On April 29, 2021, the Company’s subsidiary, PAC signed a Letter of Intent to acquire certain assets of 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% of the joint venture and has 85.1% voting interest and Sharp owns 22.8% of the joint venture and has 14.9% voting interest. On September 8, 2021, the newly formed joint venture, Onkyo Technology KK (“Onkyo”), completed the transaction to acquire certain assets of the home audio/video business of OHEC. The acquired assets consisted of intangible 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 allocation of the purchase price based upon the fair value of the assets acquired at the date of acquisition:


	September 8, 2021		Measurement Period Adjustments			September 8, 2021 (as adjusted)
Purchase price:
Cash paid	$	21,989	$	-		$	21,989
Assignment of notes and interest receivable		8,417		-			8,417
Fair value of contingent consideration		6,710		1,119			7,829
Total transaction consideration	$	37,116	$	1,119		$	38,235

Allocation:
Intangible assets	$	26,929	$	(7,905	)	$	19,024
Goodwill		10,187		9,024			19,211
Total assets acquired	$	37,116	$	1,119			38,235

During Fiscal 2022 and during the third quarter of Fiscal 2023, the Company recorded a cumulative net measurement period adjustment that increased goodwill by $9,024. The measurement period adjustment would have resulted in a decrease in amortization expense related to tradenames and technology in the third quarter of Fiscal 2022 and was not significant. The Company made the measurement period adjustment to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date. The assets acquired include tradenames, technology, and goodwill. The amounts assigned to goodwill and intangible assets for the acquisition are as follows:

The fair values of the intangible assets and contingent consideration were determined with the assistance of a third-party valuation expert. The purchase price allocation above is preliminary. Goodwill was determined as the excess of the purchase price over the fair value of the assets acquired, including identifiable intangible assets, all of which is deductible for tax purposes. Goodwill represents workforce and expected cash flow generation for the Onkyo business that does not qualify for separate recognition as intangible assets.

The original terms of the contingent consideration payable to OHEC was based upon the calculation of 2% of the total price of certain future product purchases, as defined in the APA, by PAC. Such payments were due 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 was no set term and the payments were intended to be made in perpetuity, a one-stage Gordon Growth Model was used to account for expected payments made beyond the last year of projections.

On May 13, 2022, OHEC filed for bankruptcy protection in Japan. The filing did not include the assets previously purchased by Onkyo on September 8, 2021. On February 10, 2023, the contingent consideration obligation was settled with the bankruptcy trustee of OHEC for $6,000, for a gain of $443. This settlement relieves Onkyo from the future payments of 2% of the total purchase price of certain future product purchases that were to be made in perpetuity. The $6,000 settlement amount is to be paid in three installments of $1,500, $2,500, and $2,000. The first installment of $1,500 was made in February 2023. The remaining installments totaling $4,500, as of February 28, 2023, is expected to be made in Fiscal 2024 after the completion of the obligation of the bankruptcy trustee of OHEC under the settlement agreement.

The Company has consolidated 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 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 the put option would be settled 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 February 28, 2023 as the excess of the redemption amount over the carrying amount was minimal.

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. The Company will market and sell a variety of products under the Onkyo, Integra, and Pioneer brands through the Company's subsidiary, 11 Trading Company. Onkyo’s results of operations are

included in the consolidated financial statements of Voxx in our Consumer Electronics segment from September 8, 2021. Onkyo's sales eliminate in consolidation and totaled $11,027 and $5,190 of the Company's net sales before consolidation for the years ended February 28, 2023 and February 28, 2022, respectively. Prior to the acquisition, PAC operated under a distribution agreement with OHEC through its 11 TC 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.

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 have had on the Company’s revenue or net (loss) income had it been included in the consolidated results of the Company for the full year ended February 28, 2022, or the year ended February 28, 2021.

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 years ended February 28, 2023, February 28, 2022, and February 28, 2021 represented approximately 9.1%, 10.4%, and 8.4% of our consolidated net sales, 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:


	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

During Fiscal 2022 and Fiscal 2021, the Company recorded cumulative net measurement period adjustments 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 second quarter of Fiscal 2021. 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.