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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to           

 

Commission File Number: 001-35465

 

TURTLE BEACH CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada

27-2767540

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

44 South Broadway, 4th Floor

White Plains, New York

10601

(Address of principal executive offices)

(Zip Code)

 

(888) 496-8001

(Registrant’s telephone number, including area code)     

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock, par value $0.001

HEAR

Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No

The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding on April 30,2021 was 15,820,573

 


 

INDEX

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

2

 

 

 

Item 1.

Financial Statements (unaudited)

2

 

 

 

 

  Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020

3

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

5

 

 

 

 

Condensed Consolidated Statement of Stockholder's Equity (Deficit) for the Three Months Ended March 31, 2021 and 2020

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

23

 

 

 

Item 4.

Controls and Procedures

24

 

 

 

PART II. OTHER INFORMATION

25

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

Item 1A.

Risk Factors

25

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

34

 

 

 

Item 5.

Other Information

34

 

 

 

Item 6.

Exhibits

35

 

 

SIGNATURES

36

 

 

1


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Turtle Beach Corporation

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands, except per-share data)

 

Net revenue

 

$

93,053

 

 

$

35,007

 

Cost of revenue

 

 

58,198

 

 

 

24,222

 

Gross profit

 

 

34,855

 

 

 

10,785

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling and marketing

 

 

11,545

 

 

 

7,648

 

Research and development

 

 

3,993

 

 

 

2,427

 

General and administrative

 

 

7,037

 

 

 

5,723

 

Total operating expenses

 

 

22,575

 

 

 

15,798

 

Operating income (loss)

 

 

12,280

 

 

 

(5,013

)

Interest expense

 

 

97

 

 

 

169

 

Other non-operating expense, net

 

 

579

 

 

 

197

 

Income (loss) before income tax

 

 

11,604

 

 

 

(5,379

)

Income tax expense (benefit)

 

 

2,766

 

 

 

(1,824

)

Net income (loss)

 

$

8,838

 

 

$

(3,555

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

 

$

0.57

 

 

$

(0.25

)

Diluted

 

$

0.49

 

 

$

(0.25

)

Weighted average number of shares:

 

 

 

 

 

 

 

 

Basic

 

 

15,551

 

 

 

14,495

 

Diluted

 

 

18,076

 

 

 

14,495

 

 

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

2


Turtle Beach Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

2021

 

 

March 31,

2020

 

 

 

(in thousands)

 

Net income (loss)

 

$

8,838

 

 

$

(3,555

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(711

)

 

 

(819

)

Other comprehensive income (loss)

 

 

(711

)

 

 

(819

)

Comprehensive income (loss)

 

$

8,127

 

 

$

(4,374

)

 

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

 

3


 

 

Turtle Beach Corporation

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

(in thousands, except par value and share amounts)

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,965

 

 

$

46,681

 

Accounts receivable, net

 

 

32,370

 

 

 

43,867

 

Inventories

 

 

59,136

 

 

 

71,301

 

Prepaid expenses and other current assets

 

 

14,685

 

 

 

8,127

 

Total Current Assets

 

 

169,156

 

 

 

169,976

 

Property and equipment, net

 

 

7,089

 

 

 

6,575

 

Deferred income taxes

 

 

7,334

 

 

 

6,946

 

Goodwill

 

 

10,686

 

 

 

8,178

 

Intangible assets, net

 

 

6,760

 

 

 

5,138

 

Other assets

 

 

6,380

 

 

 

6,640

 

Total Assets

 

$

207,405

 

 

$

203,453

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Revolving credit facility

 

$

 

 

$

 

Accounts payable

 

 

27,761

 

 

 

42,529

 

Other current liabilities

 

 

44,011

 

 

 

36,122

 

Total Current Liabilities

 

 

71,772

 

 

 

78,651

 

Income tax payable

 

 

3,432

 

 

 

3,146

 

Other liabilities

 

 

5,079

 

 

 

5,257

 

Total Liabilities

 

 

80,283

 

 

 

87,054

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value - 25,000,000 shares authorized; 15,653,644 and 15,475,504 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

16

 

 

 

15

 

Additional paid-in capital

 

 

193,163

 

 

 

190,568

 

Accumulated deficit

 

 

(65,935

)

 

 

(74,773

)

Accumulated other comprehensive income (loss)

 

 

(122

)

 

 

589

 

Total Stockholders’ Equity

 

 

127,122

 

 

 

116,399

 

Total Liabilities and Stockholders’ Equity

 

$

207,405

 

 

$

203,453

 

 

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

 

4


 

Turtle Beach Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31, 2021

 

 

March 31, 2020

 

 

 

(in thousands)

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,838

 

 

$

(3,555

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

739

 

 

 

1,033

 

Amortization of intangible assets

 

 

303

 

 

 

222

 

Amortization of debt financing costs

 

 

47

 

 

 

47

 

Stock-based compensation

 

 

1,786

 

 

 

999

 

Deferred income taxes

 

 

(388

)

 

 

(1,891

)

Change in sales returns reserve

 

 

678

 

 

 

(2,553

)

Provision for obsolete inventory

 

 

57

 

 

 

439

 

Increase in fair value of contingent consideration

 

 

 

 

 

21

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

10,819

 

 

 

34,681

 

Inventories

 

 

12,108

 

 

 

5,981

 

Accounts payable

 

 

(15,669

)

 

 

(11,192

)

Prepaid expenses and other assets

 

 

(6,568

)

 

 

(1,091

)

Income taxes payable

 

 

3,086

 

 

 

(132

)

Other liabilities

 

 

5,251

 

 

 

(5,483

)

Net cash provided by operating activities

 

 

21,087

 

 

 

17,526

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,280

)

 

 

(890

)

Acquisition of a business, net of cash acquired

 

 

(2,500

)

 

 

 

Net cash used for investing activities

 

 

(4,780

)

 

 

(890

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

97,032

 

 

 

48,426

 

Repayment of revolving credit facilities

 

 

(97,032

)

 

 

(63,780

)

Proceeds from exercise of stock options and warrants

 

 

911

 

 

 

18

 

Repurchase of common stock to satisfy employee tax withholding obligations

 

 

(215

)

 

 

(48

)

Net cash provided by (cash used for) financing activities

 

 

696

 

 

 

(15,384

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(719

)

 

 

(768

)

Net increase in cash and cash equivalents

 

 

16,284

 

 

 

484

 

Cash and cash equivalents - beginning of period

 

 

46,681

 

 

 

8,249

 

Cash and cash equivalents - end of period

 

$

62,965

 

 

$

8,733

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF INFORMATION

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

64

 

 

$

161

 

Cash paid for income taxes

 

$

5

 

 

$

175

 

 

 

 

 

 

 

 

 

 

 

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

5


Turtle Beach Corporation

Condensed Consolidated Statement of StockholdersEquity (Deficit)

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2020

 

 

15,476

 

 

$

15

 

 

$

190,568

 

 

$

(74,773

)

 

$

589

 

 

$

116,399

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,838

 

 

 

 

 

 

8,838

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(711

)

 

 

(711

)

Issuance of restricted stock

 

 

26

 

 

 

 

 

 

113

 

 

 

 

 

 

 

 

 

113

 

Repurchase of common stock and retirement of related treasury shares

 

 

(6

)

 

 

 

 

 

(215

)

 

 

 

 

 

 

 

 

(215

)

Stock options exercised

 

 

159

 

 

 

1

 

 

 

911

 

 

 

 

 

 

 

 

 

912

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,786

 

 

 

 

 

 

 

 

 

1,786

 

Balance at March 31, 2021

 

 

15,655

 

 

$

16

 

 

$

193,163

 

 

$

(65,935

)

 

$

(122

)

 

$

127,122

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

 

 

(in thousands)

 

Balance at December 31, 2019

 

 

14,488

 

 

$

14

 

 

$

176,776

 

 

$

(113,519

)

 

$

116

 

 

$

63,387

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,555

)

 

 

 

 

 

(3,555

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(819

)

 

 

(819

)

Issuance of restricted stock

 

 

19

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Repurchase of common stock and retirement of related treasury shares

 

 

(7

)

 

 

 

 

 

(48

)

 

 

 

 

 

 

 

 

(48

)

Stock options exercised

 

 

6

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Stock-based compensation

 

 

 

 

 

 

 

 

999

 

 

 

 

 

 

 

 

 

999

 

Balance at March 31, 2020

 

 

14,506

 

 

$

15

 

 

$

177,745

 

 

$

(117,074

)

 

$

(703

)

 

$

59,983

 

 

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

6


Turtle Beach Corporation

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

Note 1. Background and Basis of Presentation

Organization

 

Turtle Beach Corporation (“Turtle Beach” or the “Company”), headquartered in White Plains, New York and incorporated in the state of Nevada in 2010, is a premier audio and gaming technology company with expertise and experience in developing, commercializing and marketing innovative products across a range of large addressable markets under the Turtle Beach® and ROCCAT®. Turtle Beach is a worldwide leader of feature-rich headset solutions for use across multiple platforms, including video game and entertainment consoles, handheld consoles, personal computers (“PC”), tablets and mobile devices. Under the ROCCAT brand, the Company creates award-winning keyboards, mice, headsets, mousepads, and other computer accessories. The recently acquired, Neat Microphones® brand creates high-quality USB and analog microphones for gamers, streamers, and professionals that embrace cutting-edge technology and design.

 

VTB Holdings, Inc. (“VTBH”), a wholly-owned subsidiary of Turtle Beach and the owner of Voyetra Turtle Beach, Inc. (“VTB”), was incorporated in the state of Delaware in 2010. VTB, the owner of TBC Holding Company LLC and Turtle Beach Europe Limited (“TB Europe”), was incorporated in the state of Delaware in 1975 with operations principally located in White Plains, New York. TB Europe, the owner of TB Germany GmbH, was incorporated in the United Kingdom in 1999.

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year.

The December 31, 2020 Condensed Consolidated Balance Sheet has been derived from the Company’s audited financial statements included in its Annual Report on Form 10-K filed with the SEC on March 4, 2021 (“Annual Report”).

These financial statements should be read in conjunction with the annual financial statements and the notes thereto included in the Annual Report that contains information useful to understanding the Company's businesses and financial statement presentations.

Use of estimates: The preparation of accompanying unaudited consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements and reported amounts of revenues and expenses during the reporting period. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the consolidated financial statements in the period in which such changes occur. Future actual results could differ materially from these estimates.

The novel coronavirus (“COVID-19”) pandemic has disrupted worldwide economic markets and the extent to which COVID-19 continues to affect the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. We continue to actively monitor and assess the impact of the pandemic on our business, operations, and financial condition.

 

Note 2. Summary of Significant Accounting Policies

The preparation of consolidated annual and quarterly financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Company’s consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. The Company can give no assurance that actual results will not differ from those estimates.

There have been no material changes to the critical accounting policies and estimates from the information provided in Note 1 of the notes to our consolidated financial statements in our Annual Report.  

7


Note 3. Acquisitions

 

Neat Microphones

 

On January 12, 2021, the Company acquired certain assets related to the Neat Microphones business of Stray Electrons LLC, a California limited liability company (“Neat Microphones”) for a purchase price of $2.5 million and up to $2.3 million in potential earn-outs based on revenues and earnings targets for the year ended December 31, 2021, as provided in the asset purchase agreement. The closing payment was funded from cash on the Company’s balance sheet. In addition, business transaction costs incurred in connection with the acquisition of $0.2 million for the three months ended March 31, 2021, were recorded as a component of “General and administrative” expenses in the Condensed Consolidated Statements of Operations. Neat Microphones creates, manufactures, and sells high-quality digital USB and analog microphones that embrace cutting-edge technology and design.

 

The fair values of Neat Microphone’s assets and liabilities are provisional and were determined based on preliminary estimates and assumptions that management believes are reasonable. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. These adjustments will primarily relate to certain intangible assets and certain liabilities including contingent consideration. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information is available, including the completion of a valuation of the intangible assets and the contingent consideration, but no later than one year from the acquisition date.

The goodwill from the acquisition of Neat Microphones, which is fully deductible for tax purposes, consists largely of synergies and economies of scale expected from adding the operations of Neat Microphones’ and the Company’s existing business and supply channels.

The preliminary estimate of fair value of Neat Microphone’s identifiable intangible assets was determined primarily using the “income approach,” which requires a forecast of all expected future cash flows either through the use of the multi-period excess earnings method or the relief-from-royalty method. Some of the more significant assumptions inherent in the development of intangible asset values include: the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows, the assessment of the intangible asset’s life cycle, as well as other factors. The following table summarizes key information underlying intangible assets related to the Neat Microphones acquisition:

(In thousands)

 

Life

 

Amount

 

Developed technology

 

7 Years

 

$

1,100

 

Customer relationships

 

2 Years

 

 

440

 

Tradenames

 

10 Years

 

 

380

 

Total

 

 

 

$

1,920

 

 

In addition, the Company recorded $1.9 million fair value of contingent consideration associated with the potential $2.3 million earn-outs as a component of “Other Current Liabilities” within the Condensed Consolidated Balance Sheet.

 

Note 4. Fair Value Measurement

The Company follows a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

 

 

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.

8


Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt instruments and certain warrants. As of March 31, 2021 and December 31, 2020, the Company had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted. The following is a summary of the carrying amounts and estimated fair values of our financial instruments at March 31, 2021 and December 31, 2020.

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Reported

 

 

Fair Value

 

 

Reported

 

 

Fair Value

 

 

 

(in thousands)

 

Financial Assets and Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,965

 

 

$

62,965

 

 

$

46,681

 

 

$

46,681

 

Contingent consideration liabilities

 

$

1,928

 

 

$

1,928

 

 

$

-

 

 

$

-

 

 

Cash equivalents are stated at amortized cost, which approximates fair value as of the consolidated balance sheet dates, due to the short period of time to maturity; and accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows.

Note 5. Allowance for Sales Returns

The following table provides the changes in our sales return reserve, which is classified as a reduction of accounts receivable:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

Balance, beginning of period

 

$

11,233

 

 

$

8,815

 

Reserve accrual

 

 

6,551

 

 

 

2,651

 

Recoveries and deductions, net

 

 

(5,873

)

 

 

(5,204

)

Balance, end of period

 

$

11,911

 

 

$

6,262

 

 

Note 6. Composition of Certain Financial Statement Items

Inventories

Inventories consist of the following:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

 

 

(in thousands)

 

Finished goods

 

$

57,965

 

 

$

69,939

 

Raw materials

 

 

1,171

 

 

 

1,362

 

Total inventories

 

$

59,136

 

 

$

71,301

 

 

Property and Equipment, net

Property and equipment, net, consists of the following:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

 

 

(in thousands)

 

Machinery and equipment

 

$

2,194

 

 

$

2,223

 

Software and software development

 

 

2,240

 

 

 

1,629

 

Furniture and fixtures

 

 

1,094

 

 

 

1,123

 

Tooling

 

 

6,855

 

 

 

6,548

 

Leasehold improvements

 

 

1,848

 

 

 

1,833

 

Demonstration units and convention booths

 

 

14,283

 

 

 

14,439

 

Total property and equipment, gross

 

 

28,514

 

 

 

27,795

 

Less: accumulated depreciation and amortization

 

 

(21,425

)

 

 

(21,220

)

Total property and equipment, net

 

$

7,089

 

 

$

6,575

 

9


 

 

Other Current Liabilities

Other current liabilities consist of the following:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

 

 

(in thousands)

 

Accrued tax-related payables

 

 

9,126

 

 

 

5,670

 

Accrued royalty

 

 

9,001

 

 

 

5,166

 

Accrued employee expenses

 

 

7,709

 

 

 

7,138

 

Accrued freight

 

 

2,282

 

 

 

3,401

 

Accrued marketing

 

 

5,332

 

 

 

5,487

 

Contingent consideration

 

 

1,928

 

 

 

-

 

Accrued expenses

 

 

8,633

 

 

 

9,260

 

Total other current liabilities

 

$

44,011

 

 

$

36,122

 

 

Note 7. Goodwill and Other Intangible Assets

Acquired Intangible Assets

Acquired identifiable intangible assets, and related accumulated amortization, as of March 31, 2021 and December 31, 2020 consist of:

 

 

 

March 31, 2021

 

 

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

 

 

(in thousands)

 

Customer relationships

 

$

8,355

 

 

$

5,760

 

 

$

2,595

 

Tradenames

 

 

3,066

 

 

 

500

 

 

 

2,566

 

Developed technology

 

 

1,884

 

 

 

238

 

 

 

1,646

 

Foreign currency

 

 

(804

)

 

 

(757

)

 

 

(47

)

Total Intangible Assets

 

$

12,501

 

 

$

5,741

 

 

$

6,760

 

 

 

 

December 31, 2020

 

 

 

Gross

Carrying

Value

 

 

Accumulated

Amortization

 

 

Net Book

Value

 

 

 

(in thousands)

 

Customer relationships

 

$

7,915

 

 

$

5,584

 

 

$

2,331

 

Tradenames

 

 

2,686

 

 

 

425

 

 

 

2,261

 

Developed technology

 

 

784

 

 

 

177

 

 

 

607

 

Foreign currency

 

 

(845

)

 

 

(784

)

 

 

(61

)

Total Intangible Assets

 

$

10,540

 

 

$

5,402

 

 

$

5,138

 

 

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

 

In May 2019, the Company acquired the business and assets of ROCCAT. The acquired intangible assets of ROCCAT relating to developed technology, customer relationships and trade name are subject to amortization. In January 2021, the Company acquired the business and assets of Neat Microphones. The acquired intangible assets of Neat Microphones related to developed technology, customer relationships and trade name are subject to amortization. Refer to Note 3, “Acquisitions” for additional information related to Neat Microphone’s identifiable intangible assets.

Amortization expense related to definite lived intangible assets of $0.3 million was recognized for the three months ended March 31, 2021, and $0.2 million for the three months ended March 31, 2020.

 

10


 

As of March 31, 2021, estimated annual amortization expense related to definite lived intangible assets in future periods is as follows:

 

 

 

(in thousands)

 

2021