by the Company (without having given or received notice of the termination of your employment) at the time such bonus is payable in accordance with the Bonus Plan and Company practices. The Company does not pay pro-rata bonuses upon departure.
|
SIGN ON BONUS
|
|
VACATION & SICK TIME:
|
You will be granted 20 paid days off per year (pro-rated based on your start date for your first year of employment), consisting of 14 vacation and 6 sick days, which are described in and governed by our standard vacation and sick day rules in effect from time to time. Upon termination of your employment for any reason, you will not be paid for any credited but unused sick days, unless otherwise required by applicable law.
|
BENEFITS:
|
At your option, and on the 1
st
of the month following your start date, you will be eligible to participate in our health benefit plans. The employee contribution depends on coverage election and is on a pre-tax basis. At your option, and on the 1
st
of the month following your start date, you may participate in the long-term disability and life insurance plans, which require employee contribution depending on coverage election and are on a post-tax basis. Following 30 days of employment, you may participate in the TB 401k plan.
|
PROPRIETARY INFORMATION AND EMPLOYMENT AGREEMENT:
|
Your employment is conditioned upon and you will be required to sign and return the enclosed Proprietary Information and Employment Agreement.
|
EQUITY PARTICIPATION:
|
You will be entitled to receive a grant of options to purchase 20,000 shares of Turtle Beach Corporation Common Stock, 25% of which will vest on the first anniversary of your first day of employment with the remainder vesting ratably each month over the following three year period, subject to the terms of any applicable agreements that you may be required to sign in connection with such options.
|
REPRESENTATION:
|
You represent that you are free to accept employment with TB and have no duties or obligations to any person or entity, by agreement or otherwise, that would prevent or impair you from fully performing your duties and responsibilities to TB.
|
POLICIES & PROCEDURES:
|
You will be required to comply with TB policies and procedures for employees as they may be in effect from time to time, which include, among other things, your obligations to comply with TB rules regarding confidential and proprietary information and trade secrets, and to furnish accurate and complete information to TB in connection with your application for employment.
|
CONFIDENTIALITY:
|
You agree not to disclose the terms of this letter to anyone, other than to your immediate family, your tax advisors and legal counsel (provided each such person agrees to maintain the confidentiality of the disclosed terms), or as otherwise required by law.
|
1.
|
I have reviewed this annual report on Form
10-K 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 officer(s) 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;
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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
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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
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5.
|
The registrant's other certifying officer(s) 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:
|
March 30, 2016
|
By:
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/s/ JUERGEN STARK
|
|
|
|
Juergen Stark
|
|
|
|
Chief Executive Officer and President
|
1.
|
I have reviewed this annual report on Form
10-K 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 officer(s) 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(s) 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:
|
March 30, 2016
|
By:
|
/s/ JOHN T. HANSON
|
|
|
|
John T. Hanson
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
1.
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date:
|
March 30, 2016
|
By:
|
/s/ JUERGEN STARK
|
|
|
|
Juergen Stark
|
|
|
|
Chief Executive Officer and President
|
|
|
|
(Principal Executive Officer)
|
Date:
|
March 30, 2016
|
By:
|
/s/ JOHN T. HANSON
|
|
|
|
John T. Hanson
|
|
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
|
|
(Principal Financial Officer)
|