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:

Effective 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 has issued EyeLock LLC a promissory note for the purposes of repaying protective advances and funding working capital

requirements of the company. On August 25, 2022, this promissory note was amended and restated to allow EyeLock LLC to borrow up to maximum of $71,200. Through March 1, 2019, interest on the outstanding principal of the loan accrued at 10%. From March 1, 2019 forward, interest accrues at 2.5%. The amended and restated promissory note is due on February 28, 2025. 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 have determined that we hold a variable interest in EyeLock LLC as a result of:

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 that we had the power to direct the activities of EyeLock LLC 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, as a result of 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 in 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 Partners LLC (“GalvanEyes”), a Florida LLC managed by Beat Kahli, a significant shareholder of Voxx. The Agreement provides that GalvanEyes would become the exclusive distributor of EyeLock products in the European Union, Switzerland, Puerto Rico, Malaysia, and Singapore, with the exception of any existing customer relationships. GalvanEyes was also 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% 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% equity interest given to GalvanEyes. Under the Agreement, in addition to paying for any products purchased, GalvanEyes agreed to pay EyeLock $10,000 in the form of an annual fee, over a two-year period, of up to $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 February 29, 2024 or February 28, 2023. The quarterly installment payments owed by GalvanEyes, totaling $2,500 for the quarters ended May 31, 2023 and August 31, 2023, remain unpaid and are currently past due. Interest has been accrued on the outstanding balance at a rate of 8% through February 29, 2024. The past due payments, plus accrued interest, are recorded as receivables due from GalvanEyes at February 29, 2024 on the accompanying Consolidated Balance Sheet. The Company has also recorded a corresponding liability within Other long-term liabilities on the accompanying Consolidated Balance Sheets, representing a prepayment made by GalvanEyes of a 20% interest in EyeLock upon exercise of the put option. The balance of this liability at February 29, 2024 and February 28, 2023 was $9,817 and $7,317, respectively, which includes the balance receivable at February 29, 2024, as well as previous payments received since September 1, 2021.

On March 1, 2024, EyeLock LLC entered into a joint venture agreement with GalvanEyes to engage in a newly formed entity, BioCenturion LLC, to operate its biometrics business. EyeLock and GalvanEyes have each agreed to contribute selected assets and liabilities to the joint venture, with GalvanEyes controlling the day-to-day operations of the joint venture. All working capital needs and the funding of losses of the joint venture shall be borne by GalvanEyes for the first two years. Beat Kahli will serve as Chairman of the Board

and Chief Executive Officer of BioCenturion LLC. In conjunction with the formation of the joint venture, the distribution agreement between EyeLock LLC and GalvanEyes was terminated, and a promissory note was signed by GalvanEyes for the repayment of the remaining quarterly installments due at February 29, 2024. The balance will be paid in eight quarterly installments beginning May 31, 2024 and ending on February 28, 2026 with interest accruing at a rate of 8%.

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 February 29, 2024 and February 28, 2023:


	February 29, 2024			February 28, 2023
Assets
Current assets:
Cash and cash equivalents	$	-		$	158
Accounts receivable, net		64			520
Inventory, net		1,839			1,836
Due from GalvanEyes LLC, current		1,238			-
Prepaid expenses and other current assets		58			93
Total current assets		3,199			2,607
Property, plant and equipment, net		4			9
Intangible assets, net		1,514			1,786
Due from GalvanEyes LLC, less current portion		1,340
Other assets		5			8
Total assets	$	6,062		$	4,410
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable	$	759		$	864
Interest payable to VOXX		16,525			14,803
Accrued expenses and other current liabilities		287			296
Due to VOXX		69,377			66,175
Total current liabilities		86,948			82,138
Prepaid ownership interest due to GalvanEyes LLC		9,817			7,317
Other long-term liabilities		1,200			1,200
Total liabilities		97,965			90,655
Commitments and contingencies
Partners' deficit:
Capital		41,416			41,416
Retained losses		(133,319	)		(127,661	)
Total partners' deficit		(91,903	)		(86,245	)
Total liabilities and partners' deficit	$	6,062		$	4,410

The assets of EyeLock LLC can only be used to satisfy the obligations of EyeLock LLC.

The following table sets forth the revenue and expenses of EyeLock LLC that were included in our Consolidated Statements of Operations and Comprehensive Loss for the years ended February 29, 2024, February 28, 2023, and February 28, 2022:


	Year Ended			Year Ended			Year Ended
	February 29, 2024			February 28, 2023			February 28, 2022
Net sales	$	531		$	1,046		$	882
Cost of sales		422			688			694
Gross profit		109			358			188
Operating expenses:
Selling		410			575			653
General and administrative		1,638			1,509			1,410
Engineering and technical support		2,034			2,355			5,817
Restructuring expenses (Note 6)		27			-			-
Total operating expenses		4,109			4,439			7,880
Operating loss		(4,000	)		(4,081	)		(7,692	)
Other (expense) income:
Interest and bank charges		(1,736	)		(1,720	)		(1,662	)
Other, net		78			(15	)		—
Total other expense, net		(1,658	)		(1,735	)		(1,662	)
Loss before income taxes		(5,658	)		(5,816	)		(9,354	)
Income tax expense		—			—			—
Net loss	$	(5,658	)	$	(5,816	)	$	(9,354	)