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. 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 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 largest shareholder. The Agreement provides that GalvanEyes will 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 has 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 November 30, 2021. As of November 30, 2021, the Company has recorded a receivable in the amount of $1,201 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. The Company has also recorded a corresponding liability within Other long-term liabilities on the accompanying Consolidated Balance Sheet, representing a prepayment made by GalvanEyes of a 20% interest in EyeLock upon exercise of the put option. The balance of the liability at November 30, 2021 is $1,201. The balance receivable from GalvanEyes was paid on December 20, 2021.

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 and February 28, 2021:

	November 30, 2021			February 28, 2021
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	—		$	—
Accounts receivable, net		235			167
Inventory, net		2,027			2,245
Prepaid expenses and other current assets		1,271			30
Total current assets		3,533			2,442
Property, plant and equipment, net		40			39
Intangible assets, net		2,125			2,329
Other assets		59			60
Total assets	$	5,757		$	4,870
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable	$	1,400		$	1,396
Interest payable to VOXX		12,680			11,453
Accrued expenses and other current liabilities		430			824
Due to VOXX		67,053			61,072
Total current liabilities		81,563			74,745
Other long-term liabilities		2,459			1,200
Total liabilities		84,022			75,945
Commitments and contingencies
Partners' deficit:
Capital		41,416			41,416
Retained losses		(119,681	)		(112,491	)
Total partners' deficit		(78,265	)		(71,075	)
Total liabilities and partners' deficit	$	5,757		$	4,870

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 and 2020:

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