Signal management

VOXX INTERNATIONAL CORP MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

Forward-looking statements

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 months ended May 31, 2022 compared to the three months
ended May 31, 2021. Next, we present EBITDA and Adjusted EBITDA attributable to
Voxx for the three months ended May 31, 2022 compared to the three months ended
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 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 otherwise indicated, all amounts presented in our MD&A below are in thousands, except per share and per share data.

Company overview

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 ("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 majority owned 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.

COVID-19

While COVID-19 did not have a significant adverse impact on demand for our
products for the three months ended 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
three months ended May 31, 2022. As countries around the world continue to
combat COVID-19, and as government-imposed regulations regarding, among other
things, COVID-19 testing, travel restrictions, and vaccine mandates change,
there is still a risk that the pandemic may impact the overall demand
environment, and our ability to source product and materials to meet demand
levels and maintain adequate inventory levels, as well as maintain staffing
levels at our own facilities in order to fulfill our customer orders and
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

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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 expects to have sufficient resources to operate over the next twelve month period.

Reportable Segments

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.

The products included in these segments are:

Automotive electronics products include:

?

mobile multimedia infotainment products, including dome, seatback and headrest systems;

?

automotive security, vehicle access and remote start systems;

?

satellite radios, including plug and play models and direct connect models;

?

telematics applications for smart phones;

?

mobile interface modules;

?

automotive electrical accessories;

?

rear view and collision avoidance systems;

?

driver distraction products;

?
power lift gates;

?
turn signal switches;

?

automotive lighting products;

?

automotive sensor and camera systems;

?
USB ports;

?
cruise control systems; and

?
heated seats.

Consumer electronics products include:

?
premium loudspeakers;

?
architectural speakers;

?
commercial speakers;

?
outdoor speakers;

?

wireless and Bluetooth speakers;

?
home theater systems;

?
business music systems;

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?
streaming music systems;

?
A/V receivers;

?

over-ear and in-ear headphones;

?

wired and wireless headphones and earbuds;

?

Bluetooth headsets and earpieces;

?

sound bars;

?

DLNA (Digital Living Network Alliance) compatible devices;

?

high-definition television (“HDTV”) antennas;

?

Wireless Fidelity (“Wi-Fi”) antennas;

?

high-definition multimedia interface (“HDMI”) accessories;

?

home electronics accessories such as wiring, power cords and other connectivity products;

?

performance enhancement electronics;

?

universal remote controls for televisions;

?

mounting systems for flat screen televisions;

?
karaoke products;

?
infant/nursery products;

?

power systems and charging products;

?

cleaning preparations for electronic equipment;

?
personal sound amplifiers;

?
set-top boxes; and

?
home and portable stereos.

Biometric products include:

?

iris identification products, and

?

biometric security related products.

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 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.


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Acquisitions and disposals

On September 8, 2021, the Company's subsidiary, 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).

Significant Accounting Policies and Estimates

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; 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, 2022. During Fiscal 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 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, 2022, there have
been no changes in our critical accounting policies.

Operating results

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 months ended May 31, 2022
and 2021.

The following tables present, for the periods indicated, certain statements of operating data for the three months ended May 31, 2022 and 2021.

Net Sales

                                 May 31,
                           2022          2021        $ Change       % Change
Three Months Ended
Automotive Electronics   $  39,585     $  42,657     $  (3,072 )         (7.2 )%
Consumer Electronics        88,937        94,113        (5,176 )         (5.5 )%
Biometrics                     103           205          (102 )        (49.8 )%
Corporate                      107            85            22           25.9 %
Total net sales          $ 128,732     $ 137,060     $  (8,328 )         (6.1 )%



Automotive Electronics sales represented 30.7% of the net sales for the three
months ended May 31, 2022, compared to 31.1% in the prior year period and
decreased $3,072 for the three months ended May 31, 2022, as compared to the
three months ended 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 $2,300 during the three months ended May 31, 2022, as a result of
the start of a new rear seat entertainment program with Stellantis during the
second half of Fiscal 2022 that was not present in the comparable prior year
period. This was offset by a decline in sales for certain customer programs due
to chip shortages. Aftermarket accessory

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product sales also increased approximately $400 for the three months ended May
31, 2022 due to the successful launch of new soundbars for club cars during the
second quarter of Fiscal 2022.

Consumer Electronics sales represented 69.1% of our net sales for the three
months ended May 31, 2022, compared to 68.7% in the comparable prior year period
and decreased $5,176 for the three months ended May 31, 2022, as compared to the
three months ended 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 speaker products totaling
approximately $13,100 during the three months ended May 31, 2022. The Company
has been selling its remaining inventory of certain home theater products in
preparation for new product launches expected in the 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 three months ended May 31,
2022 as a result of the transition. This was partially offset by higher sales
and customer demand for premium soundbars and Bluetooth speakers, 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 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 approximately $900 related to wireless
accessory speakers during the three months ended May 31, 2022, due to the timing
of customer orders, as one of its larger customers made a large purchase in the
first quarter of Fiscal 2022 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 declines, the Company experienced an increase in domestic sales of Onkyo
and Pioneer products of approximately $10,000 for the three months ended May 31,
2022. The Company's 11 Trading Company subsidiary began selling these products
through a distribution agreement during 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 have increased since the acquisition, as there has been higher factory
production of these products 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
increased approximately $2,600 in during the three months ended May 31, 2022, as
this entity was established during the first quarter of Fiscal 2022 and began
shipping product at the end of May 2021.

Biometrics sales represented 0.1% of our net sales for the three months ended
May 31, 2022 and 2021. Sales for the three months ended May 31, 2022 have
decreased approximately $100. The decrease in sales during the three months
ended May 31, 2022 was due primarily to higher sales of the NIXT product in the
prior year, as the product launched during Fiscal 2021.

Gross profit and gross margin percentage

                                May 31,
                           2022         2021       $ Change       % Change
Three Months Ended
Automotive Electronics   $  8,782     $ 11,522     $  (2,740 )        (23.8 )%
                             22.2 %       27.0 %
Consumer Electronics       24,326       25,052          (726 )         (2.9 )%
                             27.4 %       26.6 %
Biometrics                     25           40           (15 )        (37.5 )%
                             24.3 %       19.5 %
Corporate                     106           81            25           30.9 %
                         $ 33,239     $ 36,695     $  (3,456 )         (9.4 )%
                             25.8 %       26.8 %



Gross margin percentages for the Company have decreased 100 basis points for the
three months ended May 31, 2022, as compared to the three months ended May 31,
2021.

Gross margin percentages in the Automotive Electronics segment decreased 480
basis points for the three months ended May 31, 2022, as compared to the prior
year period. 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 months ended May 31, 2022 for such items as OEM rear seat
entertainment and OEM automotive safety products, which the Company has been
actively working to mitigate through a combination of sales price adjustments
and other sourcing strategies, as such supply chain issues are expected to
continue through

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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 second half of Fiscal 2022, and that have positively
contributed to sales for the 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 increased 80 basis
points for the three months ended May 31, 2022, as compared to the prior year
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 products since the 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 costing of the
products since it acquired the business as well, which has 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 has actively worked to mitigate through pricing
adjustments and other sourcing 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 saw declines in sales of
its older line of premium home theater speakers during the three months ended
May 31, 2022 in preparation for new product launches. As these products have
typically generated higher margins for the segment, this decrease in sales
negatively impacted margins for the quarter.

Gross margin percentages in the Biometrics segment improved 480 basis points for
the three months ended May 31, 2022 as compared to the prior year period. The
increase in margins for the three months ended May 31, 2022 was primarily a
result of tooling costs incurred during the three months ended May 31, 2021 that
did not repeat in the current year.

Operating Expenses

                                           May 31,
                                      2022         2021        $ Change       % Change
Three Months Ended
Operating expenses:
Selling                             $ 12,285     $ 11,467     $      818            7.1 %
General and administrative            19,130       18,676            454            2.4 %
Engineering and technical support      8,389        6,232          2,157           34.6 %
Acquisition costs                        136          676           (540 )        (79.9 )%
Total operating expenses            $ 39,940     $ 37,051     $    2,889            7.8 %


Total operating expenses increased $2,889 for the three months ended May 31, 2022compared to the period of the previous year.

For the three months ended May 31, 2022, selling expenses increased $818. This
increase was primarily attributable to higher trade show expenses of
approximately $700, as the Company attended the annual Consumer Electronics Show
("CES") in person in 2022. The 2021 CES event was held virtually due to the
COVID-19 pandemic. The Company also saw an increase in travel expenses for the
three months ended May 31, 2022 of approximately $300 due to the continued
lifting 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 $300 for the three months ended May 31, 2022
as a result of 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. Depreciation and
amortization expense increased approximately $300 due to the amortization of
intangible assets of the Company's new Onkyo subsidiary, which was not present
in the prior year period. Benefit expenses also increased $300 for the

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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 increased approximately $200 during the three months ended May 31,
2022 due primarily to licenses required for the Company's Onkyo subsidiary
established in September 2021. The Company also experienced an increase in
insurance expense of approximately $200 related to an overall increase in
insurance policy premiums as compared to the prior year, including cyber
security and directors and officers coverage. Finally, travel and entertainment
expense increased approximately $100 as a result of the lifting of COVID
restrictions on the Company's travel policies. As an offset to these increases
in general and administrative expense, the Company experienced a net decrease in
professional fees of approximately $600 for the three months ended 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 $2,157 for the three months
ended May 31, 2022, as compared to the prior year period. The Company
experienced an increase in direct labor and related payroll expense of
approximately $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 the use of outside labor for certain projects. The Company also experienced a
net increase in research and development expense of approximately $200 for the
three months ended 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 and Automotive segments. This was offset by
decreases related to projects in development during the prior year that have
been completed, as well as due to a headcount reduction in the Biometrics
segment.

Acquisition costs decreased $540 for the three months ended May 31, 2022, as
compared to the prior year period. During both the three months ended 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.

Other (Expense) Income

                                            May 31,
                                        2022        2021       $ Change      % Change
Three Months Ended
Interest and bank charges             $   (730 )   $  (528 )   $    (202 )       (38.3 )%
Equity in income of equity investee      1,588       2,723        (1,135 )       (41.7 )%
Interim arbitration award                 (986 )         -          (986 )      (100.0 )%
Other, net                              (2,110 )       442        (2,552 )      (577.4 )%
Total other income                    $ (2,238 )   $ 2,637     $  (4,875 )      (184.9 )%



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. The Company borrowed funds from the Wells Fargo Credit
Facility for operating purposes during the three months ended May 31, 2022. This
resulted in an increase in interest expense incurred for the three months ended
May 31, 2022 as compared to the prior year period, in which the Company did not
borrow any funds from the Credit 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 months ended May 31, 2022. This
shareholder loan was not outstanding during the 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 decrease in income for the three months ended May 31,
2022 is due to a decrease in ASA revenue, gross profit, and net income resulting
from an increase in supply chain and logistics costs impacting all industries.

During the first quarter of Fiscal 2023, the Company recorded a charge of $986
representing interest expense related to the interim arbitration award accrued
during Fiscal 2022, as the award will be payable to Seaguard plus interest when
settled.

Other, net includes net foreign currency gains or losses, interest income,
rental income, and other miscellaneous income and expense. During the three
months ended May 31, 2022, the Company had net foreign currency losses of
$2,366, as compared to net foreign currency gains of $116 for the three months
ended May 31, 2021. 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

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Intercompany loans from Onkyo subsidiaries and interest payable that are not long-term investments. The loss attributable to these revaluations for the three months ended May 31, 2022 has been $2,664.

Provision for income tax

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 May 31, 2022, the Company recorded an income tax
benefit of $1,092, which includes a discrete income tax benefit of $164 related
primarily to the reversal of uncertain tax position liabilities as a result of
the lapse of the applicable statute of limitations. For the three months ended
May 31, 2021, the Company recorded an income tax provision of $484, which
includes a discrete income tax benefit of $74 related primarily to the reversal
of uncertain tax position liabilities as a result of the lapse of the applicable
statute of limitations.

The effective tax rates for the three months ended May 31, 2022 and 2021 were an
income tax benefit of 12.2% on pre-tax loss of $8,939 and an income tax
provision of 21.2% on pre-tax income of $2,281, respectively. The effective tax
rate for the three months ended 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 a decrease in valuation allowance.

EBITDA and Adjusted EBITDA

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, and awards.
Depreciation, amortization, 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

                                                              Three months ended
                                                                   May 31,
                                                            2022              2021

Net income (loss) attributable to VOXX International Society

                                             $      (6,527 )   $ 

2,716

Adjustments:

Interest expense and bank charges (1)                             527       

372

Depreciation and amortization (1)                               2,904       

2,778

Income tax (benefit) expense                                   (1,092 )            484
EBITDA                                                         (4,188 )          6,350
Stock-based compensation                                          126              236
Foreign currency losses (gains) (1)                             2,362             (116 )
Acquisition costs                                                 136       

676

Professional fees related to distribution agreement
with GalvanEyes LLC                                                 -              325
Non-routine legal fees                                            508              686
Interim arbitration award                                         986                -
Adjusted EBITDA                                         $         (70 )   $      8,157



(1)
For purposes of calculating Adjusted EBITDA for the Company, interest expense
and bank charges, depreciation and amortization, as well as foreign currency
losses and (gains) have been adjusted in order to exclude the non-controlling
interest portion of these expenses attributable to EyeLock LLC.

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Cash and capital resources

Cash flows, commitments and obligations

As of May 31, 2022, we had working capital of $121,976 which includes cash and
cash equivalents of $5,733, compared with working capital of $126,756 at
February 28, 2022, which included cash and cash equivalents of $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 May 31, 2022, we had cash amounts totaling $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 $22,267 for the three months ended May 31,
2022 due to factors including the increase in inventory and the decrease in
accounts 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 decrease in accounts receivable. For the three months
ended May 31, 2021, operating activities used cash of $17,043 due to factors
including the decrease in accounts payable and accrued expenses, the increase in
inventory, as well as losses incurred by EyeLock LLC. This was offset by
increases in net sales, as well as a decrease in accounts receivable.

Investing activities used cash of $1,383 during the three months ended May 31,
2022 primarily due to capital expenditures. For the three months ended May 31,
2021, investing activities used cash of $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 repayment of borrowings from the Company's Credit Facility and
Euro asset-based loan in 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 Credit Facility. During the three months ended May 31,
2021, financing activities used cash of $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.

Federal, state, and local governments have taken a variety of actions to contain
the spread of COVID-19. Many jurisdictions imposed various regulations,
including capacity limitations and other restrictions affecting our operations
during the Company's 2022 fiscal year, following the mandatory lockdowns imposed
during the 2021 fiscal year. Many of the most severe restrictions have been
lifted, 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 $122,259 as of 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.

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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.

Obligations under the Credit Facility Documents are secured by a general lien and charge on substantially all of the assets of the Borrowers and certain of the Guarantors, including accounts receivable, equipment, real estate, general intangible assets 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.

Material cash needs

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

                                                Amount of Commitment Expiration per Period
                                                    Less than        2-3          4-5         After
Contractual Cash Obligations            Total         1 Year        Years        Years       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



1.

Represents the total principal payments due under finance lease and finance lease obligations. The total current balances (included in Accruals and other current liabilities) due under finance lease and operating lease obligations is $190 and
$1,248respectively, to May 31, 2022. The total long-term balances due under finance leases and operating leases are $39 and $3,067respectively, to May 31, 2022.

2.

Represents amounts outstanding under the Company’s credit facility and VOXX Germany’s asset-based loan facility as of May 31, 2022.

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3.

We issue stand-by and commercial letters of credit to secure certain purchases and certain insurance requirements.

4.

This amount represents the outstanding mortgage balances of our manufacturing plant in Florida and the shareholder loan payable to Sharp.

5.

Represents the contingent liability payable to Onkyo Home Entertainment Corp.
for future purchases of certain product inventory.

6.

Represents the liabilities of an employer-sponsored defined benefit pension plan covering certain eligible current and former employees of Voxx Germany.

seven.

Purchase obligations in progress represent inventory commitments. These obligations are only recognized in the consolidated financial statements once the commitments have been fulfilled, given that these obligations are likely to change depending on negotiations with manufacturers.

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 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.

Off-balance sheet arrangements

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

Related party transactions

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.

New accounting statements

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

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