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~~ Yes☒No 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~~ Yes☒No 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

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 ☒

Number of shares of each class of the issuer's common stock outstanding as of the latest practicable date.


	November 30, 2021			February 28, 2021			May 31, 2022			February 28, 2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	21,162		$	59,404		$	5,733		$	27,788
Accounts receivable, net		131,811			106,165			82,645			105,625
Inventory		166,361			130,793			181,187			174,922
Receivables from vendors		398			277			217			363
Prepaid expenses and other current assets		24,935			22,266			19,602			21,340
Income tax receivable		431			434			749			734
Total current assets		345,098			319,339			290,133			330,772
Investment securities		1,440			1,777			1,222			1,231
Equity investment		22,628			23,267			22,010			21,348
Property, plant and equipment, net		50,692			52,026			49,813			49,794
Operating lease, right of use asset		4,010			4,572			4,255			4,464
Goodwill		66,913			58,311			72,507			74,320
Intangible assets, net		111,293			90,104			97,541			101,450
Deferred income tax assets		95			99			39			40
Other assets		946			1,323			3,577			3,245
Total assets	$	603,115		$	550,818		$	541,097		$	586,664
Liabilities, Redeemable Equity, Redeemable Non-Controlling Interest, and Stockholders' Equity
Current liabilities:
Accounts payable	$	78,274		$	61,826		$	54,113		$	76,665
Accrued expenses and other current liabilities		64,782			53,392			46,923			54,659
Income taxes payable		1,172			1,587			1,545			2,714
Accrued sales incentives		31,450			25,313			20,427			23,755
Interim arbitration award payable (see Note 24)		39,444			0			40,431			39,444
Contract liabilities, current		3,713			4,178			4,218			4,373
Current portion of long-term debt		2,091			500			500			2,406
Total current liabilities		220,926			146,796			168,157			204,016
Long-term debt, net of debt issuance costs		9,925			5,962			14,858			9,786
Finance lease liabilities, less current portion		117			302			39			78
Operating lease liabilities, less current portion		3,073			3,582			3,067			3,298
Deferred compensation		1,440			1,777			1,222			1,231
Contingent consideration, less current portion (see Note 2)		5,582			0			5,001			5,750
Deferred income tax liabilities		6,128			6,645			4,330			5,300
Other tax liabilities		1,002			1,170			913			1,083
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC (see Note 21)								3,692			2,451
Other long-term liabilities		5,790			5,255			3,279			3,508
Total liabilities		253,983			171,489			204,558			236,501
Commitments and contingencies (see Note 24)
Redeemable equity (see Note 8)		3,448			3,260			3,450			3,550
Redeemable non-controlling interest (see Note 2)		1,355			0			(227	)		511
Stockholders' equity:
Preferred stock:
NaN shares issued or outstanding (see Note 20)		0			0			—			—
Common stock:
Class A, $.01 par value, 60,000,000 shares authorized, 24,476,847 and 24,416,194 shares issued and 21,614,629 and 21,666,976 shares outstanding at November 30, 2021 and February 28, 2021, respectively		245			245
Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both November 30, 2021 and February 28, 2021		22			22
Class A, $.01 par value, 60,000,000 shares authorized, 24,538,184 and 24,476,847 shares issued and 21,675,966 and 21,614,629 shares outstanding at May 31, 2022 and February 28, 2022, respectively								246			245
Class B Convertible, $.01 par value, 10,000,000 shares authorized, 2,260,954 shares issued and outstanding at both May 31, 2022 and February 28, 2022								22			22
Paid-in capital		300,240			300,402			296,175			300,453
Retained earnings		123,812			148,906			120,046			126,573
Accumulated other comprehensive loss		(17,249	)		(14,977	)		(18,878	)		(17,503	)
Less: Treasury stock, at cost, 2,862,218 and 2,749,218 shares of Class A Common Stock at November 31, 2021 and February 28, 2021, respectively		(25,138	)		(23,918	)
Less: Treasury stock, at cost, 2,862,218 shares of Class A Common Stock at both May 31, 2022 and February 28, 2022								(25,138	)		(25,138	)
Less: Redeemable equity		(3,448	)		(3,260	)		(3,450	)		(3,550	)
Total VOXX International Corporation stockholders' equity		378,484			407,420			369,023			381,102
Non-controlling interest		(34,155	)		(31,351	)		(35,707	)		(35,000	)
Total stockholders' equity		344,329			376,069			333,316			346,102
Total liabilities, redeemable equity, redeemable non-controlling interest, and stockholders' equity	$	603,115		$	550,818		$	541,097		$	586,664


	Three months ended November 30,						Nine months ended November 30,						Three months ended May 31,
	2021			2020			2021			2020			2022			2021
Net sales	$	191,871		$	201,065		$	472,040		$	401,084		$	128,732		$	137,060
Cost of sales		140,167			142,937			346,455			284,905			95,493			100,365
Gross profit		51,704			58,128			125,585			116,179			33,239			36,695
Operating expenses:
Selling		13,864			13,176			37,169			30,976			12,285			11,467
General and administrative		20,049			21,104			56,609			51,398			19,130			18,676
Engineering and technical support		9,706			5,676			23,824			14,942			8,389			6,232
Acquisition costs		287			24			3,279			270			136			676
Total operating expenses		43,906			39,980			120,881			97,586			39,940			37,051
Operating income		7,798			18,148			4,704			18,593
Operating loss														(6,701	)		(356	)
Other (expense) income:
Interest and bank charges		(730	)		(471	)		(1,840	)		(2,280	)		(730	)		(528	)
Equity in income of equity investee		2,206			1,761			6,964			4,506			1,588			2,723
Interim arbitration award (see Note 24)		(39,444	)		—			(39,444	)		—			(986	)		—
Investment gain (see Note 4)		—			42			—			42
Other, net		(143	)		294			675			753			(2,110	)		442
Total other (expense) income, net		(38,111	)		1,626			(33,645	)		3,021			(2,238	)		2,637
(Loss) income before income taxes		(30,313	)		19,774			(28,941	)		21,614			(8,939	)		2,281
Income tax (benefit) expense		(641	)		2,334			(374	)		6,724			(1,092	)		484
Net (loss) income		(29,672	)		17,440			(28,567	)		14,890			(7,847	)		1,797
Less: net loss attributable to non-controlling interest		(1,551	)		(811	)		(3,473	)		(2,429	)		(1,320	)		(919	)
Net (loss) income attributable to VOXX International Corporation	$	(28,121	)	$	18,251		$	(25,094	)	$	17,319		$	(6,527	)	$	2,716
Other comprehensive income (loss):
Other comprehensive (loss) income:
Foreign currency translation adjustments		(1,835	)		79			(2,797	)		3,608			(1,494	)		372
Derivatives designated for hedging		184			(43	)		466			(514	)		87			119
Pension plan adjustments		36			(6	)		59			(85	)		32			1
Other comprehensive (loss) income, net of tax		(1,615	)		30			(2,272	)		3,009			(1,375	)		492
Comprehensive (loss) income attributable to VOXX International Corporation	$	(29,736	)	$	18,281		$	(27,366	)	$	20,328		$	(7,902	)	$	3,208
(Loss) income per share - basic: Attributable to VOXX International Corporation	$	(1.16	)	$	0.75		$	(1.03	)	$	0.72		$	(0.27	)	$	0.11
(Loss) income per share - diluted: Attributable to VOXX International Corporation	$	(1.16	)	$	0.74		$	(1.03	)	$	0.71		$	(0.27	)	$	0.11
Weighted-average common shares outstanding (basic)		24,289,909			24,197,786			24,279,084			24,196,393			24,412,462			24,266,242
Weighted-average common shares outstanding (diluted)		24,289,909			24,677,525			24,279,084			24,532,329			24,412,462			24,925,974

For the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~


																								Class A and Class B Common Stock		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Treasury Stock			Redeemable Equity			Total Stock- holders' Equity
Balances at February 28, 2022																								$	267	$	300,453		$	126,573		$	(17,503	)	$	(35,000	)	$	(25,138	)	$	(3,550	)	$	346,102
Net loss																									—		—			(6,527	)		—			(707	)		—			—			(7,234	)
Other comprehensive loss, net of tax																									—		—			—			(1,375	)		—			—			—			(1,375	)
Cash settlement of market stock units upon vesting of 80% of award																									—		(4,000	)		—			—			—			—			—			(4,000	)
Net settlement of 61,337 shares of common stock upon vesting of stock awards, net of withholding taxes																									1		(404	)		—			—			—			—			—			(403	)
Reclassification of stockholders' equity to redeemable equity																									—		—			—			—			—			—			(33	)		(33	)
Stock-based compensation expense																									—		126			—			—			—			—			133			259
Balances at May 31, 2022																									268		296,175			120,046			(18,878	)		(35,707	)		(25,138	)		(3,450	)		333,316

	Class A and Class B Common Stock		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non- controlling Interests			Treasury Stock			Redeemable Equity			Total Stock- holders' Equity
Balances at February 28, 2021	$	267	$	300,402		$	148,906		$	(14,977	)	$	(31,351	)	$	(23,918	)	$	(3,260	)	$	376,069		$	267	$	300,402		$	148,906		$	(14,977	)	$	(31,351	)	$	(23,918	)	$	(3,260	)	$	376,069
Net income (loss)		0		0			2,716			0			(919	)		0			0			1,797			—		—			2,716			—			(919	)		—			—			1,797
Other comprehensive income, net of tax		0		0			0			492			0			0			0			492			—		—			—			492			—			—			—			492
Net settlement of 60,693 shares of common stock upon vesting of stock awards		0		(856	)		0			0			0			0			0			(856	)
Settlement of 60,693 shares of Class A Common Stock upon vesting of stock awards, net of withholding taxes																									—		(856	)		—			—			—			—			—			(856	)
Stock-based compensation expense		0		236			0			0			0			0			34			270			—		236			—			—			—			—			34			270
Balances at May 31, 2021		267		299,782			151,622			(14,485	)		(32,270	)		(23,918	)		(3,226	)		377,772			267		299,782			151,622			(14,485	)		(32,270	)		(23,918	)		(3,226	)		377,772
Net income (loss)		0		0			311			0			(1,003	)		0			0			(692	)
Other comprehensive loss, net of tax		0		0			0			(1,149	)		0			0			0			(1,149	)
Repurchase of 113,000 shares of Class A common stock		0		0			0			0			0			(1,220	)		0			(1,220	)
Stock-based compensation expense		0		237			0			0			0			0			(119	)		118
Balances at August 31, 2021		267		300,019			151,933			(15,634	)		(33,273	)		(25,138	)		(3,345	)		374,829
Net loss		0		0			(28,121	)		0			(882	)		0			0			(29,003	)
Other comprehensive loss, net of tax		0		0			0			(1,615	)		0			0			0			(1,615	)
Stock-based compensation expense		0		221			0			0			0			0			(103	)		118
Balances at November 30, 2021	$	267	$	300,240		$	123,812		$	(17,249	)	$	(34,155	)	$	(25,138	)	$	(3,448	)	$	344,329


Balances at February 29, 2020	$	266	$	299,228		$	122,139		$	(19,055	)	$	(27,950	)	$	(23,918	)	$	(2,481	)	$	348,229
Net loss		0		0			(8,272	)		0			(833	)		0			0			(9,105	)
Other comprehensive income, net of tax		0		0			0			313			0			0			0			313
Stock-based compensation expense		1		351			0			0			0			0			(201	)		151
Balances at May 31, 2020		267		299,579			113,867			(18,742	)		(28,783	)		(23,918	)		(2,682	)		339,588
Net income (loss)		0		0			7,340			0			(785	)		0			0			6,555
Other comprehensive income, net of tax		0		0			0			2,666			0			0			0			2,666
Settlement of SERP restricted stock units		0		(575	)		0			0			0			0			0			(575	)
Stock-based compensation expense		0		335			0			0			0			0			(85	)		250
Balances at August 31, 2020		267		299,339			121,207			(16,076	)		(29,568	)		(23,918	)		(2,767	)		348,484
Net income (loss)		0		0			18,251			0			(811	)		0			0			17,440
Other comprehensive income, net of tax		0		0			0			30			0			0			0			30
Stock-based compensation expense		0		768			0			0			0			0			(192	)		576
Balances at November 30, 2020	$	267	$	300,107		$	139,458		$	(16,046	)	$	(30,379	)	$	(23,918	)	$	(2,959	)	$	366,530


	Nine months ended November 30,						Three months ended May 31,
	2021			2020			2022			2021
Cash flows from operating activities:
Net (loss) income	$	(28,567	)	$	14,890		$	(7,847	)	$	1,797
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		8,978			8,224			3,117			2,807
Amortization of debt discount		208			508			63			83
Bad debt expense (recovery)		201			(385	)
Bad debt (recovery) expense								(70	)		19
Reduction in the carrying amount of the right of use asset		1,007			836			395			341
Loss on forward contracts		232			61
(Gain) loss on forward contracts								(63	)		174
Equity in income of equity investees		(6,964	)		(4,506	)		(1,588	)		(2,723	)
Distribution of income from equity investees		7,603			4,248			926			2,845
Deferred income tax (benefit) expense		(578	)		4,187			(935	)		318
Non-cash compensation adjustment		(337	)		(455	)		(9	)		(92	)
Stock based compensation expense		694			1,454			126			236
Changes in operating assets and liabilities:
Accounts receivable		(27,372	)		(78,692	)		22,105			10,803
Inventory		(36,344	)		(31,406	)		(7,543	)		(5,827	)
Receivables from vendors		(122	)		(19	)		145			(80	)
Prepaid expenses and other		(2,486	)		(6,465	)		1,254			(1,223	)
Investment securities-trading		337			455			9			92
Accounts payable, accrued expenses, accrued sales incentives, contract liabilities, and other liabilities		73,903			83,049			(31,092	)		(26,777	)
Income taxes payable		(401	)		1,388			(1,260	)		164
Net cash used in operating activities		(10,008	)		(2,628	)		(22,267	)		(17,043	)
Cash flows from investing activities:
Purchases of property, plant, and equipment		(3,046	)		(3,510	)		(1,383	)		(927	)
Purchase of acquired business		(30,406	)		(11,000	)
Issuance of promissory note								—			(3,000	)
Net cash used in investing activities		(33,452	)		(14,510	)		(1,383	)		(3,927	)
Cash flows from financing activities:
Principal payments on finance lease obligation		(323	)		(470	)		(73	)		(114	)
Repayment of bank obligations		(375	)		(20,375	)		(24,499	)		(125	)
Borrowings on bank obligations		1,656			20,000			28,138			—
Deferred financing costs		(667	)		(260	)		—			(660	)
Settlement of market stock unit awards								(4,000	)		—
Withholding taxes paid on net issuance of stock award		(857	)		—			(404	)		(856	)
Settlement of restricted stock units		—			(575	)
Purchase of treasury stock		(1,220	)		—
Proceeds from the issuance of subsidiary shares to non-controlling interest		2,069			—
Proceeds from the issuance of long-term debt to non-controlling interest		4,877			—
Net cash provided by (used in) financing activities		5,160			(1,680	)
Net cash used in financing activities								(838	)		(1,755	)
Effect of exchange rate changes on cash		58			2,730			2,433			31
Net decrease in cash and cash equivalents		(38,242	)		(16,088	)		(22,055	)		(22,694	)
Cash and cash equivalents at beginning of period		59,404			37,425			27,788			59,404
Cash and cash equivalents at end of period	$	21,162		$	21,337		$	5,733		$	36,710

(1) Basis of Presentation

~~(1)~~

~~Basis of Presentation~~

The accompanying unaudited interim consolidated financial statements of VOXX International Corporation and Subsidiaries ("Voxx" or the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 270 for interim financial information, and in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and include all adjustments (consisting of normal recurring adjustments), which, in the opinion of management, are necessary to present fairly the consolidated financial position, results of operations, changes in stockholders’ equity, and cash flows for all periods presented. The results of operations are not necessarily indicative of the results to be expected for the full fiscal year or any interim period. These unaudited consolidated financial statements do not include all disclosures associated with audited consolidated financial statements prepared in accordance with GAAP. Accordingly, these statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto contained in the Company's Form 10-K for the fiscal year ended February 28, ~~2021.~~2022. Certain amounts in the prior year have been reclassified to conform to the current year presentation.

We operate in 3 reportable segments: Automotive Electronics, Consumer Electronics, and Biometrics. See Note 22 for the Company's segment reporting disclosures.

On July 1, 2020, the Company completed the acquisition of certain assets and liabilities, which comprise the aftermarket vehicle remote start and security systems and connected car solutions (telematics) businesses of Directed LLC and Directed Electronics Canada Inc. (collectively, with Directed LLC, “Directed”) via an asset purchase agreement. The acquired assets included inventory, accounts receivable, certain fixed assets, IT systems, and intellectual property. The cash purchase price was $11,000. Net sales from the Company’s newly formed subsidiaries, VOXX DEI LLC and VOXX DEI Canada, Ltd. (collectively, with VOXX DEI LLC, “DEI”), included in our consolidated results for the three and nine months ended November 30, 2021, represented approximately 11.9% and 10.3% of our consolidated net sales, respectively, as compared to 11.8% and 7.1% for the three and nine months ended November 30, 2020, respectively. DEI’s results of operations are included in the consolidated financial statements of Voxx in our Automotive Electronics segment. The purpose of this acquisition was to expand the Company’s market share within the automotive electronics industry.

~~The following summarizes the allocation of the purchase price based upon the fair value of the assets acquired and liabilities assumed at the date of acquisition:~~

During Fiscal 2021 and during the nine months ended November 30, 2021, the Company recorded a cumulative net measurement period adjustment that decreased goodwill by $1,690, as presented in the table above. The measurement period adjustment would have resulted in an insignificant decrease in amortization expense related to the customer relationships in the prior year. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. Goodwill was determined as the excess of the purchase price over the fair value of the assets acquired (including the identifiable intangible assets) and represents synergies expected.

On April 29, 2021, the Company’s subsidiary, Premium Audio Company LLC (“PAC”), signed a Letter of Intent to acquire the home audio/video business of Onkyo Home Entertainment Corporation (“OHEC”), along with Sharp Corporation (“Sharp”) as PAC’s partner. On May 26, 2021, PAC and Sharp signed an asset purchase agreement (“APA”) to jointly acquire the home audio/video business of OHEC through a joint venture entity. The APA was approved by OHEC’s shareholders at its ordinary general meeting of shareholders on June 25, 2021 and on June 28, 2021, the Company announced that PAC had entered into a joint venture with Sharp in order to execute the transaction. PAC owns ~~77.2%~~77.2% of the joint venture and has ~~85.1%~~an 85.1% voting interest and Sharp owns approximately ~~22.8%~~22.8% of the joint venture and has ~~14.9%~~a 14.9% voting interest.

On September 8, 2021, ~~PAC~~the newly formed joint venture, Onkyo Technology KK ("Onkyo"), completed the transaction to acquire the home audio/video business of ~~OHEC with its partner, Sharp, through the newly formed joint venture, Onkyo Technology KK (“Onkyo”).~~OHEC. The acquired assets ~~included~~consisted of intangible ~~assets and minimal tangible~~ assets.

The joint venture agreement between PAC and Sharp also contains a put/call arrangement, whereby Sharp has the right to put its interest in the joint venture back to Voxx and Voxx has the right to the call Sharp’s ownership interest in the joint venture at any time after the approval of Onkyo’s annual financial statements for the year ending February 28, 2025 at a purchase price based on a formula as defined in the joint venture agreement.

The following summarizes the preliminary allocation of the purchase price based upon the fair value of the assets acquired at the date of acquisition:


	September 8, 2021		September 8, 2021		Measurement Period Adjustments			September 8, 2021 (as adjusted)
Purchase price:
Cash paid	$	21,989	$	21,989		-			21,989
Assignment of notes and interest receivable		8,417		8,417		-			8,417
Fair value of contingent consideration		6,710		6,710		68			6,778
Total transaction consideration	$	37,116	$	37,116		68			37,184

Allocation:
Intangible assets	$	26,929	$	26,929		(7,905	)		19,024
Goodwill		10,187		10,187		7,973			18,160
Total assets acquired	$	37,116	$	37,116		68			37,184

During the fourth quarter of Fiscal 2022, the Company recorded a net measurement period adjustment that increased goodwill by $7,973. The measurement period adjustment would have resulted in a decrease in amortization expense related to the tradenames and technology in the third quarter of Fiscal 2022 and was not significant. The purchase price allocation presented above is based upon preliminary estimates, including Level 3 inputs which were unobservable and subject to change. We consider the preliminary purchase price allocation incomplete. The information relevant to determine an estimated fair value was not available at the time of acquisition close or as of November 30, 2021. Under these circumstances, the preliminary valuation was based upon initial internal estimates. The assets acquired include ~~technology,~~ trade names, ~~in process research and development,~~technology, and goodwill. The ~~tax effects of this transaction~~amounts assigned to goodwill and intangible assets for the acquisition are ~~still being evaluated.~~ as follows:

Contingent consideration is payable to OHEC based upon the calculation of 2%2% of the total price of certain future product purchases, as defined in the APA, by PAC. Such payments will be made to OHEC in perpetuity. The fair value of the contingent consideration was determined using an income approach, by estimating potential payments based on projections of future inventory purchases multiplied by the 2% payment and discounting them back to their present values using a weighted average cost of capital. A second discount rate was applied to account for the Company’s credit risk to arrive at the present value of the payments. As there is no set term and the payments will be made in perpetuity, a one-stage Gordon Growth Model was used to account for expected payments made beyond the last year of projections.

The preliminary fair value of the intangible assets and contingent consideration were estimated with the assistance of a third-party valuation expert. ~~The fair value~~We are in the process of refining the ~~put~~valuation of acquired assets, including goodwill, and ~~call options are still being evaluated. The amounts recognized will be finalized as~~expect to finalize the ~~information necessary to complete the analysis is obtained, but~~purchase price allocation no later than one year after the acquisition date, which is September 8, 2022. Finalization of the valuation during the measurement period could result in significant changes in the amounts recorded for the acquisition date fair value. Goodwill was determined as the excess of the purchase price over the fair value of the assets acquired, including identifiable intangible assets, and represents workforce and expected cash flow generation for the Onkyo business that does not qualify for separate recognition as intangible assets.

The Company consolidates the financial results of Onkyo since the acquisition date for financial reporting purposes. The non-controlling interest has been classified as redeemable non-controlling interest outside of equity on the accompanying Consolidated Balance ~~Sheet~~Sheets as the exercise of the put option is not within the Company’s control. The carrying value of the redeemable non-controlling interest of Onkyo cannot be less than the redemption amount, which is the amount Sharp will settle the put option for if exercised. Adjustments to reconcile the carrying value to the redemption amount are recorded immediately to retained earnings. No adjustment was made to the carrying amount of the redeemable non-controlling interest at ~~November 30, 2021~~May 31, 2022 as the carrying amount was in excess of the redemption amount.

The following table provides the rollforward of the redeemable non-controlling interest for the ~~nine~~three months ended ~~November 30, 2021:~~May 31, 2022:

Redeemable Non-controlling Interest

Balance at February 28, 2021

$
0

Initial investment by Sharp

2,069

Net loss attributable to non-controlling interest

(714
)
Balance at November 30, 2021

$
1,355


	Redeemable Non-controlling Interest
Balance at February 28, 2022	$	511
Net loss attributable to non-controlling interest		(613	)
Comprehensive loss attributable to non-controlling interest		(86	)
Foreign currency translation		(39	)
Balance at May 31, 2022	$	(227	)

The purpose of this acquisition was to expand the Company’s market share and product offerings within the premium audio industry. The joint venture owns the Onkyo and Integra brands and has the licensing rights to the Pioneer brands. It will market and sell a variety of products under the Onkyo, Integra, and Pioneer brands. Onkyo’s results of operations are included in the consolidated financial statements of Voxx in our Consumer Electronics segment from September 8, 2021, and ~~represent~~represents approximately ~~1.0% and 0.4%~~1.4% of the Company’s net sales for the three ~~and nine~~ months ended ~~November 30, 2021, respectively.~~May 31 2022. Prior to the acquisition, PAC operated under a distribution agreement with OHEC through its 11 Trading Company subsidiary, selling Onkyo and Pioneer products to Voxx customers. No additional customer contracts were acquired in conjunction with the acquisition and 11TC continues to sell these products to the same pre-acquisition customer base.

~~The~~Historical financial statements for Onkyo prior to the acquisition were not available and it is impracticable for the Company to determine the impact the acquisition would ~~not~~ have had ~~a material impact~~ on the Company’s revenue or net (loss) income had it been included in the consolidated results of the Company for the ~~nine~~three months ended ~~November 30, 2021 or the three and nine months ended November 30, 2020.~~May 31, 2021.

(3) Net (Loss) Income Per Common Share

~~(3)~~

~~Net (Loss) Income Per Common Share~~

Basic net (loss) income per common share attributable to VOXX International Corporation is calculated by dividing net income attributable to Voxx, adjusted to reflect changes in the redemption value of redeemable non-controlling interest, ~~is based upon~~by the weighted-average common shares outstanding during the period. ~~Diluted~~The diluted net (loss) income per common share ~~net of non-controlling interest,~~computation reflects the potential dilution that would occur if common stock equivalent securities or other contracts to issue common stock were exercised or converted into common stock.

There ~~are~~ was 0 ~~reconciling items which impact~~ redemption value adjustment of the ~~numerator of basic and diluted net (loss) income per common share.~~ redeemable non-controlling interest for the three months ended May 31, 2022.

A reconciliation between the denominator of basic and diluted net (loss) income per common share is as follows:


	Three months ended November 30,				Nine months ended November 30,				Three months ended May 31,
	2021		2020		2021		2020		2022		2021
Weighted-average common shares outstanding (basic)		24,289,909		24,197,786		24,279,084		24,196,393		24,412,462		24,266,242
Effect of dilutive securities:
Restricted stock units, stock grants, and market stock units		0		479,739		0		335,936
Restricted stock units and market stock units										0		659,732
Weighted-average common shares and potential common shares outstanding (diluted)		24,289,909		24,677,525		24,279,084		24,532,329		24,412,462		24,925,974

Restricted stock units ~~stock grants,~~ and market stock units of ~~650,325~~368,826 and 0 for the three months ended ~~November 30,~~May 31, 2022 and 2021, ~~and 2020, respectively, and 695,589 and 17,009 for the nine months ended November 30, 2021 and 2020,~~ respectively, were not included in the net (loss) income per diluted share calculation because the grant price of the restricted stock units ~~stock grants,~~ and market stock units was greater than the average market price of the Company’s common stock during these periods, or the inclusion of these components would have been anti-dilutive.

(4) Investment Securities

~~(4)~~

~~Investment Securities~~

As of ~~November 30, 2021,~~May 31, 2022, and February 28, ~~2021,~~2022, the Company had the following investments:

The Company’s mutual funds are held in connection with its deferred compensation plan. Changes in the carrying value of these securities are offset by changes in the corresponding deferred compensation liability.

(5) Fair Value Measurements and Derivatives

~~Other Long-Term Investments~~

In July 2017, the Company sold its investment in RxNetworks, a non-controlled corporation, consisting of shares of the investee’s preferred stock. Voxx recognized a gain of $1,416 during Fiscal 2018 for the sale of this investment. A portion of the cash proceeds for the sale was subject to a hold-back provision, which was not included in the calculation of the gain recognized in Fiscal 2018, as it was considered a gain contingency. During the second quarter of Fiscal 2020, the hold-back provision expired, and the Company received additional proceeds from the sale in August 2019, recording an investment gain of $775 for the nine months ended November 30, 2019. In November 2020, a final disbursement of all remaining proceeds from the sale of RxNetworks attributable to Voxx was received in the amount of $42, which was recorded as an investment gain for the three and nine months ended November 30, 2020.

~~(5)~~

~~Fair Value Measurements and Derivatives~~

The Company applies the authoritative guidance on “Fair Value Measurements," which among other things, requires enhanced disclosures about assets and liabilities that are measured and reported at fair value. This guidance establishes a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable.

Level 3 - Unobservable inputs developed using the Company's estimates and assumptions, which reflect those that market participants would use.

~~At February 28, 2021, the Company did 0t have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).~~11

The following table presents financial assets and liabilities measured at fair value on a recurring basis at ~~November 30, 2021:~~May 31, 2022:


			Fair Value Measurements at Reporting Date Using								Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and money market funds	$	21,162	$	21,162	$	0	$	0	$	5,733	$	5,733	$	—	$	—
Mutual funds		1,440		1,440		0		0		1,222		1,222		-		-

Liabilities:
Derivatives designated for hedging	$	200	$	0	$	200	$	0	$	15	$	-	$	15	$	-
Contingent consideration		6,403		0		0		6,403		5,675		-		-		5,675

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

The following table presents financial assets and liabilities measured at fair value on a recurring basis at February 28, ~~2021:~~2022:


			Fair Value Measurements at Reporting Date Using								Fair Value Measurements at Reporting Date Using
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Cash and money market funds	$	59,404	$	59,404	$	0	$	0	$	27,788	$	27,788	$	-	$	-
Mutual funds		1,777		1,777		0		0		1,231		1,231		-		-

Liabilities:
Derivatives designated for hedging	$	765	$	0	$	765	$	0	$	188		-		188		-
Contingent consideration										6,435		-		-		6,435

At ~~November 30, 2021,~~May 31, 2022, the carrying value of the Company's accounts receivable, short-term debt, accounts payable, accrued expenses, bank obligations, and long-term debt approximates fair value because of either (i) the short-term nature of the financial instrument; (ii) the interest rate on the financial instrument being reset every quarter to reflect current market rates; or (iii) the stated or implicit interest rate approximates the current market rates or are not materially different from market rates.

Contingent consideration is related to the Company’s Onkyo acquisition (see Note 2). The estimated fair value of the contingent consideration is classified within Level 3 and was determined using an income approach. Under this method, potential future purchases applicable to the contingent consideration were determined using internal estimates for growth. The potential future purchases applicable to the contingent consideration were multiplied by the appropriate percentage of payments due to OHEC, and the resulting contingent consideration amounts were adjusted for risk at the appropriate discount rate. The value of the contingent consideration was further discounted to reflect the credit risk of the Company. Changes in either the revenue growth rate assumptions or the discount rate could result in a material change to the amount of contingent consideration accrued and such changes will be recorded in the Company's Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income.

The following table provides a rollforward of the Company's contingent consideration balance for the three months ended May 31, 2022:



Balance at February 28, 2022	$	6,435
Payments made to OHEC		(140	)
Fair value adjustment		54
Foreign currency translation		(674	)
Balance at May 31, 2022	$	5,675

Derivative Instruments

The Company’s derivative instruments include an interest rate swap agreement and have also included forward foreign currency contracts and an interest rate swap agreement. The forward foreign currency contracts are utilized to hedge a portion of the Company’s foreign currency inventory purchases. The forward foreign currency derivatives qualifying for hedge accounting are designated as cash flow hedges and valued using observable forward rates for the same or similar instruments (Level 2). The duration of open forward foreign currency contracts ranges from 1 month to 3 months and are classified in ~~the balance sheet according to their terms.~~prior periods. The Company’s interest rate swap agreement hedges interest rate exposure related

to the outstanding balance of its Florida Mortgage, with monthly payments due through March 2026. The swap agreement locks the interest rate on the debt at ~~3.48%~~3.48% (inclusive of credit spread) through the maturity date of the loan. Interest rate swap agreements qualifying for hedge accounting are designated as cash flow hedges and valued based on a comparison of the change in fair value of the actual swap contracts designated as the hedging instruments and the change in fair value of a hypothetical swap contract (Level 2). We calculate the fair value of our interest rate swap agreement quarterly based on the quoted market price for the same or similar financial instruments. Interest rate swaps are classified in the balance sheet as either assets or liabilities based on the fair value of the instruments at the end of the period.

~~VOXX International Corporation~~When entered into, forward foreign currency contracts are utilized to hedge a portion of the Company’s foreign currency inventory purchases. Forward foreign currency derivatives qualifying for hedge accounting are designated as cash flow hedges and ~~Subsidiaries~~valued using observable forward rates for the same or similar instruments (Level 2). As of May 31, 2022, there are no open forward foreign currency contracts.

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

Financial Statement Classification

The following table discloses the fair value as of ~~November 30, 2021~~May 31, 2022 and February 28, ~~2021~~2022 of the Company’s derivative instruments:


	Derivative Assets and Liabilities							Derivative Assets and Liabilities
		Fair Value							Fair Value
	Account	November 30, 2021			February 28, 2021			Account	May 31, 2022			February 28, 2022
Designated derivative instruments
Foreign currency contracts	Prepaid expenses and other current assets	$	561		$	412
	Accrued expenses and other current liabilities		(456	)		(731	)
Interest rate swap agreement	Other long-term liabilities		(305	)		(446	)	Other long-term liabilities		(15	)		(188	)
Total derivatives		$	(200	)	$	(765	)		$	(15	)	$	(188	)

Cash Flow Hedges

The Company's policy is to enter into derivative instrument contracts with terms that coincide with the underlying exposure being hedged. As such, the Company’s derivative instruments are expected to be highly effective. For derivative instruments that are designated and qualify as cash flow hedges, the entire change in fair value of the hedging instrument included in the assessment of the hedge ineffectiveness is recorded to Other comprehensive (loss) income. When the amounts recorded in Other comprehensive (loss) income are reclassified to earnings, they are presented in the same income statement line item as the effect of the hedged item.

During Fiscal ~~2021,~~2022 and through the first quarter of Fiscal 2023, the Company ~~entered~~did not enter into any new forward foreign currency contracts. All forward foreign currency contracts ~~which have a current outstanding notional value~~entered into during Fiscal 2021 settled as of ~~$2,700~~February 28, 2022 and ~~are~~had been designated as cash flow ~~hedges at November 30, 2021.~~hedges. The current outstanding notional value of the Company's interest rate swap at ~~November 30, 2021~~May 31, 2022 is ~~$6,739.~~$6,490. For cash flow hedges, the gain or loss is reported as a component of Other comprehensive (loss) income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The net ~~(loss)~~ income recognized in Other comprehensive (loss) income for foreign currency contracts ~~is expected to be~~settled in the fourth quarter of Fiscal 2022 were recognized in Cost of sales during the ~~next six months.~~ three months ended May 31, 2022. NaN amounts were excluded from the assessment of hedge effectiveness during the respective periods. The gain or loss on the Company’s interest rate swap is recorded in Other comprehensive (loss) income and subsequently reclassified into Interest and bank charges in the period in which the hedged transaction affects earnings. As of ~~November 30, 2021,~~ May 31, 2022, 0 interest rate swaps originally designated for hedge accounting were de-designated or terminated.

Activity related to cash flow hedges recorded during the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~ was as follows:

Three months ended

Nine months ended

November 30, 2021

November 30, 2021

Pretax Gain
Recognized in
Other
Comprehensive
Income

Pretax Loss
Reclassified from
Accumulated Other
Comprehensive
Income

Pretax Gain
Recognized in
Other
Comprehensive
Income

Pretax Loss
Reclassified from
Accumulated Other
Comprehensive
Income

Cash flow hedges

Foreign currency contracts

$
89

$
(30
)

$
233

$
(235
)
Interest rate swaps

104

0

141

0

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

Three months ended

Nine months ended

November 30, 2020

November 30, 2020

Pretax (Loss) Gain
Recognized in
Other
Comprehensive
Income

Pretax Loss
Reclassified
from
Accumulated Other
Comprehensive
Income

Pretax Loss
Recognized in
Other
Comprehensive
Income

Pretax Loss
Reclassified
from
Accumulated Other
Comprehensive
Income

Cash flow hedges

Foreign currency contracts

$
(242
)

$
(121
)

$
(707
)

$
(69
)
Interest rate swaps

39

0

(76
)

0


~~(6)~~	Three months ended
	May 31, 2022
	Pretax Gain Recognized in Other Comprehensive Income		Pretax Gain Reclassified from Accumulated Other Comprehensive ~~Loss~~ Income
Cash flow hedges
Foreign currency contracts	$	—	$	63
Interest rate swaps		173		—


	Three months ended
	May 31, 2021
	Pretax (Loss) Gain Recognized in Other Comprehensive Income			Pretax Loss Reclassified from Accumulated Other Comprehensive Income
Cash flow hedges
Foreign currency contracts	$	(28	)	$	(176	)
Interest rate swaps		18			—

(6) Accumulated Other Comprehensive Loss

The Company’s accumulated other comprehensive loss consists of the following:

Foreign
Currency
Translation
Losses

Pension plan
adjustments,
net of tax

Derivatives
designated
in a hedging
relationship,
net of tax

Total

Balance at February 28, 2021

$
(13,374
)

$
(869
)

$
(734
)

$
(14,977
)
Other comprehensive (loss) income before reclassifications

(2,797
)

59

306

(2,432
)
Reclassified from accumulated other comprehensive loss

0

0

160

160

Net current-period other comprehensive income

(2,797
)

59

466

(2,272
)
Balance at November 30, 2021

$
(16,171
)

$
(810
)

$
(268
)

$
(17,249
)


	Foreign Currency Translation Losses			Pension plan adjustments, net of tax			Derivatives designated in a hedging relationship, net of tax			Total
Balance at February 28, 2022	$	(16,691	)	$	(711	)	$	(101	)	$	(17,503	)
Other comprehensive (loss) income before reclassifications		(1,494	)		32			130			(1,332	)
Reclassified from accumulated other comprehensive loss		—			—			(43	)		(43	)
Net current-period other comprehensive (loss) income		(1,494	)		32			87			(1,375	)
Balance at May 31, 2022	$	(18,185	)	$	(679	)	$	(14	)	$	(18,878	)

During the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2022, the Company recorded other comprehensive (loss) income, ~~(loss),~~ net of the associated tax impact of ~~$37 and $141, respectively,~~$20 related to derivatives designated in a hedging relationship, and ~~$0 in both periods~~$0 related to pension plan adjustments.

The other comprehensive (loss) income ~~(loss)~~ before reclassification related to foreign currency translation losses of ~~$(2,797)~~$(1,494) includes the remeasurement of intercompany transactions of a long-term investment nature of ~~$222~~$852 with certain subsidiaries whose functional currency is not the U.S. dollar, and ~~$(3,019)~~$(2,346) from translating the financial statements of the Company's non-U.S. dollar functional currency subsidiaries into our reporting currency, which is the U.S. dollar.

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

(7) Supplemental Cash Flow Information

~~(7)~~

~~Supplemental Cash Flow Information~~

The following is supplemental information relating to the Unaudited Consolidated Statements of Cash Flows:


	Nine months ended November 30,					Three months ended May 31,
	2021			2020		2022			2021
Non-cash investing and financing activities:
Change in redeemable equity	$	188		$	478
Recording of redeemable equity						$	(133	)	$	(34	)
Reclassification of stockholders' equity to redeemable equity							33			0
Gross issuance of shares							1			1
Change in goodwill due to measurement period adjustments, net		(1,353	)		638		0			(903	)
Settlement of debt with receivables		-			607
Additional goodwill from the recognition of the fair value of non-controlling interest in connection with business acquisition		8,463			-
Contingent purchase price consideration in connection with business acquisition		6,710			-
Right of use assets obtained in exchange for operating lease obligations		419			735		295			0
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,018		$	836	$	380		$	341
Operating cash flows from finance leases		9			23		1			4
Finance cash flows from finance leases		323			470		73			114
Cash paid during the period:
Interest (excluding bank charges)	$	492		$	831	$	238		$	128
Income taxes (net of refunds)		625			1,139		1,038			1,553

The Company has various stock-based compensation plans, which are more fully described in Note 1 of the Notes to the Consolidated Financial Statements contained in the Company’s Form 10-K for the fiscal year ended February 28, ~~2021.~~2022.

Restricted stock awards are granted pursuant to the Company's 2012 Equity Incentive Plan (the "2012 Plan"). A restricted stock award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are subject to forfeiture if employment terminates for a reason other than death, disability, or retirement prior to the release of the restrictions.

The Company's Omnibus Equity Incentive Plan was established in 2014 (the "2014 Plan"). Pursuant to the 2014 Plan, Restricted Stock Units ("RSUs") may be awarded by the Company to any individual who is employed by, provides services to, or serves as a director of the Company or its affiliates. RSUs vest on the later of three years from the date of grant, or the grantee reaching the age of 65 years. The RSU awards will also vest upon the sale of all of the Company's issued and outstanding stock, the sale of all, or substantially all, of the assets of a subsidiary of which the grantee serves as CEO and/or President, or the termination of the grantee's employment without cause, provided that the grantee, at the time of termination, has been employed for at least 10 years. When vested, RSU awards may be settled in shares of Class A Common Stock or in cash, at the Company's sole option. There are no market conditions inherent in an RSU award, only the employee performance requirement for performance awards, and the service requirement that the respective employee continues employment with the Company through the vesting date. In July 2021, the Company granted 48,527 RSU awards to employees under the 2014 Plan. The Company expenses the cost of RSU awards on a straight-line basis over the requisite service period of each grantee. For these purposes, the fair market value of each RSU is determined based on the mean of the high and low price of the Company's common stock on the grant date. The fair market value of each RSU granted in July 2021 was ~~$13.59.~~$13.59.

On July 8, 2019, the Board of Directors approved a five-year Employment Agreement (the “Employment Agreement”), effective March 1, 2019, by and between the Company and Patrick M. Lavelle, the Company’s President and Chief Executive Officer. Under the terms of the Employment Agreement, in addition to a ~~$1,000~~$1,000 annual salary and a cash bonus based on the Company’s Adjusted EBITDA, Mr. Lavelle was granted the right to receive certain stock-based compensation as discussed below:

All stock grants under the Employment Agreement are subject to a hold requirement as specified in the Employment Agreement. The Employment Agreement gave Mr. Lavelle, in certain limited change of control situations, the right to require the Company to purchase shares issued in connection with the Employment Agreement, shares personally acquired by Mr. Lavelle, and shares issued to him under other incentive compensation arrangements. Accordingly, the stock awards issued in connection with the Employment Agreement are presented as redeemable equity on the Consolidated Balance Sheets at grant-date fair value. RSUs previously held by Mr. Lavelle under the 2014 Plan and shares personally purchased by Mr. Lavelle have been reclassified from permanent equity to redeemable equity. As the contingent events that would allow Mr. Lavelle to redeem the shares are not probable at this time, remeasurement of the amounts in redeemable equity have not been recorded. The Employment Agreement contains certain restrictive and non-solicitation covenants.

The following table presents a summary of the activity related to the initial stock grant, additional stock grants under the Employment Agreement, and RSU grants under the 2014 Plan for the ~~nine~~three months ended ~~November 30, 2021:~~May 31, 2022:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested award balance at February 28, 2021		603,724		$	5.18
						Number of Shares			Weighted Average Grant Date Fair Value
Unvested award balance at February 28, 2022							354,360		$	6.30
Granted		48,527			13.59		—			—
Vested		(136,008	)		5.50		—			—
Vested and settled		(100,000	)		4.15		(100,000	)		4.15
Unvested award balance at November 30, 2021		416,243		$	6.30
Unvested award balance at May 31, 2022							254,360		$	7.15

At ~~November 30, 2021,~~May 31, 2022, there were ~~414,326~~476,209 vested and unsettled ~~stock grants and~~ RSU awards under the Company’s 2014 Plan with a weighted average fair value of ~~$6.98.~~$6.90.

During the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and 2021, ~~and November 30, 2020,~~ the Company recorded ~~$221~~$126 and ~~$694, respectively, compared to $768 and $1,454,~~$236, respectively, in total stock-based compensation related to the 2014 Plan, as well as additional stock grants and MSU’s under the Employment Agreement. As of ~~November 30, 2021,~~May 31, 2022, there was approximately ~~$1,435~~$1,090 of unrecognized stock-based compensation expense related to unvested RSU awards ~~stock grants,~~ and MSU’s.

(9) Supply Chain Financing

~~(9)~~

~~Supply Chain Financing~~

The Company has supply chain financing agreements and factoring agreements that were entered into for the purpose of accelerating receivable collection and better managing cash flow. The balances under the agreements are sold without recourse and are accounted for as sales of accounts receivable. Total receivable balances sold for the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2022, net of discounts, were ~~$20,681 and $62,136, respectively,~~$20,639 compared to ~~$20,876 and $60,039~~$12,201 for the three ~~and nine~~ months ended ~~November 30, 2020, respectively.~~May 31, 2021. The increase in receivable balances sold during the three months ended May 31, 2022 relates to the Company's cash flow management strategy, which has taken into consideration its current and near term cash requirements, including the pending settlement of the Seaguard arbitration (see Note 24).

(10) Research and Development

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

~~(10)~~

~~Research and Development~~

Expenditures for research and development are charged to expense as incurred. Such expenditures amounted to ~~$3,986 and $9,931~~$2,569 for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022 compared to ~~$1,892 and $5,413~~$2,321 for the three ~~and nine~~ months ended ~~November 30, 2020, respectively.~~May 31, 2021. All amounts are net of customer reimbursements and are included within Engineering and technical support expenses on the Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company's Biometrics segment did 0t0t carry a goodwill balance at ~~November 30, 2021~~May 31, 2022 or February 28, ~~2021.~~2022.

At ~~November 30, 2021,~~May 31, 2022, intangible assets consisted of the following:


	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Finite-lived intangible assets:
Customer relationships	$	54,227	$	38,828	$	15,399	$	53,830	$	40,247	$	13,583
Trademarks/Tradenames		24,504		1,674		22,830		16,221		2,261		13,960
Developed technology		21,498		12,902		8,596		19,758		13,697		6,061
Patents		6,736		5,329		1,407		6,736		5,633		1,103
License		1,400		1,400		0		1,400		1,400		0
Contracts		1,556		1,556		0		1,556		1,556		0
Total finite-lived intangible assets	$	109,921	$	61,689		48,232	$	99,501	$	64,794		34,707
Indefinite-lived intangible assets
Trademarks						63,061						62,834
Total intangible assets, net					$	111,293					$	97,541

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

At February 28, ~~2021,~~2022, intangible assets consisted of the following:


	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Finite-lived intangible assets:
Customer relationships	$	54,688	$	36,412	$	18,276	$	54,138	$	39,669	$	14,469
Trademarks/Tradenames		5,545		811		4,734		17,466		1,927		15,539
Developed technology		14,144		12,516		1,628		20,413		13,179		7,234
Patents		6,736		4,629		2,107		6,736		5,562		1,174
License		1,400		1,400		0		1,400		1,400		0
Contracts		1,556		1,556		0		1,556		1,556		0
Total finite-lived intangible assets	$	84,069	$	57,324		26,745	$	101,709	$	63,293		38,416
Indefinite-lived intangible assets
Trademarks						63,359						63,034
Total intangible assets, net					$	90,104					$	101,450

The Company recorded amortization expense of ~~$2,017 and $4,803~~$1,925 for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022 compared to ~~$1,477 and $3,973~~$1,411 for the three ~~and nine~~ months ended ~~November 30, 2020, respectively.~~ May 31, 2021. The estimated aggregate amortization expense for all amortizable intangibles for ~~November 30~~May 31 of each of the succeeding years is as follows:


Year	Amount
2023	$	6,194
2024		5,887
2025		5,642
2026		5,020
2027		3,250

(12) Equity Investment

Year

Amount

2022

$
7,549

2023

6,956

2024

6,738

2025

6,614

2026

4,767

~~(12)~~

~~Equity Investment~~

As of ~~November 30, 2021~~May 31, 2022 and February 28, ~~2021,~~2022, the Company had a ~~50%~~50% non-controlling ownership interest in ASA Electronics, LLC and Subsidiary (“ASA") which acts as a distributor of mobile electronics specifically designed for niche markets within the automotive industry, including RV's; buses; and commercial, heavy duty, agricultural, construction, powersport, and marine vehicles.

The following presents summary financial information for ASA. Such summary financial information has been provided herein based upon the individual significance of ASA to the consolidated financial information of the Company.


	November 30, 2021		February 28, 2021		May 31, 2022		February 28, 2022
Current assets	$	50,885	$	49,956	$	48,442	$	46,202
Non-current assets		4,932		4,757		7,138		7,382
Liabilities		10,561		8,179		11,560		10,888
Members' equity		45,256		46,534		44,020		42,696


	Three months ended May 31,
	2022		2021
Net sales	$	29,789	$	33,225
Gross profit		6,206		8,645
Operating income		3,154		5,429
Net income		3,176		5,446

Nine months ended
November 30,

2021

2020

Net sales

$
91,153

$
67,940

Gross profit

22,976

16,749

Operating income

13,867

8,761

Net income

13,928

9,012

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

The Company's share of income from ASA was ~~$2,206 and $6,964~~$1,588 for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022 compared to ~~$1,761 and $4,506~~$2,723 for the three ~~and nine~~ months ended ~~November 30, 2020, respectively.~~May 31, 2021.

(13) Income Taxes

~~(13)~~

~~Income Taxes~~

The Company’s provision for income taxes consists of federal, foreign, and state taxes necessary to align the Company’s year-to-date tax provision with the annual effective rate that it expects to achieve for the full year. At each interim period, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments, as necessary.

For the three months ended ~~November 30, 2021,~~May 31, 2022, the Company recorded an income tax benefit of $641, which includes a discrete income tax provision of $175 related primarily to finalization of the federal and certain state tax return filings. For the three months ended November 30, 2020, the Company recorded an income tax provision of $2,334,$1,092, which includes a discrete income tax benefit of ~~$542~~$164 related primarily to ~~finalization of the federal and certain state tax return filings.~~

The effective tax rates for the three months ended November 30, 2021 and 2020 were an income tax benefit of 2.1% on a pre-tax loss of $30,313 and an income tax provision of 11.8% on pre-tax income of $19,774, respectively. The effective tax rate for the three months ended November 30, 2021 differs from the U.S. statutory rate of 21% primarily as a result of an increase in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the three months ended November 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of the U.S. valuation allowance based on projected current year earnings, immediate U.S. taxation of foreign earnings, non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates.

For the nine months ended November 30, 2021, the Company recorded an income tax benefit of $374, which includes a discrete income tax provision of $31 related to the finalization of federal and state tax filings during the quarter ended November 30, 2021 and the accrual of interest for unrecognized tax benefits, offset with the reversal of uncertain tax ~~provision~~position liabilities as a result of the lapse of the applicable statute of limitations. For the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, the Company recorded an income tax provision of ~~$6,724,~~$484, which includes a discrete income tax provision of $3,609. The Company recorded a discrete tax provision of $4,275 related to an increase in valuation allowance as a result of the technical correction to net operating losses as provided in the CARES Act and a discrete tax benefit of ~~$697~~$74 related primarily to ~~the finalization of federal and state filings during the quarter ended November 30, 2020, and~~ the reversal of uncertain tax ~~provision~~position liabilities as a result of the lapse of the applicable statute of ~~limitations, offset with a discrete tax provision of $31 related to the accrual of interest for unrecognized tax benefits.~~limitations.

The effective tax rates for the ~~nine~~three months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~ were an income tax benefit of ~~1.3%~~12.2% on pre-tax loss of ~~$28,941~~$8,939 and an income tax provision of ~~31.1%~~21.2% on pre-tax income of ~~$21,614,~~$2,281, respectively. The effective tax rate for the ~~nine~~three months ended ~~November 30,~~May 31, 2022 and 2021 differs from the U.S. statutory rate of ~~21%~~21% as a result of a number of factors, including the non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and ~~an increase~~a decrease in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the nine months ended November 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of the U.S. valuation allowance based on projected current year earnings, immediate U.S. taxation of foreign earnings, non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates.allowance.

At ~~November 30, 2021,~~May 31, 2022, the Company had an uncertain tax position liability of ~~$1,002,~~$913, including interest and penalties. The unrecognized tax benefits include amounts related to various U.S. federal, state, and local, and foreign tax issues.

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

(14) Inventory

~~(14)~~

~~Inventory~~

Inventories by major category are as follows:


	November 30, 2021		February 28, 2021		May 31, 2022		February 28, 2022
Raw materials	$	23,683	$	21,228	$	23,545	$	23,904
Work in process		1,264		1,732		1,322		1,519
Finished goods		141,414		107,833		156,320		149,499
Inventory	$	166,361	$	130,793	$	181,187	$	174,922

(15) Product Warranties and Product Repair Costs

~~(15)~~

~~Product Warranties and Product Repair Costs~~

The following table provides a summary of the activity with respect to product warranties and product repair costs. The liability for product warranties is included within Accrued expenses and other current liabilities and the reserve for product repair costs is recorded as a reduction of Inventory on the Consolidated Balance Sheets.

(16) Financing Arrangements

~~(16)~~

~~Financing Arrangements~~

In conjunction with the capitalization and funding of the Company’s Onkyo joint venture with its partner Sharp, which was created in order to execute the acquisition of the home audio/video business of OHEC on September 8, 2021 (see Note 2), Onkyo entered into a loan agreement with the shareholders of the joint venture, PAC and Sharp. The loan balance outstanding at November 30, 2021 represents the portion of the loan payable to Sharp. The loan balance due to PAC eliminates in consolidation. All amounts outstanding under the loan will mature and become payable ten years from the execution date of the acquisition, which is September 8, 2031. The loan may be prepaid subject the approval of the board of directors of the joint venture and must be repaid if either the put or call option is exercised in accordance with the joint venture agreement. The rate of interest for the shareholder loan is 2.5% and the loan is secured by a second priority lien on and secured interest in all assets of Onkyo.

(17)Other (Expense) Income ~~(Expense)~~

Other (expense) income ~~(expense)~~ is comprised of the following:


	Three months ended November 30,					Nine months ended November 30,						Three months ended May 31,
	2021			2020		2021			2020			2022			2021
Foreign currency (loss) gain	$	(382	)	$	34	$	(268	)	$	(445	)	$	(2,366	)	$	116
Interest income		55			6		67			77			5			7
Rental income		186			188		547			556			221			164
Miscellaneous		(2	)		66		329			565			30			155
Total other, net	$	(143	)	$	294	$	675		$	753		$	(2,110	)	$	442

~~VOXX International Corporation~~Foreign currency losses for the three months ended May 31, 2022 were primarily driven by declines in the Japanese Yen, which impacted the re-measurement of the Company's Onkyo subsidiary intercompany loans and ~~Subsidiaries~~interest payable which are not of a long-term investment nature. The total foreign currency loss attributable to these re-measurements for the three months ended May 31, 2022 was $2,664.

(18) Foreign Currency

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

~~(18)~~

~~Foreign Currency~~

The Company has a subsidiary in Venezuela. Venezuela has experienced significant political and civil unrest, as well as economic instability for several years, and has implemented various foreign currency and price controls. The Company accounts for its Venezuela subsidiary as hyper-inflationary in accordance with the guidelines in ASC 830, "Foreign Currency." A hyper-inflationary economy designation occurs when a country has experienced cumulative inflation of approximately 100 percent or more over a ~~3-year~~3-year period. The hyper-inflationary designation requires the local subsidiary in Venezuela to record all transactions as if they were denominated in U.S. dollars. The Company’s operations in Venezuela are suspended and net currency exchange gains and losses for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 were not significant.

The Company has certain long-lived assets in Venezuela, which are held for investment purposes. These properties had 0 value at ~~November 30, 2021.~~May 31, 2022.

(19)

Lease Obligations

~~(19)~~

~~Lease Obligations~~

We account for leases in accordance with ASC 842 “Leases” (“ASC 842”). We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration.

We have operating leases for office equipment, as well as offices, warehouses, and other facilities used for our operations. We also have finance leases comprised primarily of computer hardware and machinery and equipment. Our leases have remaining lease terms of less than 1 year to 9 years, some of which include renewal options. We consider these renewal options in determining the lease term used to establish our right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal option will be exercised. The Company had 0 short-term leases during the three ~~and nine~~ months ended ~~November 30, 2021.~~May 31, 2022.

The components of lease cost for the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~ were as follows:


	Three months ended November 30,				Nine months ended November 30,				Three months ended May 31,
	2021		2020		2021		2020		2022		2021
Operating lease cost (a) (c)	$	324	$	328	$	1,007	$	836	$	395	$	341
Finance lease cost:
Amortization of right of use assets (a)		102		139		324		465		73		121
Interest on lease liabilities (b)		2		6		9		23		1		4
Total finance lease cost	$	104	$	145	$	333	$	488	$	74	$	125

~~(a)~~

(a)

Recorded within Selling, General and administrative, Engineering and technical support, and Cost of sales on the ~~Unaudited Consolidated Statement of Operations and Comprehensive Income.~~

~~(b)~~

~~Recorded within Interest and bank charges on the Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income.~~

~~(c)~~

~~Includes immaterial amounts related to variable rent expense.~~

~~VOXX International Corporation and Subsidiaries~~

~~Notes to~~ Unaudited Consolidated ~~Financial~~Statement of Operations and Comprehensive Income.

Supplemental balance sheet information related to leases is as follows:


	November 30, 2021			February 28, 2021			May 31, 2022			February 28, 2022
Operating Leases
Operating lease, right of use assets	$	4,010		$	4,572		$	4,255		$	4,464
Total operating lease right of use assets	$	4,010		$	4,572		$	4,255		$	4,464
Accrued expenses and other current liabilities	$	1,029		$	1,119		$	1,248		$	1,255
Operating lease liabilities, less current portion		3,073			3,582			3,067			3,298
Total operating lease liabilities	$	4,102		$	4,701		$	4,315		$	4,553
Finance Leases
Property, plant, and equipment, gross	$	2,503		$	2,503		$	2,503		$	2,503
Accumulated depreciation		(2,129	)		(1,805	)		(2,281	)		(2,208	)
Total finance lease right of use assets	$	374		$	698		$	222		$	295
Accrued expenses and other current liabilities	$	269		$	418		$	190		$	224
Finance lease liabilities, less current portion		117			302			39			78
Total finance lease liabilities	$	386		$	720		$	229		$	302
Weighted Average Remaining Lease Term
Operating leases	6.0 years			6.0 years			5.3 years			5.5 years
Finance leases	1.4 years			1.8 years			1.1 years			1.3 years
Weighted Average Discount Rate
Operating leases		4.18	%		4.49	%		3.89	%		4.01	%
Finance leases		3.87	%		3.87	%		3.87	%		3.87	%

Maturities of lease liabilities on ~~November 30~~May 31 of each of the succeeding years are as follows:

	Operating Leases		Finance Leases
2021	$	1,156		274
					Operating Leases		Finance Leases
2022		844		118	$	1,057		193
2023		640		—		1,174		39
2024		462		—		654		0
2025		312		—		465		0
2026						329		0
Thereafter		1,150		—		1,048		0
Total lease payments		4,564		392		4,727		232
Less imputed interest		462		6		412		3
Total	$	4,102		386	$	4,315		229

As of ~~November 30, 2021,~~May 31, 2022, the Company has not entered into any lease agreements that have not yet commenced.

The Company owns and occupies buildings as part of its operations. Certain space within these buildings may, from time to time, be leased to third parties from which the Company earns rental income as lessor. This leased space is recorded within property, plant, and equipment and was not material to the Company's Consolidated Balance Sheets at ~~November 30, 2021~~May 31, 2022 and February 28, ~~2021.~~2022. Rental income earned by the Company for the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~ was ~~$186 and $547, respectively,~~$221 compared to ~~$188 and $556, respectively,~~$164 and is recorded within Other ~~income~~ (expense). income.

(20) Capital Structure

~~(20)~~

~~Capital Structure~~

The Company's capital structure is as follows:


			Shares Authorized				Shares Outstanding										Shares Authorized				Shares Outstanding
Security	Par Value		November 30, 2021		February 28, 2021		November 30, 2021		February 28, 2021		Voting Rights per Share		Liquidation Rights		Par Value		May 31, 2022		February 28, 2022		May 31, 2022		February 28, 2022		Voting Rights per Share		Liquidation Rights
Preferred Stock	$	50.00		0		50,000		0		0		—	$50 per share		$	50.00		50,000		50,000		0		0		—	$50 per share
Series Preferred Stock	$	0.01		0		1,500,000		0		0		—		—	$	0.01		1,500,000		1,500,000		0		0		—		—
Class A Common Stock	$	0.01		60,000,000		60,000,000		21,614,629		21,666,976		1	Ratably with Class B		$	0.01		60,000,000		60,000,000		21,675,966		21,614,629		1	Ratably with Class B
Class B Common Stock	$	0.01		10,000,000		10,000,000		2,260,954		2,260,954		10	Ratably with Class A		$	0.01		10,000,000		10,000,000		2,260,954		2,260,954		10	Ratably with Class A
Treasury Stock at cost	at cost			2,862,218		2,749,218	N/A		N/A		N/A				at cost			2,862,218		2,862,218	N/A		N/A		N/A

During the nine months ended November 30, 2021, the Company repurchased 113,000 shares of common stock for an aggregate cost of $1,220. As of November 30, 2021, 2,305,876 shares of the Company’s Class A common stock are authorized to be repurchased in the open market.

(21) Variable Interest Entity

~~(21)~~

~~Variable Interest Entity~~

A variable interest entity ("VIE") is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. Under ASC 810 – “Consolidation,” an entity that holds a variable interest in a VIE and meets certain requirements would be considered to be the primary beneficiary of the VIE and required to consolidate the VIE in its consolidated financial statements. In order to be considered the primary beneficiary of a VIE, an entity must hold a variable interest in the VIE and have both:

On September 1, 2015, Voxx acquired a majority voting interest in substantially all of the assets and certain specified liabilities of EyeLock, Inc. and EyeLock Corporation, a market leader of iris-based identity authentication solutions, through a newly formed entity, EyeLock LLC. The Company issued EyeLock LLC a promissory note for the purposes of repaying protective advances and funding working capital requirements of the entity. On August 29, 2021, this promissory note was amended and restated to allow EyeLock LLC to borrow up to ~~$68,200.~~$68,200. Through March 1, 2019, interest on the outstanding principal of the loan accrued at ~~10%~~10%. From March 1, 2019 forward, interest accrues at ~~2.5%~~2.5%. The amended and restated promissory note is due on December 31, 2022. The outstanding principal balance of this promissory note is convertible at the sole option of Voxx into units of EyeLock LLC. If Voxx chooses not to convert into equity, the outstanding loan principal of the amended and restated promissory note will be repaid at a multiple of 1.50 based on the repayment date. The agreement includes customary events of default and is collateralized by all of the property of EyeLock LLC.

We concluded that we became the primary beneficiary of EyeLock LLC on September 1, 2015 in conjunction with the acquisition. This was the first date on which we had the power to direct the activities that most significantly impact the economic performance of the entity because we acquired a majority interest in substantially all of the assets and certain liabilities of EyeLock, Inc. and EyeLock Corporation on this date, as well as obtained a majority voting interest as a result of this transaction. Although we are considered to have control over EyeLock LLC under ASC 810, due to our majority ownership interest, the assets of EyeLock LLC can only be used to satisfy the obligations of EyeLock LLC. As a result of our majority ownership interest in the entity and our primary beneficiary conclusion, we consolidated EyeLock LLC within our consolidated financial statements beginning on September 1, 2015.

On April 29, 2021, EyeLock LLC entered into a three-year exclusive distribution agreement (the “Agreement”) with GalvanEyes LLC (“GalvanEyes”), a Florida LLC managed by Beat Kahli, ~~Voxx’s~~the largest ~~shareholder.~~holder of Voxx's Class A Common Shares. The Agreement provides that GalvanEyes will ~~become~~be the exclusive distributor of EyeLock products in the European Union, Switzerland, Puerto Rico, Malaysia, and Singapore, with the exception of any existing customer ~~relationships.~~relationships prior to the Agreement date. GalvanEyes ~~was~~has also been granted exclusive distribution rights in the United States for the residential real estate market and specific U.S. Government agencies, and non-exclusive distribution rights in all other territories and verticals with the Company’s consent. The Agreement also includes a put/call arrangement, whereby GalvanEyes has the right to put the exclusivity back to EyeLock after the initial two-year period for a ~~20.0%~~20.0% interest in EyeLock. In turn, EyeLock has the ability to call the exclusivity during the term of the Agreement, based on the occurrence of certain events, which would result in a ~~20.0%~~20.0% equity interest given to GalvanEyes. Under the Agreement, in addition to paying for any products purchased, GalvanEyes has agreed to pay EyeLock ~~$10,000~~$10,000 in the form of an annual fee, over a two-year period, of up to ~~$5,000~~$5,000 per year, with payments on a quarterly basis beginning on September 1, 2021. Any gross profit generated on the sale of EyeLock LLC products by GalvanEyes will be deducted from the annual fee. The value of the put/call arrangement was not significant at ~~November 30, 2021. As of November 30, 2021,~~May 31, 2022. On May 31, 2022, the Company ~~has recorded~~received a ~~receivable~~payment in the amount of ~~$1,201~~$1,241 for the quarterly installment payment due from GalvanEyes for the three months ended ~~November 30, 2021, which is included within Prepaid expenses and other current assets on the accompanying Consolidated Balance Sheet.~~May 31, 2022. The Company has also recorded a corresponding liability ~~within Other long-term liabilities~~ on the accompanying Consolidated Balance ~~Sheet,~~Sheets, representing a prepayment made by GalvanEyes of a ~~20%~~20.0% interest in EyeLock upon exercise of the put option. The balance of the liability at ~~November 30, 2021~~May 31, 2022 is ~~$1,201. The balance receivable from GalvanEyes was paid on December 20, 2021.~~$3,692.

The following table sets forth the carrying values of assets and liabilities of EyeLock LLC that were included on our Consolidated Balance Sheets as of ~~November 30, 2021~~May 31, 2022 and February 28, ~~2021:~~2022:


	November 30, 2021			February 28, 2021			May 31, 2022			February 28, 2022
Assets	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	—		$	—		$	—		$	25
Accounts receivable, net		235			167			50			47
Inventory, net		2,027			2,245			2,179			2,028
Prepaid expenses and other current assets		1,271			30			196			245
Total current assets		3,533			2,442			2,425			2,345
Property, plant and equipment, net		40			39			32			39
Intangible assets, net		2,125			2,329			1,989			2,057
Other assets		59			60			59			59
Total assets	$	5,757		$	4,870		$	4,505		$	4,500
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable	$	1,400		$	1,396		$	1,051		$	1,023
Interest payable to VOXX		12,680			11,453			13,528			13,099
Accrued expenses and other current liabilities		430			824			665			766
Due to VOXX		67,053			61,072			66,613			66,390
Total current liabilities		81,563			74,745			81,857			81,278
Prepaid ownership interest in EyeLock LLC due to GalvanEyes LLC								3,692			2,451
Other long-term liabilities		2,459			1,200			1,200			1,200
Total liabilities		84,022			75,945			86,749			84,929
Commitments and contingencies
Partners' deficit:
Capital		41,416			41,416			41,416			41,416
Retained losses		(119,681	)		(112,491	)		(123,660	)		(121,845	)
Total partners' deficit		(78,265	)		(71,075	)		(82,244	)		(80,429	)
Total liabilities and partners' deficit	$	5,757		$	4,870		$	4,505		$	4,500

The following table sets forth the revenues and expenses of EyeLock LLC that were included in our Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and ~~2020:~~2021:


	For the three months ended November 30,						For the nine months ended November 30,						For the three months ended May 31,
	2021			2020			2021			2020			2022			2021
Net sales	$	355		$	343		$	813		$	703		$	103		$	205
Cost of sales		240			293			580			674			78			163
Gross profit		115			50			233			29			25			42
Operating expenses:
Selling		167			132			493			434			165			163
General and administrative		261			446			1,037			1,303			373			344
Engineering and technical support		1,526			1,178			4,654			3,427			869			1,487
Total operating expenses		1,954			1,756			6,184			5,164			1,407			1,994
Operating loss		(1,839	)		(1,706	)		(5,951	)		(5,135	)		(1,382	)		(1,952	)
Other expense:
Interest and bank charges		(423	)		(372	)		(1,239	)		(1,094	)		(433	)		(401	)
Other, net		—			—			—			—
Total other expense, net		(423	)		(372	)		(1,239	)		(1,094	)		(433	)		(401	)
Loss before income taxes		(2,262	)		(2,078	)		(7,190	)		(6,229	)		(1,815	)		(2,353	)
Income tax expense		—			—			—			—			—			0
Net loss	$	(2,262	)	$	(2,078	)	$	(7,190	)	$	(6,229	)	$	(1,815	)	$	(2,353	)

(22) Segment Reporting

~~(22)~~

~~Segment Reporting~~

The Company operates in 3 distinct segments based on our products and our internal organizational structure. The 3 operating segments, which are also the Company’s reportable segments, are Automotive Electronics, Consumer Electronics, and Biometrics.

Our Automotive Electronics segment designs, manufactures, markets and distributes rear-seat entertainment devices, remote start systems, automotive security, vehicle access systems, mobile interface modules, mobile multimedia devices, aftermarket/OE-styled radios, car link-smartphone telematics applications, driver distraction products, collision avoidance systems, location-based services, turn signal switches, automotive lighting products, automotive sensing and camera systems, USB ports, cruise control systems, heated seats, and satellite radio products.

Our Consumer Electronics segment designs, manufactures, markets and distributes home theater systems, A/V receivers, high-end loudspeakers, outdoor speakers, business music systems, cinema speakers, wireless and Bluetooth speakers, soundbars, wired and wireless headphones and ear buds, DLNA (Digital Living Network Alliance) compatible devices, remote controls, karaoke products, personal sound amplifiers, infant/nursery products, as well as A/V connectivity, portable/home charging, reception, and digital consumer products.

Our Biometrics segment designs, manufactures, markets, and distributes iris identification and biometric security related products.

The accounting principles applied at the consolidated financial statement level are generally the same as those applied at the operating segment level and there are no material intersegment sales. The segments are allocated interest expense, based upon a pre-determined formula, which utilizes a percentage of each operating segment's intercompany balance, which is offset in Corporate/Eliminations.

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

Segment data for each of the Company's segments is presented below:

	Automotive Electronics		Consumer Electronics		Biometrics			Corporate/ Eliminations			Total
Three Months Ended November 30, 2021
														Automotive Electronics			Consumer Electronics		Biometrics			Corporate/ Eliminations			Total
Three Months Ended May 31, 2022
Net sales	$	61,589	$	129,733	$	355		$	194		$	191,871		$	39,585		$	88,937	$	103		$	107		$	128,732
Equity in income of equity investees		2,206		0		0			0			2,206			1,588			0		0			0			1,588
Interest expense and bank charges		417		2,076		423			(2,186	)		730			405			1,967		433			(2,075	)		730
Depreciation and amortization expense		749		1,647		73			937			3,406			761			1,804		73			479			3,117
Income (loss) before income taxes (a)		4,818		9,998		(2,263	)		(42,866	)		(30,313	)
(Loss) income before income taxes (a)															(491	)		527		(1,815	)		(7,160	)		(8,939	)

Three Months Ended November 30, 2020
Three Months Ended May 31, 2021
Net sales	$	61,488	$	139,039	$	343		$	195		$	201,065		$	42,657		$	94,113	$	205		$	85		$	137,060
Equity in income of equity investees		1,761		0		0			0			1,761			2,723			0		0			0			2,723
Interest expense and bank charges		537		2,290		372			(2,728	)		471			373			1,975		401			(2,221	)		528
Depreciation and amortization expense		876		1,002		75			981			2,934			783			1,001		76			947			2,807
Income (loss) before income taxes		6,601		20,351		(2,078	)		(5,100	)		19,774			3,230			5,468		(2,353	)		(4,064	)		2,281

Nine Months Ended November 30, 2021
Net sales	$	150,007	$	320,805	$	813		$	415		$	472,040
Equity in income of equity investees		6,964		0		0			0			6,964
Interest expense and bank charges		1,099		5,962		1,239			(6,460	)		1,840
Depreciation and amortization expense		2,287		3,651		224			2,816			8,978
Income (loss) before income taxes (a)		8,974		17,905		(7,191	)		(48,629	)		(28,941	)

Nine Months Ended November 30, 2020
Net sales	$	111,397	$	288,545	$	703		$	439		$	401,084
Equity in income of equity investees		4,506		0		0			0			4,506
Interest expense and bank charges		1,058		6,530		1,094			(6,402	)		2,280
Depreciation and amortization expense		2,050		2,921		247			3,006			8,224
Income (loss) before income taxes		3,730		33,087		(6,229	)		(8,974	)		21,614

(a) Included within (Loss) income before taxes on Corporate/Eliminations for the three months ended May 31, 2022 are foreign currency losses of approximately $2,700 attributable to the Company's Onkyo subsidiary related to intercompany transactions and financial statement translation adjustments.

The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. We apply the FASB’s guidance on revenue recognition, which requires us to recognize the amount of revenue and consideration that we expect to receive in exchange for goods and services transferred to our customers. To do this, the Company applies the five-step model prescribed by the FASB, which requires us to: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, we satisfy a performance obligation.

Within our Automotive Electronics segment, while the majority of the contracts we enter into with Original Equipment Manufacturers (“OEMs”) are long-term supply arrangements, the performance obligations are established by the enforceable contract, which is generally considered to be the purchase order. The purchase orders are of durations less than one year. As such, the Company applies the practical expedient in ASC paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less for which work has not yet been performed.

The Company’s primary source of revenue is derived from the manufacture and distribution of consumer electronic, automotive electronic, and biometric products. Our consumer electronic products primarily consist of finished goods sold to retail and commercial customers, consisting of premium audio products and other consumer electronic products. Our automotive electronic products, some of which are manufactured by the Company, are sold both to OEM and aftermarket customers. Our biometric products, primarily consisting of finished goods, are sold to retail and commercial customers. We recognize revenue for sales to our customers when transfer of control of the related good or service has occurred. The majority of our revenue was recognized under the point in time approach for the three ~~and nine~~ months ended ~~November 30, 2021.~~May 31, 2022. Certain telematic subscription revenues generated by our Automotive Electronics segment are recognized over time. Contract terms with certain of our OEM customers could result in additional products and services being transferred over time as a result of the customized nature of some of our products, together with contractual provisions in the customer contracts that provide us with an enforceable right to payment for performance completed to date; however, under typical terms, we do not have the right to consideration until the time of shipment from our manufacturing facilities or distribution centers, or until the time of delivery to our customers. If certain contracts in the future provide the Company with this enforceable right of payment, the timing of revenue recognition from products

transferred to customers over time may be slightly accelerated compared to our right to consideration at the time of shipment or delivery.

Under ASC 606, we are required to present a refund liability and a return asset within the Consolidated Balance Sheets. The changes in the refund liability are reported in Net sales, and the changes in the return asset are reported in Cost of sales in the Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income. As of ~~November 30, 2021~~May 31, 2022 and February 28, ~~2021,~~2022, the balance of the return asset was ~~$2,554~~$2,303 and ~~$2,404,~~$2,619, respectively, and the balance of the refund liability was ~~$5,277~~$4,631 and ~~$5,145,~~$5,469, respectively, and are presented within Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, on the Consolidated Balance Sheets.

We warrant our products against certain defects in material and workmanship when used as designed, which primarily range from 30 days to 3 years. We offer limited lifetime warranties on certain products, which limit the customer’s remedy to the repair or replacement of the defective product or part for the designated lifetime of the product, or for the life of the vehicle for the original owner, if it is an automotive product. We do not sell extended warranties.

Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts with customers. Contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been met, and therefore, revenue has not been recognized. The Company had current and non-current contract liability balances totaling ~~$4,658~~$5,041 at ~~November 30, 2021~~May 31, 2022 related to telematic subscription services of the Company’s DEI ~~subsidiary established in connection with the Company’s acquisition of DEI in July 2020 (see Note 2).~~ subsidiary. The following table provides a reconciliation of the Company’s contract liabilities as of ~~November 30, 2021:~~May 31, 2022:



Balance at February 28, 2022	$	5,412
Subscription payments received		1,497
Revenue recognized		(1,868	)
Balance at May 31, 2022	$	5,041

The Company had no contract asset balances at ~~November 30, 2021~~May 31, 2022 or February 28, ~~2021.~~

The Company operates in 3 reportable segments: Automotive Electronics, Consumer Electronics, and Biometrics. ASC 606 requires further disaggregation of an entity’s revenue. In the following table, the Company's net sales are disaggregated by segment and product type for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and ~~2020:~~2021:


	Three months ended May 31,
	2022		2021
Automotive Electronics Segment
OEM Products	$	16,724	$	14,914
Aftermarket Products		22,861		27,743
Total Automotive Segment		39,585		42,657
Consumer Electronics Segment
Premium Audio Products		69,944		71,593
Other Consumer Electronic Products		18,993		22,520
Total Consumer Electronics Segment		88,937		94,113
Biometrics Segment
Biometric Products		103		205
Total Biometrics Segment		103		205
Corporate/Eliminations		107		85
Total Net Sales	$	128,732	$	137,060

Three months ended
November 30,

Nine months ended
November 30,

2021

2020

2021

2020

Automotive Electronics Segment

OEM Products

$
18,536

$
14,089

$
49,853

$
32,462

Aftermarket Products

43,053

47,399

100,154

78,935

Total Automotive Segment

61,589

61,488

150,007

111,397

Consumer Electronics Segment

Premium Audio Products

104,877

112,681

252,610

216,501

Other Consumer Electronic Products

24,856

26,358

68,195

72,044

Total Consumer Electronics Segment

129,733

139,039

320,805

288,545

Biometrics Segment

Biometric Products

355

343

813

703

Total Biometrics Segment

355

343

813

703

Corporate/Eliminations

194

195

415

439

Total Net Sales

$
191,871

$
201,065

$
472,040

$
401,084

The Company is currently, and has in the past, been a party to various routine legal proceedings incident to the ordinary course of business. If management determines, based on the underlying facts and circumstances of each matter, that it is probable a loss will result from a litigation contingency and the amount of the loss can be reasonably estimated, the estimated loss is accrued for.

The products the Company sells are continually changing as a result of improved technology. As a result, although the Company and its suppliers attempt to avoid infringing known proprietary rights, the Company may be subject to legal proceedings and claims for alleged infringement by patent, trademark, or other intellectual property owners. Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and resources, or require the Company to either enter into royalty or license agreements that are not advantageous to the Company, or pay material amounts of ~~damages~~damages.

In March 2007, the Company entered into a contract with Seaguard Electronics, LLC (“Seaguard”) relating to the Company’s purchase from Seaguard of a stolen vehicle recovery product and back-end services. In August 2018, Seaguard filed a demand for arbitration against the Company with the American Arbitration Association (“AAA”) alleging claims for breach of contract and patent infringement. Seaguard originally sought damages of approximately ~~$10,000~~$10,000 and on the seventh day of an eight-day fact witness portion of the arbitration in June 2021, amended its damages demand to ~~$40,000,~~$40,000, which was effected by the service of Claimant’s notice dated July 14, 2021.

On November 29, 2021, the Arbitrator issued an interim award (the “Interim Award”) with Seaguard prevailing on its breach of contract claim. The Company’s affirmative defenses relating to those claims, however, were denied in their entirety. Seaguard was awarded damages in the amount of ~~$39,444~~$39,444 against the Company. ~~Seaguard is seeking reimbursement~~On March 3, 2022, the Arbitrator issued a Partial Final Award on Bifurcated Issue in the amount of $39,444, plus $798 for its attorneys’ fees and ~~expenses. The Arbitrator has deferred scheduling, until late February~~costs. On March 11, 2022, the ~~balance~~Arbitrator fixed the schedule of the patent portion of the bifurcated arbitration, ~~which principally relates to patent infringement claims against the Company; however, the~~with a trial date set for October 16, 2023. The Company has anput its suppliers on notice of its indemnification ~~from its supplier~~rights with respect to the alleged infringing products. ~~A schedule has not been established~~

On March 14, 2022, Seaguard filed a Petition in the United States District Court, Central District of California, Western Division, to confirm the Partial Final Award. On April 25, 2022, the Company filed its opposition to Seaguard’s Petition to Confirm and a Counter-Petition to Vacate the Partial Final Award. On May 31, 2022, the Court ordered the matter taken under submission for decision without oral hearing.

During Fiscal 2022, the Company recorded an accrual for the ~~issuance of a final~~interim arbitration ~~award. The Company is reviewing its legal options, and has moved~~award in the ~~arbitration proceeding to modify~~amount of $39,444. During the ~~interim award and if unsuccessful,~~three months ended May 31, 2022, the Company ~~will seek to have a court vacate, modify, or correct~~accrued an additional charge of $986 representing interest due on the ~~interim award.~~award when paid. At ~~November 30, 2021,~~May 31, 2022, the Company has ~~recorded~~ a ~~charge~~total accrued balance of ~~$39,444 within Other (expense) income in~~$40,431 on the accompanying ~~Unaudited~~ Consolidated ~~Statements of Operations and Comprehensive (Loss) Income. No accrual or reserve was included in~~Balance Sheet related to the ~~Company’s previously issued financial statements based on an assessment that an award of damages in the~~interim arbitration ~~proceeding would not be material and that the amount as determined by the Arbitrator’s award was not probable.~~award. The Company made its accrual determination in accordance with reports and evaluations from its damages expert, as well as from the guidance and opinion letters received from the Company’s trial attorneys.

(25) New Accounting Pronouncements

~~VOXX International Corporation and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements, continued~~

~~(Amounts in thousands, except share and per share data)~~

~~(25)~~

~~New Accounting Pronouncements~~

In March 2020 and January 2021, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU No. 2021-01, “Reference Rate Reform: Scope,” respectively. Together, these ASU’s provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 provides, among other things, guidance that modifications of contracts within the scope of Topic 470, Debt, should be accounted for by prospectively adjusting the effective interest rate; modifications of contracts within the scope of Topic ~~840,~~842, Leases, should be accounted for as a continuation of the existing contract; and, changes in the critical terms of hedging relationships caused by reference rate reform should not result in the de-designation of the instrument, provided certain criteria are met. ASU 2021-01 clarifies the scope and application of ASU 2020-04 and among other things, permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows. The Company’s exposure to LIBOR rates includes its Credit Facility, as well as its Florida Mortgage and related interest rate swap agreement. These optional expedients and exceptions are effective as of March 12, 2020 through December 31, 2022. Adoption is permitted at any time. The Amended and Restated Credit Agreement provides both the Credit Facility and the Florida Mortgage with a Benchmark Replacement that will replace the LIBOR

rate (see Note 16). The Company is currently evaluating the impact this update may have on its consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts With Customers,” which amends the accounting for contract assets acquired and contract liabilities assumed from contracts with customers in business combinations (“acquired contract balances”). The update requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract. Previously, acquired contract assets and liabilities were measured at fair value. The ASU is effective for fiscal years ending after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact this update may have on its consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain information in this Quarterly Report on Form 10-Q would constitute forward-looking statements, including, but not limited to, information relating to the future performance and financial condition of the Company, the impact of the COVID-19 pandemic on our results of operations, the plans and objectives of the Company’s management, and the Company’s assumptions regarding such performance and plans that are forward-looking in nature and involve certain risks and uncertainties. Actual results could differ materially from such forward-looking information and could be exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result.

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") with an overview of the business. This is followed by a discussion of the Critical Accounting Policies and Estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results. In the next section, we discuss our results of operations for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 compared to the three ~~and nine~~ months ended ~~November 30, 2020.~~May 31, 2021. Next, we present EBITDA and Adjusted EBITDA attributable to Voxx for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 compared to the three ~~and nine~~ months ended ~~November 30, 2020,~~May 31, 2021, in order to provide a useful and appropriate supplemental measure of our performance. We then provide an analysis of changes in our balance sheets and cash flows and discuss our ~~financial commitments~~material cash requirements in the sections entitled "Liquidity and Capital Resources." We conclude this MD&A with a discussion of "Related Party Transactions" and "Recent Accounting Pronouncements."

Unless specifically indicated otherwise, all amounts presented in our MD&A below are in thousands, except share and per share data.

VOXX International Corporation ("Voxx," "We," "Our," "Us" or the "Company") is a leading international manufacturer and distributor operating in the Automotive Electronics, Consumer Electronics, and Biometrics industries. The Company has widely diversified interests, with more than 30 global brands that it has acquired and grown throughout the years, achieving a powerful international corporate image, and creating a vehicle for each of these respective brands to emerge with its own identity. We conduct our business through nineteen wholly-owned subsidiaries: Audiovox Atlanta Corp., VOXX Electronics Corporation, VOXX Accessories Corp., VOXX German Holdings GmbH ("Voxx Germany"), Audiovox Canada Limited, Voxx Hong Kong Ltd., Audiovox International Corp., Audiovox Mexico, S. de R.L. de C.V. ("Voxx Mexico"), Code Systems, Inc., Oehlbach Kabel GmbH ("Oehlbach"), Schwaiger GmbH ("Schwaiger"), Invision Automotive Systems, Inc. ("Invision"), Premium Audio Company LLC ("~~Klipsch")~~PAC," which includes Klipsch Group, Inc. and 11 Trading Company LLC), Omega Research and Development, LLC ("Omega"), Voxx Automotive Corp., Audiovox Websales LLC, VSM-Rostra LLC (“VSM”), VOXX DEI LLC, and VOXX DEI Canada, Ltd. (collectively, with VOXX DEI, LLC, “DEI”), as well as a majority owned ~~subsidiary,~~subsidiaries, EyeLock LLC ("EyeLock") and Onkyo Technology KK ("Onkyo"). We market our products under the Audiovox® brand name and other brand names and licensed brands, such as 808®, Acoustic Research®, Advent®, Avital®, Car Link®, Chapman®, Clifford®, Code-Alarm®, Crimestopper™, Directed®, Discwasher®, Energy®, Heco®, Integra®, Invision®, Jamo®, Klipsch®, Mac Audio™, Magnat®, Mirage®, myris®, Oehlbach®, Omega®, Onkyo®, Pioneer®, Prestige®, Project Nursery®, Python®, RCA®, RCA Accessories, Rosen®, Rostra®, Schwaiger®, Smart Start®, Terk®, Vehicle Safety Automotive, Viper®, and Voxx Automotive, as well as private labels through a large domestic and international distribution network. We also function as an OEM ("Original Equipment Manufacturer") supplier to several customers, as well as market a number of products under exclusive distribution agreements, such as SiriusXM satellite radio products.

While COVID-19 did not have a global pandemic was declared by the World Health Organization and a National Emergency was declared by the President of the United States related to the rapidly growing outbreak of COVID-19. The pandemic has significantly impacted economic conditions in the United States, as federal, state, and local governments reacted to the public health crisis, creating significant ~~uncertainties in the United States, as well as the global economy. In the interest of public health and safety, U.S. jurisdictions (national, state, and local) where~~adverse impact on demand for our primary operations and those of many of our customers are located required mandatory business closures, capacity limitations, or other restrictions for those permitted to continue to operate or allowed to reopen since the initial shut-downs in March 2020. As of the date of this filing, all of our operating locations are open.

~~The Company’s revenues have decreased~~products for the three months ended ~~November 30, 2021, but have increased~~May 31, 2022, we did experience pandemic-related pressures in the global supply network that caused logistical issues, including higher freight costs, supplier product delays, and inflation with respect to materials and labor costs, which impacted our results for the ~~nine~~three months ended ~~November 30, 2021~~May 31, 2022. As countries around the world continue to combat COVID-19, and as ~~compared to the respective prior year periods. The impact of~~government-imposed regulations regarding, among other things, COVID-19 ~~on the market~~testing, travel restrictions, and vaccine mandates change, there is still ~~rapidly changing~~a risk that the pandemic may impact the overall demand environment, and ~~additional impacts~~our ability to ~~the business may arise that we are not aware of currently, which could have an adverse impact on revenues, results of operations,~~source product and ~~cash flows for the 2022 fiscal year. We cannot predict whether, when, or~~

~~the manner~~materials to meet demand levels and maintain adequate inventory levels, as well as maintain staffing levels at our own facilities in ~~which the conditions surrounding COVID-19 will change, including the ultimate duration~~order to fulfill our customer orders and scope of the pandemic; the severity of the virus, including the emergence of new variants; the impact of the COVID-19 vaccines, including the speed at which they are disseminated and their effectiveness; the actions taken by governments to contain the virus or treat its impact; and how quickly and to what extent normal economic and operating conditions can resume.contractual obligations. Due to the evolving situation, future results of the Company could be impacted in ways we are not able to predict today, including, but not limited to, non-cash write-downs and impairments; foreign currency fluctuations; potential adjustments to the carrying value of inventory; and the delayed collections of, or inability to collect accounts receivables. We will continue to closely monitor updates regarding the spread of COVID-19 and its variants, the

distribution of vaccines and vaccine boosters, and any applicable local, state, and federal government-imposed restrictions, and we will adjust our operations accordingly. In light of the foregoing, we may take actions to alter our business operations or such actions that we determine are in the best interest of our employees, customers, suppliers, and shareholders.

The Company continues to focus on cash flow and anticipates having sufficient resources to operate for the coming twelve-month period. In April 2021, the Company amended its Credit Facility in the U.S. in order to increase the maximum borrowing base thereunder and extend the maturity date of the Credit Facility to April 2026 (see Note 16(a)).

The Company operates in three reportable segments based on our products and internal organizational structure. The operating segments consist of Automotive Electronics, Consumer Electronics, and Biometrics. See Note 22 to the Company's Consolidated Financial Statements for segment information.

We believe our segments have expanding market opportunities with certain levels of volatility related to domestic and international markets, new car sales, increased competition by manufacturers, private labels, technological advancements, discretionary consumer spending and general economic conditions. All of our products are subject to price fluctuations which could affect the carrying value of inventories and gross margins in the future. Macroeconomic factors, such as ~~increases~~fluctuations in the unemployment rate and inflation have been pressured as a result of factors including the COVID-19 pandemic, supply chain shortages, and the war in the Ukraine and have created a challenging demand environment in some of our markets, the duration and severity of which we are still unable to predict.

Our objective is to continue to grow our business by acquiring new brands, embracing new technologies, expanding product development, and applying this to a continued stream of new products that should increase gross margins and improve operating income. In addition, it is our intention to continue to acquire synergistic companies that would allow us to leverage our overhead, penetrate new markets and expand existing product categories through our business channels. Notwithstanding the above, if the appropriate opportunity arises, the Company will explore the potential divestiture of a product line or business.

On September 8, 2021, the Company’s subsidiary, ~~Premium Audio Company LLC (“PAC”),~~PAC, completed the transaction to acquire the home audio/video business of Onkyo Home Entertainment Corporation with its partner Sharp through the newly formed joint venture, Onkyo Technology KK (see Note 2).

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses reported in those financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; accrued sales incentives; business combinations; expected credit losses on accounts receivable; inventory valuation; valuation of long-lived assets; valuation and impairment assessment of goodwill, trademarks, and other intangible assets; warranties; ~~stock-based compensation;~~ recoverability of deferred tax assets; and the reserve for uncertain tax positions at the date of the consolidated financial statements. A summary of the Company's critical accounting policies is identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company's Form 10-K for the fiscal year ended February 28, ~~2021.~~2022. During Fiscal ~~2021, there were significant~~2022, changes to the global economic situation continued to occur as a consequence of the COVID-19 pandemic and related supply chain challenges, chip shortages, and freight issues that could continue during Fiscal ~~2022.~~2023. It is possible that this could cause changes to estimates in the future as a result of the financial circumstances of the markets in which the Company operates, the price of the Company’s publicly traded equity in comparison to the Company’s carrying value, and the health of the global economy. Such changes to estimates could potentially result in impacts that would be material to the Company’s consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units in relation to potential goodwill impairment and the fair value of long-lived assets in relation to potential impairment. Since February 28, ~~2021,~~2022, there have been no changes in our critical accounting policies.

As you read this discussion and analysis, refer to the accompanying Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income, which present the results of our operations for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and ~~2020.~~2021.

The following tables set forth, for the periods indicated, certain statements of operations data for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and ~~2020.~~2021.

Automotive Electronics sales represented ~~32.1%~~30.7% of the net sales for the three months ended ~~November 30, 2021,~~May 31, 2022, compared to ~~30.6%~~31.1% in the prior year period and ~~remained relatively flat with an increase of $101~~decreased $3,072 for the three months ended ~~November 30, 2021,~~May 31, 2022, as compared to the three months ended ~~November 30, 2020.~~May 31, 2021. The primary driver of the sales decrease was the decline in sales of aftermarket security products of approximately $3,700, which includes aftermarket remote starts and telematic products. In the prior year, component shortages caused some customers to make large product purchases earlier in order to avoid future stock outages, and has led to high inventory levels at some customers during the three months ended May 31, 2022 and caused delays in our sales. Chip shortages and shipping delays have also lead to sales declines for these products for the quarter. Sales of the Company's OEM and aftermarket automotive safety electronics also decreased approximately $1,100 in total for the three months ended May 31, 2022 primarily as a result of component part shortages, labor shortages, and low inventories of vehicles in which these products are generally installed, as well as some fall-off in business for certain older products. Additionally, the Company experienced a decline in satellite radio sales of approximately $1,000 for the three months ended May 31, 2022 as a result of inventory shortages which have negatively affected the Company’s ability to fulfill orders. As an offset to these sales declines, the Company’s OEM rear seat entertainment sales experienced a net increase of approximately ~~$3,700 for~~$2,300 during the three months ended ~~November 30, 2021, primarily~~May 31, 2022, as a result of the start of a new rear seat entertainment ~~programs~~program with ~~Ford and~~ Stellantis during the second half of Fiscal 2022 that ~~were~~was not present in the comparable prior ~~year.~~year period. This was offset by a decline in sales for ~~one of the Company’s rear-seat entertainment~~certain customer programs ~~that ended during the quarter. Sales of OEM automotive safety electronics products~~due to chip shortages. Aftermarket accessory

product sales also increased approximately $1,400 as a result of rebounding sales following the COVID-19 shut-downs of automotive manufacturers in the prior year. As an offset to these increases, the Company experienced decreases in sales of both aftermarket security and safety electronics products, as well as satellite radios of approximately $1,900, $1,300 and $1,200, respectively,$400 for the three months ended November 30, 2021, as a result of inventory shortages that have negatively affected the Company’s ability to fulfill orders, as well as due to the fact that some customers purchased product earlier in the year to avoid future stock outages in light of worldwide issues with shipping container shortages and chip shortages. Additionally, sales of aftermarket rear seat entertainment products decreased approximately $400 due to product delays.

Automotive Electronics sales represented 31.8% of the net sales for the nine months ended November 30, 2021, compared to 27.8% in the prior year period and increased $38,610 for the nine months ended November 30, 2021, as compared to the nine months ended November 30, 2020. The primary driver of the sales increase in this segment was sales of aftermarket security products related to the Company’s DEI subsidiary, established in connection with the Company’s acquisition in July 2020. These sales increased approximately $20,100 for the nine months ended November 30, 2021 to a total of approximately $48,400, as a result of nine full months of sales included for FiscalMay 31, 2022 as compared to five months during the comparable Fiscal 2021 year-to-date period. The Company’s OEM rear seat entertainment sales experienced a net increase of approximately $12,700 during the nine months ended November 30, 2021, as a result of the start of new rear seat entertainment programs with Nissan, Ford, and Stellantis that were not present in the prior year. This was offset by a decline in sales for one of the Company’s rear-seat entertainment programs that ended during Fiscal 2022. Sales of OEM automotive safety electronics also increased approximately $6,900 for the nine months ended November 30, 2021, as a result of rebounding sales following the COVID-19 shut-downs of automotive manufacturers. In addition, the Company’s aftermarket security products, which include aftermarket remote starts, and aftermarket rear seat entertainment products increased by approximately $1,600 and $1,200, respectively, for the nine months ended November 30, 2021, due to rebounding sales following the prior year COVID-19 shut-downs, as well as due to current year component shortages that caused some customers to purchase product earlier in order to avoid future stock outages. Finally, aftermarket accessory products increased approximately $800 for the nine months ended November 30, 2021 due to the successful launch of new soundbars for club cars during the second quarter of the fiscal year. As an offset to these increases, the Company experienced net decreases in both aftermarket safety electronics and satellite radio sales during the nine months ended November 30, 2021 of approximately $3,000 and $1,600, respectively, as a result of inventory shortages which have negatively affected the Company’s ability to fulfill orders.Fiscal 2022.

Consumer Electronics sales represented ~~67.6%~~69.1% of our net sales for the three months ended ~~November 30, 2021,~~May 31, 2022, compared to ~~69.2%~~68.7% in the comparable prior year period and decreased ~~$9,306~~$5,176 for the three months ended ~~November 30, 2021,~~May 31, 2022, as compared to the three months ended ~~November 30, 2020.~~May 31, 2021. This net decrease was a result of several factors. The Company experienced a net decrease in domestic sales of its premium home theater speakers, mobility products and wireless ~~speakers and home separate speakers,~~speaker products totaling approximately ~~$12,600~~$13,100 during the three months ended ~~November 30, 2021 due to vessel delays and shortages, as well as chip shortages, that have caused~~May 31, 2022. The Company has been selling its remaining inventory of certain home theater products in preparation for new product ~~backorders. Additionally,~~launches expected in the ~~prior year period,~~

~~there were high load~~second quarter of Fiscal 2023 and sales of these older product lines have been on the decline. The Company also moved from a fulfillment model to a direct to customer model for its online platform sales of mobility products in order to improve pricing, which has resulted in a decrease in sales for the ~~launch~~three months ended May 31, 2022 as a result of the ~~Company’s~~transition. This was partially offset by higher sales and customer demand for premium ~~wireless computer~~soundbars and Bluetooth speakers, ~~at warehouse club channels that did not repeat~~despite experiencing chip shortages causing some product backorders and vendor delays. There was also a total decrease in domestic sales of accessory products of approximately $2,500 for the three months ended May 31, 2022 impacting most major accessory product lines, including hook-up, nursery, smart home, clock, and reception products. This decline was a result of a general softness of sales in the ~~current year. The Company also saw declines~~accessory market following prior year rebound sales experienced after the COVID-19 shut-downs in Fiscal 2021. Net sales further decreased for the three months ended May 31, 2022 as a result of an increase in the Company's reserve for returns of approximately $1,000 relating to certain premium audio products. Finally, there was a decline in sales of ~~hook-up products, reception products, and remotes totaling~~ approximately ~~$2,700~~$900 related to wireless accessory speakers during the three months ended ~~November 30, 2021 which occurred~~May 31, 2022, due to the ~~fact that these product sales increased significantly during~~timing of customer orders, as one of its larger customers made a large purchase in the ~~prior year COVID-19 shutdowns, as many people were working from home during this period. During the third~~first quarter of Fiscal 2022 ~~sales~~for the Spring, while in the current year, this seasonal order was placed in the fourth quarter of Fiscal 2022. As an offset to these ~~products have returned to normal levels. Additionally,~~declines, the Company experienced a decrease in sales of its premium mobility products of approximately $1,500 as a result of stronger prior year sales of new product and current year production delays by certain vendors. Offsetting these sales decreases was an increase in domestic sales of Onkyo and Pioneer products of approximately ~~$7,800 within~~$10,000 for the ~~Company’s~~three months ended May 31, 2022. The Company's 11 Trading Company ~~LLC~~ subsidiary ~~(“11TC”). 11TC~~ began selling these products through a distribution ~~agreements~~agreement during the third quarter of Fiscal 2021. In the third quarter of Fiscal 2022, the Company completed an acquisition of certain assets of the Onkyo Home Entertainment business with its joint venture partner, resulting in the establishment of the Company’s Onkyo subsidiary and an increase in factory production and sales of Onkyo and Pioneer products during the three months ended November 30, 2021.

Consumer Electronics sales represented 68.0% of our net sales for the nine months ended November 30, 2021, compared to 71.9% in the comparable prior year period and increased $32,260 for the nine months ended November 30, 2021, as compared to the nine months ended November 30, 2020. The Company’s 11TC subsidiary contributed to an increase in sales of approximately $25,500 for the nine months ended November 30, 2021 to a total of approximately $32,000. 11TC began selling Onkyo and Pioneer products through distribution agreements during the third quarter of Fiscal 2021 and during the third quarter of Fiscal 2022, the Company completed an acquisition of certain assets of the Onkyo Home Entertainment business with its joint venture partner, resulting in the establishment of the Company’s Onkyo subsidiary. Sales of Onkyo and Pioneer products ~~under~~have increased since the distribution agreements were only present for three months during the prior year to date period. The Company also experienced an increase in sales of its premium home theater speakers during the nine months ended November 30, 2021 of approximately $15,100,acquisition, as ~~the Company continues to see high consumer demand and~~there has achieved market share growth and began selling many of its products through warehouse club channels during Fiscal 2021. Additionally, the lifting of many of the COVID-19 restrictions that were in place during the nine months ended November 30, 2020 has contributed positively to the salesbeen higher factory production of these products ~~in Fiscal 2022. The~~to meet customer demand, which the Company is still working toward. Prior to the acquisition, the Onkyo Home Entertainment parent company was unable to meet customer demand due to financial difficulty. Sales of premium audio products made by the Company's PAC Australia subsidiary have also ~~experienced improvements of~~increased approximately ~~$2,100 related to wireless accessory speakers~~$2,600 in during the ~~nine~~three months ended ~~November 30, 2021, due to the rebound in sales following nationwide COVID-19 brick and mortar business closures and delayed customer orders~~May 31, 2022, as this entity was established during the ~~nine months ended November 30, 2020. Within Europe, the Company experienced net increases in its premium audio product and accessories sales~~first quarter of approximately $1,600 as a result of the partial lifting of COVID-19 restrictions during the nine months ended November 30, 2021, although many restrictions are still noted to be in place. Offsetting these increases, the Company experienced declining sales of hook-up products, reception products, and remotes totaling approximately $5,400 during the nine months ended November 30, 2021, as these products saw a large increase during the comparable prior year period due to the significant number of people working from home during the COVID-19 pandemic. During Fiscal 2022 ~~sales~~and began shipping product at the end of these products have returned to normal levels. Additionally, sales of premium wireless speakers and premium mobility products decreased approximately $4,200 in total during the nine months ended November 30, 2021 primarily as a result of chip shortages that have caused product backorders, vendor delays, and shipping container and vessel shortages, as well as due to large load in sales or speaker products at warehouse club channels that did not repeat in the current year.May 2021.

Biometrics sales represented ~~0.2%~~0.1% of our net sales for ~~both~~ the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and ~~2020.~~2021. Sales for the three months ended ~~November 30, 2021~~May 31, 2022 have ~~remained relatively flat, while sales for the nine months ended November 30, 2021 have increased $110.~~decreased approximately $100. The ~~increase~~decrease in sales during the ~~nine~~three months ended ~~November 30, 2021~~May 31, 2022 was due primarily to ~~an increase in~~higher sales of the NIXT product ~~which~~in the ~~Company began selling~~prior year, as the product launched during ~~the second half of~~ Fiscal 2021. The NIXT product can be optionally fitted with iTEMP, a product that can take an individual’s temperature before allowing iris access. During Fiscal 2022, the Company has also begun selling NIXT, iTemp, and NEXT products under the distribution agreement signed with GalvanEyes LLC in April 2021.


	November 30,												May 31,
	2021			2020			$ Change			% Change			2022			2021			$ Change			% Change
Three Months Ended
Automotive Electronics	$	14,648		$	15,777		$	(1,129	)		(7.2	)%	$	8,782		$	11,522		$	(2,740	)		(23.8	)%
		23.8	%		25.7	%								22.2	%		27.0	%
Consumer Electronics		36,754			42,109			(5,355	)		(12.7	)%		24,326			25,052			(726	)		(2.9	)%
		28.3	%		30.3	%								27.4	%		26.6	%
Biometrics		114			50			64			128.0	%		25			40			(15	)		(37.5	)%
		32.1	%		14.6	%								24.3	%		19.5	%
Corporate		188			192			(4	)		(2.1	)%		106			81			25			30.9	%
	$	51,704		$	58,128		$	(6,424	)		(11.1	)%	$	33,239		$	36,695		$	(3,456	)		(9.4	)%
		26.9	%		28.9	%								25.8	%		26.8	%

Nine Months Ended
Automotive Electronics	$	37,111		$	25,555		$	11,556			45.2	%
		24.7	%		22.9	%
Consumer Electronics		87,854			90,166			(2,312	)		(2.6	)%
		27.4	%		31.2	%
Biometrics		231			28			203			725.0	%
		28.4	%		4.0	%
Corporate		386			430			(44	)		(10.2	)%
	$	125,582		$	116,179		$	9,403			8.1	%
		26.6	%		29.0	%

Gross margin percentages for the Company have decreased ~~200 and 240~~100 basis points for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022, as compared to the three ~~and nine~~ months ended ~~November 30, 2020.~~May 31, 2021.

Gross margin percentages in the Automotive Electronics segment decreased ~~190~~ 480 basis points for the three months ended ~~November 30, 2021 and increased 180 basis points for the nine months ended November 30, 2021,~~May 31, 2022, as compared to the ~~respective~~ prior year periods. Positive margin impacts in this segment have been driven primarily by sales of aftermarket security products related to the Company’s DEI subsidiary, whose products have higher profit margins than those typically achieved by the segment. Sales from DEI were present in the prior year period for five months, as it was established in July 2020, and therefore these sales increased significantly for the nine months ended November 30, 2021 as compared the prior year; but were relatively flat for the three month comparable quarterly periods, achieving less benefit from these high margin sales.period. The decrease in sales of satellite radio products for both the three and nine months ended November 30, 2021, which typically generate lower margins for the Company, also contributed positively to margins overall. Offsetting these positive impacts, the increased cost of materials and shipping, as well as increases in tariffs included in cost of goods sold, have negatively affected margins during the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 for such items as OEM rear seat entertainment ~~OEM~~ and ~~aftermarket~~OEM automotive safety ~~products, and aftermarket accessory~~ products, which the Company ishas been actively working to mitigate through a combination of sales price adjustments and other sourcing ~~strategies.~~strategies, as such supply chain issues are expected to continue through

most of Fiscal 2023. These mitigating actions have helped to stabilize margins for certain other product lines within the segment during the three months ended May 31, 2022, or have helped to reduce the negative impact of these supply chain issues. Additionally, certain new OEM rear seat entertainment products that began selling during the ~~three and nine months ended November 30, 2021,~~second half of Fiscal 2022, and that have positively contributed to sales ~~during~~for the ~~periods,~~three months ended May 31, 2022, have generated lower margins than are normally achieved in this segment. Finally, sales of aftermarket security products, which have higher profit margins than those typically achieved by the segment, have experienced sales declines during the three months ended May 31, 2022 and thus have contributed negatively to the segment's margins for the quarter. Offsetting these negative margin impacts, and in addition to mitigating strategies related to rising supply chain costs noted above, the decrease in sales of satellite radio products for the three months ended May 31, 2022, which typically generate lower margins for the Company, contributed positively to margins overall.

Gross margin percentages in the Consumer Electronics segment ~~decreased 200 and 380~~increased 80 basis points for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022, as compared to the prior year ~~periods. The primary driver~~period. Sales of Onkyo and Pioneer products positively impacted margins for the three months ended May 31, 2022, as there have been higher sales and higher factory production of these ~~declines during~~products since the ~~three~~acquisition of the Onkyo Home Entertainment business in September 2021, as compared to sales under its distribution agreement with Onkyo Home Entertainment Corp. prior to the acquisition. The Company has more control over pricing and ~~nine months ended November 30, 2021~~costing of the products since it acquired the business as well, which has ~~been~~further improved these margins. Offsetting this positive margin impact, significant increases to container costs and surcharges affecting cost of sales for many of the products within the segment have caused declines in margins for the three month ended May 31, 2022, which the Company ishas actively ~~working~~worked to mitigate through pricing adjustments and other sourcing ~~strategies.~~strategies, and has effectively helped to stabilize margins for some products, or has helped to reduce the negative impact of these issues for others. These supply chain issues are expected to continue through most of Fiscal 2023. In addition, the ~~Company’s newest~~Company saw declines in sales of its older line of premium ~~wireless computer~~home theater speakers ~~as well as other premium audio products sold through warehouse club channels, which have contributed positively to sales~~ during the three ~~and nine month periods,~~months ended May 31, 2022 in preparation for new product launches. As these products have ~~been sold at lower~~typically generated higher margins ~~than those typically associated with~~for the ~~Company’s premium audio products. Offsetting these negative margin impacts,~~segment, this decrease in sales ~~from the Company’s 11 Trading Company subsidiary positively~~negatively impacted margins for the three and nine month periods, as these sales were present for only three months of the prior year comparable periods and have also increased year over year for the three months ended November 30, 2021.quarter.

Gross margin percentages in the Biometrics segment improved 480 basis points for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 as compared to the prior year ~~periods.~~period. The increase in margins for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 was

primarily a result of ~~the increase in sales during the nine months ended November 30, 2021 and consistent sales levels~~tooling costs incurred during the three months ended ~~November 30,~~May 31, 2021 ~~as the Company’s NIXT product has generated high margins for the segment. Additionally,~~that did not repeat in the ~~prior year comparable periods, the Company reduced pricing on certain products, which helped generate sales, but resulted in lower margins for the segment.~~current year.


	November 30,										May 31,
	2021		2020		$ Change			% Change			2022		2021		$ Change			% Change
Three Months Ended
Operating expenses:
Selling	$	13,864	$	13,176	$	688			5.2	%	$	12,285	$	11,467	$	818			7.1	%
General and administrative		20,049		21,104		(1,055	)		(5.0	)%		19,130		18,676		454			2.4	%
Engineering and technical support		9,706		5,676		4,030			71.0	%		8,389		6,232		2,157			34.6	%
Acquisition costs		287		24		263			1095.8	%		136		676		(540	)		(79.9	)%
Total operating expenses	$	43,906	$	39,980	$	3,926			9.8	%	$	39,940	$	37,051	$	2,889			7.8	%

Nine Months Ended
Operating expenses:
Selling	$	37,169	$	30,976	$	6,193			20.0	%
General and administrative		56,609		51,398		5,211			10.1	%
Engineering and technical support		23,824		14,942		8,882			59.4	%
Acquisition costs		3,279		270		3,009			1114.4	%
Total operating expenses	$	120,881	$	97,586	$	23,295			23.9	%

Total operating expenses have increased ~~$3,926 and $23,295~~$2,889 for the three ~~and nine~~ months ended ~~November 30, 2021, respectively,~~May 31, 2022, as compared with the prior year ~~periods.~~period.

For the three months ended ~~November 30, 2021,~~May 31, 2022, selling expenses increased ~~$688.~~$818. This increase was ~~partially~~primarily attributable to higher salary expenses and related payroll taxes, which increased approximately $500 due to the additional headcount created by new hires at the 11 Trading Company and Australia Premium Audio Company (“Australia PAC”) subsidiaries established in the second quarter of Fiscal 2021 and first quarter of Fiscal 2022, respectively, as well as headcount and compensation increases at certain other subsidiary locations. Website fees also increased approximately $500 for the three months ended November 30, 2021, due to additional online advertising and promotions, as well as the increased price of web advertising as compared to the prior year. The Company also experienced an increase in trade show expenses of approximately ~~$200 during~~$700, as the ~~three months ended November 30,~~Company attended the annual Consumer Electronics Show ("CES") in person in 2022. The 2021 ~~as a result of the return to in-person attendance at certain shows during the quarter, as compared~~CES event was held virtually due to the ~~prior year in which all shows were virtual. Finally, the~~COVID-19 pandemic. The Company also saw an increase in travel expenses for the three months ended ~~November 30, 2021~~May 31, 2022 of approximately ~~$100~~$300 due to the continued lifting ~~of some~~ of the Company’s COVID-19 related restrictions which have allowed salesmen to begin traveling to customer sites again. Additionally, salary and benefits expenses increased approximately $200 during the three months ended May 31, 2022, due in part to an increase in headcount, as well as due to certain medical accrual releases in the prior year that did not repeat. Finally, there was an increase in web platform expenses of approximately $100 for the three months ended May 31, 2022 as a result of a net increase in online advertising and promotion, as well as due to the higher cost of online platform fees. Offsetting these increases in selling expenses, there was a decrease in commission expense of approximately ~~$600~~$300 for the three months ended ~~November 30, 2021~~May 31, 2022 as a result of ~~lower~~a decrease in the Company's sales for the quarter, as compared to the three months ended May 31, 2021. The Company also experienced a decrease in advertising expenses of approximately $300 primarily as a result of the timing of the launch of new displays at customer sites, which is expected in the second quarter of Fiscal 2022.

General and administrative expenses increased $454 during the three months ended May 31, 2022, as compared to the prior year period.

For the nine months ended November 30, 2021, selling expenses increased $6,193. This increase was primarily attributable to higher salary expenses during the nine months ended November 30, 2021, as compared to the prior year-to-date period. Salary expense and related payroll taxes increased approximately $3,300 due primarily to the absence of COVID-19 related furloughs and salary and bonus reductions that were present in the comparable prior year period, as well as due to the additional headcount created by the July 2020 acquisition resulting in the establishment of the Company’s DEI subsidiary and new hires related to the 11 Trading Company and Australia PAC subsidiaries established in the second quarter of Fiscal 2021 and first quarter of Fiscal 2022, respectively. Advertising expenses and web fees increased approximately $1,900 for the nine months ended November 30, 2021, due to increased advertising and promotions in response to higher online traffic and sales, the lifting of COVID-19 related cost cutting measures, as well as due to the increased price of web advertising compared to the prior year. Commission expense increased approximately $700, as a result of the increase in the Company’s sales for the nine months ended November 30, 2021 as compared to prior year. The Company also experienced an increase in credit card fees of approximately $600 during the nine months ended November 30, 2021, due primarily to sales generated by the Company’s new DEI subsidiary, as its telematic subscription sales are paid by customers through credit card transactions. Additionally, a larger number of customers have gradually begun using credit cards to pay for orders than in prior periods across the entire Company. Finally, the Company saw an increase in travel expenses for the nine months ended November 30, 2021 of approximately $300 due to the lifting of some of the Company’s COVID-19 related restrictions which have allowed salesmen to begin traveling to customer sites again. Offsetting these increases in selling expenses for the nine months ended November 30, 2021 was a

decrease in trade show expenses of approximately $800, as most trade shows have continued to be either cancelled or held virtually due to the COVID-19 pandemic and only began to return to in person attendance during the third quarter of Fiscal 2022.

General and administrative expenses decreased $1,055 during the three months ended November 30, 2021, as compared to the prior year period. Salary expense decreased approximately $3,100 during the three months ended November 30, 2021, due primarily to lower bonus accruals as compared to the prior year period. Professional fees also decreased approximately $300 due primarily to a stock grant awarded to the Company’s non-employee directors during the third quarter of Fiscal 2021 that did not repeat in the current year. As an offset to these decreases, the Company experienced increases in occupancy and office expenses totaling approximately $800 due to expenses related to the Company’s new Onkyo subsidiary as a result of the September 2021 acquisition, as well as due to a return to normal operations in the third quarter of Fiscal 2022 with all of the Company’s office locations open and operating. Bad debt expense increased approximately $400 for the three months ended November 30, 2021 due to the prior year recovery of a receivable balance that did not recur in the current year. Depreciation and amortization expense increased approximately ~~$500~~$300 due to ~~additional expense related to~~the amortization of intangible assets of the Company’s new Onkyo subsidiary, ~~established~~which was not present in ~~September 2021. Taxes~~the prior year period. Benefit expenses also increased $300 for the

three months ended May 31, 2022 due to the absence of medical releases in the current year quarter as compared to prior year. Fees related to taxes and licensing ~~fees~~ increased approximately $200 during the three months ended ~~November 30, 2021,~~May 31, 2022 due primarily to licenses required for the Company’s Onkyo subsidiary established in September 2021. The Company also ~~due to expenses~~experienced an increase in insurance expense of approximately $200 related to ~~the new Onkyo subsidiary, as well as due to additional licenses related to cyber security. Finally,~~an overall increase in insurance policy premiums ~~increased approximately $200 during the three months ended November 30, 2021 due to higher premiums for cyber security coverage and directors’ and officers’ insurance~~ as compared to the prior year, ~~period.~~

~~General~~including cyber security and ~~administrative expenses increased $5,211 during the nine months ended November 30, 2021, as compared to the prior year period. Professional fees~~directors and officers coverage. Finally, travel and entertainment expense increased approximately $2,500 for the year-to-date period due to increased litigation fees related primarily to an arbitration case, as well as consulting fees related to the EyeLock distribution agreement with GalvanEyes LLC, and legal and professional fees related to the Company’s newest 11 Trading Company and Australia PAC subsidiaries established in the second quarter of Fiscal 2021 and the first quarter of Fiscal 2022, respectively. Professional fees were also higher during the nine months ended November 30, 2021, due to the lifting of many COVID-19 related restrictions, as both the Company and many of its professional service providers had temporary office closures during the nine months ended November 30, 2020, or provided fee concessions$100 as a result of the pandemic that did not repeat in the current year. Occupancy and office expenses increased approximately $1,300 in total for the nine months ended November 30, 2021, due to costs related to the Company’s new Onkyo subsidiary resulting from the September 2021 acquisition and a full year of DEI expenses resulting from the July 2020 acquisition. The Company has also returned to normal operations after the lifting of ~~COVID-19 related~~COVID restrictions ~~with all of~~on the Company’s locations open and operating, resulting in further increases to office and occupancy costs. Fees related to taxes and licensing increased approximately $800 during the nine months ended November 30, 2021 due to the establishment of Company’s Onkyo subsidiary in September 2021, as well as the DEI, 11 Trading Company, and PAC Australia subsidiaries, and additional licenses obtained related to cyber security. Depreciation and amortization expense also increased approximately $800 due to additional expense related to the Company’s Onkyo subsidiary and a full year of expense related to DEI. Finally, bad debt expense increased approximately $600 for the nine months ended November 30, 2021 due primarily to the prior year recovery of a receivable balance that did not recur in the current year.Company's travel policies. As an offset to these increases in general and administrative expense, the Company experienced a net decrease in ~~salary expense~~professional fees of approximately ~~$700 during~~$600 for the ~~nine~~three months ended ~~November 30, 2021,~~May 31, 2022 due to a decrease in certain fees incurred in the prior year related to an arbitration case, and the absence of consulting fees related to the EyeLock distribution agreement with GalvanEyes LLC that was approved during Fiscal 2022. Salary expense also decreased approximately $100 for the three months ended May 31, 2022, due primarily to lower profitability for bonus accruals as compared to the prior year period.

Engineering and technical support expenses increased ~~$4,030~~$2,157 for the three months ended ~~November 30, 2021,~~May 31, 2022, as compared to the prior year period. The Company experienced a net increase in research and development expense of approximately $2,100 for the three months ended November 30, 2021, primarily as a result of the Company’s product development projects related to its new Onkyo subsidiary in the Consumer Electronics segment, and within the Automotive Electronics segment related to projects for Stellantis and Ford. This was offset by decreases related to certain Consumer Electronics projects in development during the prior year period that have been completed. There was also an increase in direct labor and related payroll ~~tax~~ expense of approximately ~~$1,900,~~$1,800 for the three months ended May 31, 2022 primarily as a result of additional headcount created by the September 2021 acquisition resulting in the establishment of the Company’s Onkyo subsidiary, as well as due to ~~prior year reimbursements of engineering labor expense that did not recur, and an increase in~~ the use of outside labor atfor certain ~~subsidiaries.~~

~~Engineering and technical support expenses increased $8,882 for the nine months ended November 30, 2021, as compared to the prior year period.~~projects. The Company also experienced a net increase in research and development expense of approximately ~~$4,500~~$200 for the ~~nine~~three months ended ~~November 30, 2021,~~May 31, 2022, primarily as a result of the Company’s product development projects related to its new Onkyo subsidiary within its Consumer Electronics segment, as well as the development and launch of other new products in both the Consumer Electronics ~~segment,~~ and ~~within the~~ Automotive ~~Electronics segment related to projects for Stellantis and Ford, as well as due to additional headcount within the Biometrics segment.~~segments. This was offset by decreases related to ~~certain Consumer Electronics~~ projects in development during the prior year that have been completed. The Company also experienced an increase in direct labor and related payroll tax expense of approximately $4,100 for the nine months ended November 30, 2021, as a result of additional headcount created by the July 2020 and September 2021 acquisitions resulting in the establishment of the Company’s DEI and Onkyo subsidiaries, respectively,completed, as well as due to ~~the~~

~~prior year reimbursement of engineering labor expense that did not recur, and~~a headcount reduction in the ~~absence of Company-wide furloughs and pay reductions related to COVID-19 that were in place during the nine months ended November 30, 2020.~~Biometrics segment.

Acquisition costs ~~increased $263 and $3,009~~decreased $540 for the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2022, as compared to the ~~respective~~ prior year ~~periods.~~period. During both the three ~~and nine~~ months ended ~~November 30,~~May 31, 2022 and May 31, 2021, acquisition costs incurred were related to consulting and due diligence fees for the asset purchase agreement signed with Onkyo Home Entertainment Corporation and the joint venture created with Sharp Corporation to complete the transaction. This transaction was completed on September 8, 2021. ~~In the prior year, acquisition costs incurred were related to the Company’s VSHC and DEI acquisitions, completed in January 2020 and July 2020, respectively.~~


	November 30,												May 31,
	2021			2020			$ Change			% Change			2022			2021			$ Change			% Change
Three Months Ended
Interest and bank charges	$	(730	)	$	(471	)	$	(259	)		(55.0	)%	$	(730	)	$	(528	)	$	(202	)		(38.3	)%
Equity in income of equity investee		2,206			1,761			445			25.3	%		1,588			2,723			(1,135	)		(41.7	)%
Arbitration settlement		(39,444	)		—			(39,444	)		(100.0	)%
Investment gain		—			42			(42	)		(100.0	)%
Interim arbitration award														(986	)		—			(986	)		(100.0	)%
Other, net		(143	)		294			(437	)		148.6	%		(2,110	)		442			(2,552	)		(577.4	)%
Total other income	$	(38,111	)	$	1,626		$	(39,737	)		(2443.8	)%	$	(2,238	)	$	2,637		$	(4,875	)		(184.9	)%

Nine Months Ended
Interest and bank charges	$	(1,840	)	$	(2,280	)	$	440			19.3	%
Equity in income of equity investee		6,964			4,506			2,458			54.5	%
Arbitration settlement		(39,444	)		—			(39,444	)		(100.0	)%
Investment gain		—			42			(42	)		(100.0	)%
Other, net		675			753			(78	)		(10.4	)%
Total other income	$	(33,645	)	$	3,021		$	(36,666	)		(1213.7	)%

Interest and bank charges represent interest expense and fees related to the Company's bank obligations, shareholder loan, supply chain financing and factoring agreements, interest related to finance leases, and amortization of debt issuance costs. ~~During the first quarter of Fiscal 2021, the~~The Company ~~made a precautionary borrowing~~borrowed funds from the Wells Fargo Credit Facility ~~of $20,000 related to COVID-19 pandemic concerns. This balance was repaid during the third quarter of Fiscal 2021 and there has been no balance outstanding~~for operating purposes during the three ~~and nine~~ months ended ~~November 30, 2021.~~May 31, 2022. This resulted in ~~a decrease~~an increase in interest expense ~~related to the Credit Facility of approximately $115 and $302~~incurred for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 as compared to the prior ~~year. In addition, interest expense was lower during~~year period, in which the ~~three and nine months ended November 30, 2021 due to~~Company did not borrow any funds from the ~~amendment of the Company’s~~ Credit Facility in April 2021, which resulted in a decrease in amortization of debt issuance costs of $51 and $247 for the three and nine months ended November 30, 2021. As an offset to these decreases in interest expense,Facility. Additionally, the Company’s new Onkyo subsidiary entered into a shareholder loan payable to the Company’s joint venture partner, Sharp, during the third quarter of Fiscal 2022, for which interest expense was incurred during the three ~~and nine~~ months ended ~~November 30, 2021 that~~May 31, 2022. This shareholder loan was not ~~present in~~outstanding during the ~~prior year periods.~~three months ended May 31, 2021.

Equity in income of equity investee represents the Company's share of income from its 50% non-controlling ownership interest in ASA Electronics LLC and Subsidiaries ("ASA"). The ~~increase~~decrease in income for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 is due to ~~an increase~~a decrease in ASA revenue, gross profit, and net income resulting from ~~improved sales across all of its markets due primarily to the lifting of COVID-19 restrictions on customers and end consumers and~~ an increase in ~~demand for product, offset by an increase in both ocean~~supply chain and ~~air freight costs.~~logistics costs impacting all industries.

~~For~~During the ~~three and nine months ended November 30, 2021,~~first quarter of Fiscal 2023, the Company ~~has~~ recorded a charge of ~~$39,444~~$986 representing interest expense related to ~~an unfavorable~~the interim arbitration ~~settlement~~ award ~~relating~~accrued during Fiscal 2022, as the award will be payable to ~~a breach of contract claim brought against the Company by~~ Seaguard Electronics LLC for a contractual arrangement entered in 2007 for the purchase of products and back-end services. The Company is reviewing its legal options and has moved in the arbitration proceeding to modify the interim award.plus interest when settled.

During the three and nine months ended November 30, 2020, a final pay-out of $42 was received representing proceeds from the Fiscal 2018 sale of the Company’s investment in a non-controlled corporation, consisting of shares of the investee’s preferred stock, as a portion of the proceeds had been held back at the time of sale. The payment was recorded as an investment gain for the three and nine months ended November 30, 2020

Other, net includes net foreign currency gains or losses, interest income, rental income, and other miscellaneous income and expense. During the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2022, the Company had net foreign currency losses of ~~$382 and $268, respectively,~~$2,366, as compared to net foreign currency ~~gains/(losses)~~gains of ~~$34 and $(445)~~$116 for the three ~~and nine~~ months ended ~~November 30, 2020, respectively. As an offset, during~~May 31, 2021. Foreign currency losses for the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2022 were primarily driven by declines in the ~~Company received~~Japanese Yen, which impacted the ~~proceeds~~re-measurement of the Company's

Onkyo subsidiary intercompany loans and interest payable which are not of a ~~key man life insurance policy in~~long-term investment nature. The loss attributable to these re-measurements for the ~~net amount of $420, which did not recur in the current year.~~ three months ended May 31, 2022 was $2,664.

For the three months ended ~~November 30, 2021,~~May 31, 2022, the Company recorded an income tax benefit of $641, which includes a discrete income tax provision of $175 related primarily to finalization of the federal and certain state tax return filings. For the three months ended November 30, 2020, the Company recorded an income tax provision of $2,334,$1,092, which includes a discrete income tax benefit of ~~$542~~$164 related primarily to ~~the finalization of the federal and certain state tax return filings.~~

The effective tax rates for the three months ended November 30, 2021 and 2020 were an income tax benefit of 2.1% on a pre-tax loss of $30,313 and an income tax provision of 11.8% on pre-tax income of $19,774, respectively. The effective tax rate for the three months ended November 30, 2021 differs from the U.S. statutory rate of 21% primarily related to an increase in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the three months ended November 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of the U.S. valuation allowance based on projected current year earnings, immediate U.S. taxation of foreign earnings, non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates.

For the nine months ended November 30, 2021, the Company recorded an income tax benefit of $374, which includes a discrete income tax provision of $31 related to the finalization of federal and state tax filings during the quarter ended November 30, 2021 and the accrual of interest for unrecognized tax benefits, offset with the reversal of uncertain tax ~~provision~~position liabilities as a result of the lapse of the applicable statute of limitations. For the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, the Company recorded an income tax provision of ~~$6,724,~~$484, which includes a discrete income tax provision of $3,609. The Company recorded a discrete tax provision of $4,275 related to an increase in valuation allowance as a result of the technical correction to net operating losses as provided in the CARES Act and a discrete income tax benefit of ~~$697~~$74 related primarily to ~~finalization of federal and state tax filings during the quarter ended November 30, 2020, and~~ the reversal of uncertain tax ~~provision~~position liabilities as a result of the lapse of the applicable statute of ~~limitations, offset with a discrete tax provision of $31 related to the accrual of interest for unrecognized tax benefits.~~ limitations.

The effective tax rates for the ~~nine~~three months ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~ were an income tax benefit of ~~1.3%~~12.2% on pre-tax loss of ~~$28,941~~$8,939 and an income tax provision of ~~31.1%~~21.2% on pre-tax income of ~~$21,614,~~$2,281, respectively. The effective tax rate for the ~~nine~~three months ended ~~November 30,~~May 31, 2022 and 2021 differs from the U.S. statutory rate of 21% as a result of a number of factors, including the non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, income taxed in foreign jurisdictions at varying tax rates, and ~~an increase~~a decrease in valuation allowance as the Company recorded a limited tax benefit with respect to the Arbitration Settlement as it could not conclude that all of its US deferred tax assets were realizable on a more-likely-than-not basis. The effective tax rate for the nine months ended November 30, 2020 differed from the statutory rate of 21% primarily due to the anticipated reversal of a portion of the U.S. valuation allowance based on projected current year earnings, immediate U.S. taxation of foreign earnings, non-controlling interest related to EyeLock LLC, state and local income taxes, nondeductible permanent differences, and income taxed in foreign jurisdictions at varying tax rates.allowance.

EBITDA and Adjusted EBITDA are not financial measures recognized by GAAP. EBITDA represents net (loss) income attributable to VOXX International Corporation, computed in accordance with GAAP, before interest expense and bank charges, taxes, and depreciation and amortization. Adjusted EBITDA represents EBITDA adjusted for stock-based compensation expense, foreign currency losses (gains), acquisition costs, certain non-routine legal and professional fees, ~~settlements,~~ and ~~life insurance proceeds.~~awards. Depreciation, amortization, ~~and~~ stock-based compensation, and foreign currency losses (gains) are non-cash items.

We present EBITDA and Adjusted EBITDA in this Form 10-Q because we consider them to be useful and appropriate supplemental measures of our performance. Adjusted EBITDA helps us to evaluate our performance without the effects of certain GAAP calculations that may not have a direct cash impact on our current operating performance. In addition, the exclusion of certain costs or gains relating to certain events allows for a more meaningful comparison of our results from period-to-period. These non-GAAP measures, as we define them, are not necessarily comparable to similarly entitled measures of other companies and may not be an appropriate measure for performance relative to other companies. EBITDA and Adjusted

EBITDA should not be assessed in isolation from, are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP.

Reconciliation of GAAP Net Income Attributable to VOXX International Corporation to EBITDA and Adjusted EBITDA

As of ~~November 30, 2021,~~May 31, 2022, we had working capital of ~~$124,172~~$121,976 which includes cash and cash equivalents of ~~$21,162,~~$5,733, compared with working capital of ~~$172,543~~$126,756 at February 28, ~~2021,~~2022, which included cash and cash equivalents of ~~$59,404.~~$27,788. We plan to utilize our current cash position as well as collections from accounts receivable, the cash generated from our operations, when applicable, and the income on our investments to fund the current operations of the business. However, we may utilize all or a portion of current capital resources to pursue other business opportunities, including acquisitions, or to further pay down our debt. As of ~~November 30, 2021,~~May 31, 2022, we had cash amounts totaling ~~$1,077~~$114 held in foreign bank accounts, none of which would be subject to United States federal income taxes if made available for use in the United States. The Tax Cuts and Jobs Act provides a 100% participation exemption on dividends received from foreign corporations after January 1, 2018, as the United States has moved away from a worldwide tax system and closer to a territorial system for earnings of foreign corporations.

Operating activities used cash of ~~$10,008~~$22,267 for the ~~nine~~three months ended ~~November 30, 2021~~May 31, 2022 due to factors including the increase in inventory and the decrease in accounts ~~receivable,~~payable, accrued expenses and other current liabilities, and accrued sales incentives, as well as due to losses incurred by EyeLock LLC. This was offset primarily by the ~~increase~~decrease in accounts ~~payable, accrued expenses, and accrued sales incentives.~~receivable. For the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, operating activities used cash of ~~$2,628~~$17,043 due to factors including the ~~increases~~decrease in ~~both~~ accounts ~~receivable~~payable and accrued expenses, the increase in inventory, as well as losses incurred by EyeLock LLC. This was offset ~~primarily~~ by increases in net sales, as well as a decrease in accounts ~~payable, accrued expenses, and accrued sales incentives.~~receivable.

Investing activities used cash of ~~$33,452~~$1,383 during the ~~nine~~three months ended ~~November 30, 2021~~May 31, 2022 primarily due ~~the acquisition of the home audio/video business of Onkyo Home Entertainment Corporation, as well as~~to capital expenditures. For the ~~nine~~three months ended ~~November 30, 2020,~~May 31, 2021, investing activities used cash of ~~$14,510~~$3,927 primarily due the issuance of a promissory note to Onkyo Home Entertainment Corp., as well as due to capital expenditures.

Financing activities used cash of $838 during the three months ended May 31, 2022 due to the ~~acquisition~~repayment of ~~the Directed business, as well as capital expenditures.~~

~~Financing activities provided cash of $5,160 during the nine months ended November 30, 2021 due to proceeds received~~borrowings from the ~~issuance of shares~~Company's Credit Facility and ~~long-term debt to the non-controlling interest of the Company’s Onkyo joint venture, as well as borrowings under the Company’s~~ Euro asset-based loan in ~~Germany.~~Germany, the settlement of market stock unit awards in cash, the payment of withholding taxes on the net issuance of a stock award, as well as repayments of finance leases and the Florida mortgage. This was offset by borrowings from the ~~purchase~~Credit Facility. During the three months ended May 31, 2021, financing activities used cash of ~~treasury shares,~~$1,755 primarily due to the payment of withholding taxes on the net issuance of a stock award, the payment of deferred finance fees related to the

amendment of the Credit Facility, as well as repayments of finance leases and the Florida mortgage. During the nine months ended November 30, 2020, financing activities used cash of $1,680 primarily due to the repayment of the Company’s precautionary borrowing of $20,000 from the Credit Facility, the repayment of the Magnat subsidiary’s Euro asset-based loan balance upon its expiration, repayments of finance leases, and the payment of deferred finance fees related to the amendment of the Credit Facility, offset by the precautionary borrowing of $20,000 made in April 2020.

Federal, state, and local governments have taken a variety of actions to contain the spread of COVID-19. Many jurisdictions ~~required mandatory business closures during the Company’s 2021 fiscal year and~~ imposed various regulations, including capacity limitations and other restrictions affecting our operations ~~some of which have continued into Fiscal 2022.~~during the Company's 2022 fiscal year, following the mandatory lockdowns imposed during the 2021 fiscal year. Many of ~~these~~the most severe restrictions ~~were~~have been lifted, ~~in phases throughout Fiscal 2021~~ but could return if there is a resurgence of the pandemic spread. We have proactively taken steps to increase available cash, including, but not limited to, utilizing existing supply chain financing and factoring agreements, and utilizing available funds under our existing Credit Facility.

The Company has a senior secured credit facility (the "Credit Facility") that provides for a revolving credit facility with committed availability of up to $140,000. The availability under the revolving credit line within the Credit Facility is subject to a borrowing base, which is based on eligible accounts receivable, eligible inventory and certain real estate, subject to reserves as determined by the lender, and is also limited by amounts outstanding under the Florida Mortgage (see Note 16(b)). The availability under the revolving credit line of the Credit Facility was ~~$128,517~~$122,259 as of ~~November 30, 2021.~~May 31, 2022.

All amounts outstanding under the Credit Facility will mature and become due on April 19, 2026; however, it is subject to acceleration upon the occurrence of an Event of Default (as defined in the Agreement). The Company may prepay any amounts outstanding at any time, subject to payment of certain breakage and redeployment costs relating to LIBOR Rate Loans. The commitments under the Credit Facility may be irrevocably reduced at any time, without premium or penalty as set forth in the Agreement.

Generally, the Company may designate specific borrowings under the Credit Facility as either Base Rate Loans or LIBOR Rate Loans, except that Swingline Loans may only be designated as Base Rate Loans. Loans designated as LIBOR Rate Loans shall bear interest at a rate equal to the then applicable LIBOR rate plus a range of 1.75 - 2.25%. Loans designated as Base Rate loans shall bear interest at a rate equal to the applicable margin for Base Rate Loans plus a range of 0.75 - 1.25%, as defined in the Agreement, and shall not be lower than 1.75%. The Credit Facility provides for a Benchmark Replacement that will replace the LIBOR rate for all revolver usage. The Benchmark Replacement is subject to the occurrence of a Benchmark Transition Event, as defined in the Second Amended and Restated Credit Agreement and becomes effective after a five-day transition period following the event.

Provided that the Company is in a Compliance Period (the period commencing on that day in which Excess Availability is less than 15% of the Maximum Revolver Amount and ending on a day in which Excess Availability is equal to or greater than 15% for any consecutive 30-day period thereafter), the Credit Facility requires compliance with a financial covenant calculated as of the last day of each month, consisting of a Fixed Charge Coverage Ratio. The Credit Facility also contains covenants, subject to defined carveouts, that limit the ability of the loan parties and certain of their subsidiaries which are not loan parties to, among other things: (i) incur additional indebtedness; (ii) incur liens; (iii) merge, consolidate or dispose of a substantial portion of their business; (iv) transfer or dispose of assets; (v) change their name, organizational identification number, state or province of organization or organizational identity; (vi) make any material change in their nature of business; (vii) prepay or otherwise acquire indebtedness; (viii) cause any change of control; (ix) make any restricted junior payment; (x) change their fiscal year or method of accounting; (xi) make advances, loans or investments; (xii) enter into or permit any transaction with an affiliate of any borrower or any of their subsidiaries; (xiii) use proceeds for certain items; (xiv) issue or sell any of their stock; or (xv) consign or sell any of their inventory on certain terms. In addition, if excess availability under the Credit Facility were to fall below certain specified levels, as defined in the Agreement, the lenders would have the right to assume dominion and control over the Company's cash.

The obligations under the Credit Facility documents are secured by a general lien on and security interest in substantially all of the assets of the borrowers and certain of the guarantors, including accounts receivable, equipment, real estate, general intangibles, and inventory. The Company has guaranteed the obligations of the borrowers under the Agreement.

The Company has a Euro asset-based loan facility in Germany with a credit limit of €8,000 that expires on July 31, 2023. The Company's subsidiaries Voxx German Holdings GmbH, Oehlbach Kabel GmbH, and Schwaiger GmbH are authorized to borrow funds under this facility for working capital purposes.

The Company also utilizes supply chain financing arrangements and factoring agreements as a component of its financing for working capital, which accelerates receivable collection and helps to better manage cash flow. Under the agreements, the Company has agreed to sell certain of its accounts receivable balances to banking institutions who have agreed to advance amounts equal to the net accounts receivable balances due, less a discount as set forth in the respective agreements (see Note 9). The balances under these agreements are accounted for as sales of accounts receivable, as they are sold without recourse.

Cash proceeds from these agreements are reflected as operating activities included in the change in accounts receivable in the Company's Consolidated Statements of Cash Flows. Fees incurred in connection with the agreements are recorded as interest expense by the Company.

Certain contractual cash obligations and other commercial commitments will impact our short and long-term liquidity. At ~~November 30, 2021,~~May 31, 2022, such obligations and commitments are as follows:

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations, available borrowings under bank lines of credit and possible future public or private debt and/or equity offerings. At times, we evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which transactions may require the use of cash. We believe that our cash, other liquid assets, operating cash flows, credit arrangements, and access to equity capital markets, taken together, provide adequate resources to fund ongoing operating expenditures for the next twelve months, including the intercompany loan funding we provide to our majority owned subsidiary, EyeLock LLC, and our accrual related to an unfavorable interim arbitration ~~award recorded in November 30, 2021~~ for which a schedule for the issuance of a final award has not yet been established. In the event they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through the sale of public or private equity and/or debt financings, as well as from other sources. No assurance can be given that additional financing will be available in the future or that if available, such financing will be obtainable on terms favorable when required.

We do not maintain any off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

~~None noted.~~On April 29, 2021 EyeLock LLC entered into a three-year exclusive distribution agreement (“the Agreement”) with GalvanEyes LLC, a Florida LLC, managed by Beat Kahli, the largest holder of Voxx’s Class A Common Shares. The Agreement was included in the Company’s Proxy Statement filed on June 17, 2021 and was approved by the Company’s shareholders at the Annual Meeting of Shareholders held on July 29, 2021. See Note 21 of the Notes to the Unaudited Consolidated Financial Statement of this Form 10-Q.

We are required to adopt certain new accounting pronouncements. See Note 25 to our consolidated financial statements included herein.

Voxx conducts business in various non-U.S. countries, including Germany, Canada, Mexico, China, Hong Kong, Venezuela, Denmark, the Netherlands, France, Australia, and ~~Australia~~Japan and thus is exposed to market risk for changes in foreign currency exchange rates. As a result, we have exposure to various foreign currency exchange rate fluctuations for revenues generated by our operations outside of the U.S., which can adversely impact our net income and cash flows. For the three ~~and nine~~ months ended ~~November 30, 2021,~~May 31, 2022, a uniform 10% strengthening of the U.S. dollar relative to the local currency of our foreign operations would have resulted in a decrease in sales of approximately ~~$3,900 and $9,300, respectively, and in~~$2,700. There would have been no decrease to net income ~~of approximately $270 and $630, respectively.~~as all foreign entities had net losses for the three months ended May 31, 2022. The effects of foreign currency exchange rates on future results would also be impacted by changes in sales levels or local currency prices.

While the prices we pay for products purchased from our suppliers are principally denominated in United States dollars, price negotiations depend in part on the foreign currency of foreign manufacturers, as well as market, trade, and political factors. The Company also has exposure related to transactions in which the currency collected from customers is different from the currency utilized to purchase the product sold in its foreign operations, and U.S. dollar denominated purchases in its foreign subsidiaries. The Company often enters forward contracts to hedge certain Euro-related transactions. The Company minimizes the risk of nonperformance on the forward contracts by transacting with major financial institutions. During the three months ended May 31, 2022, the Company did not have any forward contracts designated for hedge accounting, and there were no foreign currency hedge contracts outstanding at May 31, 2022. For the three ~~and nine~~ months ended ~~November 30,~~May 31, 2021, unrealized losses recorded in Other comprehensive income (loss) associated with ~~these~~ contracts held at May 31, 2021 were $89 and $233, respectively. A hypothetical 10% adverse change in the fair value of our forward exchange contracts would result in a negative impact of $11 on the fair value of these forward exchange contracts at November 30, 2021.$28.

We are also subject to risk from changes in foreign currency exchange rates from the translation of financial statements of our foreign subsidiaries and for long-term intercompany loans with the foreign subsidiaries. These changes result in cumulative translation adjustments, which are included in Accumulated other comprehensive (loss) income. At ~~November 30, 2021,~~May 31, 2022, we had translation exposure to various foreign currencies with the most significant being the Euro. A hypothetical 10% adverse change in the foreign currency exchange rates would result in a negative impact of ~~$22~~$85 on Other comprehensive income (loss) for the ~~nine~~three months ended ~~November 30, 2021.~~May 31, 2022.

The Company continues to monitor the political and economic climate in Venezuela. Venezuela did not have sales for the three ~~and nine~~ months ended ~~November 30, 2021~~May 31, 2022 and there were minimal cash related assets invested in Venezuela as of ~~November 30, 2021~~May 31, 2022 that would be subject to government foreign exchange controls. The Company has certain long-lived assets in Venezuela, which are held for investment purposes and had no value as of ~~November 30, 2021.~~May 31, 2022.

Our earnings and cash flows are subject to fluctuations due to changes in interest rates on investment of available cash balances in money market funds and investment grade corporate and U.S. government securities. In addition, our bank loans expose us to changes in short-term interest rates since interest rates on the underlying obligations are either variable or fixed. In connection with the Florida Mortgage, we have debt outstanding in the amount of ~~$6,739~~$6,490 at ~~November 30, 2021.~~May 31, 2022. Interest on this mortgage is charged at 70% of 1-month LIBOR plus 1.54%. The Company currently has one interest rate swap for the Florida Mortgage with a notional amount of ~~$6,739~~$6,490 at ~~November 30, 2021.~~May 31, 2022. This swap locks the interest rate at 3.48% (inclusive of credit spread) on the Florida Mortgage through the mortgage end date of March 2026. The Company also has a Euro asset-based lending facility in Germany with a variable ~~rate, which did not have an~~rate. There was no outstanding balance ~~at November 30, 2021~~for this facility May 31, 2022 (see Note 16).

As of ~~November 30, 2021,~~May 31, 2022, the total net fair value of the interest rate swap recorded in other liabilities on our Consolidated Balance Sheet is ~~$305,~~$15, which represents the amount that would be paid upon unwinding the interest rate swap agreement based on market conditions on that date. Changes in the fair value of this interest rate swap agreement is reflected as an adjustment to other assets or liabilities with an offsetting adjustment to Accumulated other comprehensive (loss) income.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, these disclosure controls and procedures are effective as of ~~November 30, 2021~~May 31, 2022 to provide reasonable assurance that information required to be disclosed by the Company in its filing under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.

There were no material changes in our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the ~~nine~~three months ended ~~November 30, 2021~~May 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

See Note 24 of the Notes to the Unaudited Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q and Note 15 of the Form 10-K for the fiscal year ended February 28, ~~2021~~2022 for information regarding legal proceedings.

There have been no material changes from the risk factors previously disclosed in the Company’s Form 10-K for the fiscal year ended February 28, ~~2021.~~2022.

We have an ongoing authorization from our Board of Directors to repurchase shares of the Company's Class A Common Stock. During the ~~nine~~three months ended ~~November 30, 2021,~~May 31, 2022, the Company ~~purchased 113,000~~did not purchase any shares ~~for an aggregate cost~~ of ~~$1,220 as follows:~~Class A Common Stock.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware (State or other jurisdiction of incorporation or organization)		13-1964841 (IRS Employer Identification No.)
2351 J Lawson ~~Blvd.~~Blvd., Orlando, Florida (Address of principal executive offices)		32824 (Zip Code)

~~(800)~~ (800) 645-7750 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol:	Name of Each Exchange on which Registered
Class A Common Stock $.01 par value	VOXX	The Nasdaq Stock Market LLC


		Page
PART I	FINANCIAL INFORMATION

Item 1	FINANCIAL STATEMENTS
	Consolidated Balance Sheets at ~~November 30, 2021~~May 31, 2022 (unaudited) and February 28, ~~2021~~2022	3
	Unaudited Consolidated Statements of Operations and Comprehensive Income for the Three ~~and Nine~~Months Ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~	45
	Unaudited Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~	56
	Unaudited Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~November 30,~~May 31, 2022 and 2021 ~~and 2020~~	67
	Notes to Unaudited Consolidated Financial Statements	78
Item 2	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33
Item 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4744
Item 4	CONTROLS AND PROCEDURES	4744

PART II	OTHER INFORMATION

Item 1	LEGAL PROCEEDINGS	4845
Item 1A	RISK FACTORS	4845
Item 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4845
Item 6	EXHIBITS	4946
SIGNATURES		5047

	July 1, 2020		Measurement Period Adjustments			July 1, 2020 (as adjusted)
Assets acquired:
Inventory	$	7,054		956			8,010
Accounts receivable		5,173		357			5,530
Other current assets		160		-			160
Property and equipment		2,815		-			2,815
Operating lease, right of use asset		1,771		-			1,771
Customer relationships		2,600		(100	)		2,500
Trademarks		4,500		-			4,500
Patented technology		1,030		-			1,030
Goodwill		3,290		(1,690	)		1,600
Total assets acquired	$	28,393	$	(477	)	$	27,916

Liabilities assumed:
Accounts payable		8,144		-			8,144
Accrued expenses		1,406		(136	)		1,270
Contract liabilities		4,872		11			4,883
Warranty accrual		1,200		(352	)		848
Operating lease liability		1,771		-			1,771
Total	$	17,393	$	(477	)	$	16,916
Total purchase price	$	11,000	$	-		$	11,000


Automotive Electronics:	Amount			Amount
Beginning balance at March 1, 2021	$	11,778
Beginning balance at March 1, 2022				$	10,425
Activity during the period		(1,353	)		0
Balance at November 30, 2021	$	10,425
Gross carrying value at November 30, 2021	$	10,425
Balance at May 31, 2022				$	10,425
Gross carrying value at May 31, 2022				$	10,425
Accumulated impairment charge		0			0
Net carrying value at November 30, 2021	$	10,425
Net carrying value at May 31, 2022				$	10,425
Consumer Electronics:
Beginning balance at March 1, 2021	$	46,533
Beginning balance at March 1, 2022				$	63,895
Goodwill acquired during the period		10,187			0
Foreign currency adjustments		(232	)		(1,813	)
Balance at November 30, 2021	$	56,488
Gross carrying value at November 30, 2021	$	88,651
Balance at May 31, 2022				$	62,082
Gross carrying value at May 31, 2022				$	94,245
Accumulated impairment charge		(32,163	)		(32,163	)
Net carrying value at November 30, 2021	$	56,488
Net carrying value at May 31, 2022				$	62,082
Total Goodwill, net	$	66,913		$	72,507


	Three months ended November 30,						Nine months ended November 30,						Three months ended May 31,
	2021			2020			2021			2020			2022			2021
Opening balance	$	4,495		$	5,520		$	5,290		$	4,748		$	5,622		$	5,290
Liabilities for warranties accrued during the period		1,978			864			3,215			2,339			1,998			700
Liabilities (adjusted) acquired during acquisition		0			0			(352	)		1,200
Warranty claims settled during the period		(1,016	)		(884	)		(2,696	)		(2,787	)		(1,352	)		(600	)
Ending balance	$	5,457		$	5,500		$	5,457		$	5,500		$	6,268		$	5,390


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


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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


Class		As of ~~January 7,~~July 8, 2022
Class A Common Stock		~~21,614,629~~21,675,966 Shares
Class B Common Stock		2,260,954 Shares

	Redeemable Non-controlling Interest
Balance at February 28, 2021	$	0
Initial investment by Sharp		2,069
Net loss attributable to non-controlling interest		(714	)
Balance at November 30, 2021	$	1,355

	Three months ended						Nine months ended
	November 30, 2020						November 30, 2020
	Pretax (Loss) Gain Recognized in Other Comprehensive Income			Pretax Loss Reclassified from Accumulated Other Comprehensive Income			Pretax Loss Recognized in Other Comprehensive Income			Pretax Loss Reclassified from Accumulated Other Comprehensive Income
Cash flow hedges
Foreign currency contracts	$	(242	)	$	(121	)	$	(707	)	$	(69	)
Interest rate swaps		39			0			(76	)		0


Balance at February 28, 2021	$	5,265
Subscription payments received		5,053
Revenue recognized		(5,660	)
Balance at November 30, 2021	$	4,658


	Amount of Commitment Expiration per Period
Contractual Cash Obligations	Total		Less than 1 Year		2-3 Years		4-5 Years		After 5 Years
Finance lease obligation (1)	$	229	$	190	$	39	$	—	$	—
Operating leases (1)		4,315		1,248		1,661		717		689
Total contractual cash obligations	$	4,544	$	1,438	$	1,700	$	717	$	689
Other Commitments
Bank obligations (2)	$	5,600	$	—	$	—	$	5,600	$	—
Stand-by and commercial letters of credit (3)		50		50		—		—		—
Other (4)		10,742		500		1,000		1,000		8,242
Contingent consideration (5)		5,675		674		1,480		1,550		1,971
Pension obligation (6)		246		—		—		—		246
Unconditional purchase obligations (7)		170,598		170,598		—		—		—
Total other commitments		192,911		171,822		2,480		8,150		10,459
Total commitments	$	197,455	$	173,260	$	4,180	$	8,867	$	11,148

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
7/20/2021 - 7/31/21		113,000	$	10.80		113,000		2,305,876
Total other commitments		113,000


Exhibit Number		Description


31.1		Certification of Patrick M. Lavelle Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith).

31.2		Certification of Charles M. Stoehr Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934 (filed herewith).

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101		The following materials from VOXX International Corporation's Quarterly Report on Form 10-Q for the period ended ~~November 30, 2021,~~May 31, 2022, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii), the Unaudited Consolidated Statements of Operations and Comprehensive Income, (iii) the Unaudited Consolidated Statements of Stockholders’ Equity, (iv) the Unaudited Consolidated Statements of Cash Flows, and (v) Notes to the Unaudited Consolidated Financial Statements.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).


VOXX INTERNATIONAL CORPORATION

~~January 10,~~July 11, 2022

By:		/s/ Patrick M. Lavelle
Patrick M. Lavelle,
President and Chief Executive Officer

By:		/s/ Charles M. Stoehr
Charles M. Stoehr,
Senior Vice President and Chief Financial Officer

September 8, 2021 (as adjusted)

Amortization Period (Years)

Tradenames

Technology