UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~December~~March 2829, ~~2012~~2013

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

For the transition period from to

Commission File Number 001-34716

DynaVox Inc.

(Exact name of registrant as specified in its charter)

Delaware

27-1507281

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2100 Wharton Street, Suite 400

Pittsburgh, Pennsylvania 15203

(Address of principal executive offices) (Zip Code)

Telephone: (412) 381-4883

(Registrant’s telephone number, including area code)

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s Class A common stock, par value $0.01 per share, outstanding as of ~~January~~April 2223, 2013 was 11,~~371~~391,820. The number of shares of the registrant’s Class B common stock, par value $0.01 per share, outstanding as of ~~January~~April 2223, 2013 was 43 (excluding 47 shares of Class B common stock held by a subsidiary of the registrant).

DYNAVOX INC.

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended ~~December~~ March 2829, ~~2012~~2013

Table of Contents

		Page
Forward-Looking Statements			3
Part I — Financial Information			5
Item 1.	Financial Statements		5
	DynaVox Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)		5
	DynaVox Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)		6
	DynaVox Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		7
	DynaVox Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)		8
	DynaVox Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)		9
	DynaVox Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited)		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2123
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3537
Item 4.	Controls and Procedures		3538
Part II — Other Information
Item 1.	Legal Proceedings		3639
Item 1A.	Risk Factors		3639
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3741
Item 3.	Defaults Upon Senior Securities		3741
Item 4.	Mine Safety Disclosures		3741
Item 5.	Other Information		3841
Item 6.	Exhibits		3842
Signatures			3943

Forward-Looking Statements

This report contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance, our performance under the credit agreement and deregistration of our Class A common stock. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K, as such factors may be updated by Quarterly Reports on Form 10-Q subsequently filed with the U.S. Securities and Exchange Commission (the “SEC”), including by “Item 1A. Risk Factors” of this report. Some of these important factors include, but are not limited, to the following:

• ~~Our~~We ~~use~~are ofin ~~leverage may expose us to substantial risks, including an event of~~ default ifunder weour ~~cannot~~credit ~~restructure~~agreement orand ~~refinance~~ our ~~debt.~~lenders Wehave ~~may~~the ~~not~~right ~~be able~~ to ~~make~~accelerate our ~~scheduled~~obligations ~~payments~~at ofany ~~outstanding~~time, ~~debt~~which ~~and~~raises ifsubstantial wedoubt ~~are~~about ~~unable to restructure or refinance this debt,~~ our ~~lenders~~ability ~~may~~to ~~seek~~continue ~~remedies~~as ~~under~~a angoing ~~event of default~~concern.

• IfAs the market price of our Class A common stock is ~~not~~no longer quoted on a national exchange, the market price of our common stock and our reputation may be negatively impacted and our ability to raise future capital may be impaired. In addition, ~~in light of not being quoted on a national exchange,~~ our Board ~~may~~has decided to deregister our Class A common stock which ~~would~~will suspend our SEC reporting requirements.

•

The current adverse economic environment, including the associated impact on government budgets, could continue to adversely affect our business.

•

Changes in funding for public schools could cause the demand for our speech generating devices, special education software and content to continue to decrease.

•

Reforms to the United States healthcare system may adversely affect our business.

•

Changes in third-party payor funding practices or preferences for alternatives may decrease the demand for, or put downward pressure on the price of, our speech generating devices.

•

Legislative or administrative changes could reduce the availability of third-party funding for our speech generating devices.

•

The loss of members of our senior management or other key personnel or the failure to attract and retain highly qualified personnel could compromise our ability to effectively manage our business and pursue our growth strategy.

•

We may not be able to develop and market successful new products.

•

New disruptive technologies may adversely affect our market position and financial results.

•

We are dependent on the continued support of speech language pathologists and special education teachers.

•

Our products are dependent on the continued success of our proprietary symbol sets.

•

We depend upon certain third-party suppliers and licensing arrangements, making us vulnerable to supply problems and price fluctuations, which could harm our business.

•

If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors and be unable to operate our business profitably.

•

Our products could infringe on the intellectual property of others, which may cause us to engage in costly litigation and could cause us to pay substantial damages and prohibit us from selling our products.

•

The market opportunities for our products and content may not be as large as we believe.

•

We may fail to successfully execute our strategy to grow our business.

•

We may attempt to pursue acquisitions or strategic alliances, which may be unsuccessful.

•

We are subject to a variety of risks due to our international operations that could adversely affect those operations or our profitability and operating results.

•

We depend on third-party distributors to market and sell our products internationally in a number of markets. Our business, financial condition and results of operations may be adversely affected by both our distributors’ performance and our ability to maintain these relationships on terms that are favorable to us.

•

Failure to obtain regulatory approval in foreign jurisdictions could prevent us from marketing our products abroad.

•

Our business could be adversely affected by competition including potential new entrants.

• If we fail to comply with the U.S. Federal Anti-Kickback Statute and similar state and foreign laws, we could be subject to criminal and civil penalties and exclusion from Medicare, Medicaid and other governmental programs.

• If we fail to comply with the Health Insurance Portability and Accountability Act of 1996, (HIPAA), we could be subject to enforcement actions.

•

If we fail to comply with the U.S. Federal Anti-Kickback Statute and similar state and foreign laws, we could be subject to criminal and civil penalties and exclusion from Medicare, Medicaid and other governmental programs.

•

If we fail to comply with the Health Insurance Portability and Accountability Act of 1996, (HIPAA), we could be subject to enforcement actions.

•

New regulation related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.

•

Cyber attacks as well as improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business and results of operations.

•

Risks related to our organizational structure.

•

DynaVox Inc. is controlled by the limited partners of DynaVox Systems Holdings LLC, whose interests may differ from those of our public shareholders.

•

We will be required to pay the counterparties to the tax receivable agreement for certain tax benefits we may claim arising in connection with our IPO, future purchases or exchanges of Holdings Units and related transactions, and the amounts we may pay could be significant.

•

In certain cases, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement.

•

Other risks related to our Class A Common Stock.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

DynaVox Inc. is a holding company and its sole asset is a controlling equity interest in DynaVox Systems Holdings LLC. Unless the context suggests otherwise, references in this report to “DynaVox,” the “Company,” “we,” “us” and “our” refer (1) prior to the April 2010 initial public offering (“IPO”) of the Class A common stock of DynaVox Inc. and related transactions, to DynaVox Systems Holdings LLC and its consolidated subsidiaries and (2) after our IPO and related transactions, to DynaVox Inc. and its consolidated subsidiaries. We refer to Vestar Capital Partners, a New York-based registered investment adviser, together with its affiliates, as “Vestar,” and to Park Avenue Equity Partners, L.P., together with its affiliates, as “Park Avenue.”

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

DYNAVOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except per share amounts)

	December 28,			June 29,
	March 29,2013			June 29,2012
	2012			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	14,~~126~~109		$	17,944
Trade receivables—net of allowance for doubtful accounts of $1,505 and $1,510 as of December 28, 2012 and June 29, 2012, respectively		12,135			14,864
Trade receivables - net of allowance for doubtful accounts of $1,901 and $1,510 as of March 29, 2013 and June 29, 2012, respectively		10,798			14,864
Other receivables		~~208~~264			253
Inventories		43,~~531~~437			5,401
Prepaid expenses and other current assets		1,~~298~~068			1,055
Deferred taxes		~~689~~67			685
Total current assets		3229,~~987~~743			40,202
PROPERTY AND EQUIPMENT—Net		1,919			2,890
PROPERTY AND EQUIPMENT - Net		1,467			2,890
INTANGIBLES—Net		22,344			22,941
INTANGIBLES - Net		20,145			22,941
DEFERRED TAXES		~~47,930~~—			48,709
OTHER ASSETS		~~1,153~~949			1,499
TOTAL ASSETS	$	~~106~~52,~~333~~304		$	116,241
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	~~825~~25,200		$	—
Trade accounts payable		32,~~477~~788			4,900
Deferred revenue		1,~~341~~342			1,693
Payable to related parties pursuant to tax receivable agreement		~~492~~547			492
Other liabilities		5,~~809~~384			7,503
Total current liabilities		1135,~~944~~261			14,588
LONG-TERM DEBT		~~24,375~~—			31,200
PAYABLE TO RELATED PARTIES PURSUANT TO TAX RECEIVABLE AGREEMENT		43,939			44,432
DEFERRED TAXES		564
OTHER LONG-TERM LIABILITIES		1,665			1,956
PAYABLE TO RELATED PARTIES PURSUANT TO TAX RECEIVABLE AGREEMENT		—			44,432
Total liabilities		81,923			92,176
OTHER LONG-TERM LIABILITIES		1,417			1,956
COMMITMENTS AND CONTINGENCIES (Note 10)
Total liabilities		37,242			92,176
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ EQUITY:
Class A common stock, par value $0.01 per share, 1,000,000,000 shares authorized,
Class A common stock, par value $0.01 per share, 1,000,000,000 shares authorized, 11,371,820 shares issued and 11,360,418 outstanding at March 29, 2013; 11,056,335 shares issued and 11,053,531 outstanding at June 29, 2012		114			111
11,371,820 shares issued and 11,360,418 outstanding at December 28, 2012;		114			111
Class B common stock, par value $0.01 per share, 1,000,000 shares authorized, 100 shares issued and 90 shares outstanding at March 29, 2013 and June 29, 2012		—			—
11,056,335 shares issued and 11,053,531 outstanding at June 29, 2012
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued or outstanding at March 29, 2013 and June 29, 2012		—			—
Class B common stock, par value $0.01 per share, 1,000,000 shares authorized, 100 shares issued and 90 shares outstanding at December 28, 2012 and June 29, 2012		—			—
Additional paid-in capital		23,859			24,304
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued or outstanding at December 28, 2012 and June 29, 2012		—			—
Accumulated deficit		(21,604	)		(14,915	)
Additional paid-in capital		24,441			24,304
Accumulated other comprehensive loss		(84	)		(60	)
Accumulated deficit		(15,037	)		(14,915	)
Total stockholders’ equity attributable to DynaVox Inc.		2,285			9,440
Accumulated other comprehensive loss		(50	)		(60	)
Non-controlling interest		12,844			14,712
Total stockholders’ equity attributable to DynaVox Inc.		9,468			9,440
Non-controlling interest		15,009			14,712
Non-controlling interest shareholder notes		(67	)		(87	)
Total equity		2415,~~410~~062			24,065
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	~~106~~52,~~333~~304		$	116,241

See notes to unaudited condensed consolidated financial statements.

DYNAVOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except per share amounts)

	Thirteen Weeks Ended						~~Twenty~~Thirty-~~six~~nine Weeks Ended
	December 28,			December 30,			December 28,			December 30,
	March 29,			March 30,			March 29,			March 30,
	2012			2011			2012			2011
	2013			2012			2013			2012
NET SALES	$	1714,~~554~~927		$	2324,~~225~~027		$	3651,~~186~~113		$	4973,~~407~~434
COST OF SALES		4,~~786~~479			6,~~580~~649			914,~~974~~453			1320,~~766~~415
GROSS PROFIT		1210,~~768~~448			1617,~~645~~378			2636,~~212~~660			3553,~~641~~019
OPERATING EXPENSES:
Selling and marketing		65,~~043~~204			87,~~041~~868			1318,~~165~~369			1725,~~604~~472
Research and development		1,~~730~~726			1,~~520~~540			35,~~464~~190			35,~~711~~251
General and administrative		34,~~408~~267			4,~~458~~388			711,~~543~~810			813,~~834~~222
Amortization of certain intangibles		~~191~~192			110			~~383~~575			~~220~~330
Total operating expenses		11,372			14,129			24,555			30,369
Impairment loss		1,994			62,107			1,994			62,107
INCOME FROM OPERATIONS		1,396			2,516			1,657			5,272
Total operating expenses		13,383			76,013			37,938			106,382
LOSS FROM OPERATIONS		(2,935	)		(58,635	)		(1,278	)		(53,363	)
OTHER INCOME (EXPENSE):
Interest income		422			97			1133			1522
Interest expense		(~~449~~460	)		(~~573~~574	)		(~~966~~1,426	)		(1,~~142~~716	)
Other income (expense) — net		(250	)		(31	)		517			(40	)
Other income (expense) - net		43,842			13			44,359			(27	)
Total other expense — net		(695	)		(595	)		(438	)		(1,167	)
Total other income (expense) - net		43,404			(554	)		42,966			(1,721	)
INCOME BEFORE INCOME TAXES		701			1,921			1,219			4,105
INCOME (LOSS) BEFORE INCOME TAXES		40,469			(59,189	)		41,688			(55,084	)
INCOME TAX EXPENSE (BENEFIT)		~~(22~~49,151	)		~~275~~(7,248	)		150,~~005~~156			~~634~~(6,614	)
NET INCOME ATTRIBUTABLE TO THE CONTROLLING AND NON-CONTROLLING INTERESTS	$	723		$	1,646		$	214		$	3,471
NET LOSS ATTRIBUTABLE TO THE CONTROLLING AND NON-CONTROLLING INTERESTS	$	(8,682	)	$	(51,941	)	$	(8,468	)	$	(48,470	)
Less: net income attributable to the non-controlling interests		(575	)		(1,307	)		(336	)		(2,692	)
Less: net loss attributable to the non-controlling interests		2,115			37,821			1,779			35,129
NET INCOME (LOSS) ATTRIBUTABLE TO DYNAVOX INC.	$	148		$	339		$	(122	)	$	779
NET LOSS ATTRIBUTABLE TO DYNAVOX INC.	$	(6,567	)	$	(14,120	)	$	(6,689	)	$	(13,341	)
Weighted-average shares of Class A common stock outstanding:
Basic		11,~~347~~360,~~792~~418			10,~~400~~642,~~682~~642			11,214,338			10,~~234~~354,~~088~~917
Diluted		11,~~347~~360,~~792~~418			10,~~400~~642,~~682~~642			11,214,338			10,~~234~~354,~~088~~917
Net income (loss) available to Class A common stock per share:
Net loss available to Class A common stock per share:
Basic	$	(0.0158	)	$	0(1.0333	)	$	(0.0160	)	$	0(1.0829	)
Diluted	$	(0.0158	)	$	0(1.0333	)	$	(0.0160	)	$	0(1.0829	)

See notes to unaudited condensed consolidated financial statements.

DYNAVOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

	DynaVox Inc.						Non-controlling Interests						Total
	Thirteen Weeks Ended						Thirteen Weeks Ended						Thirteen Weeks Ended
	December 28,2012			December 30,2011			December 28,2012			December 30,2011			December 28,2012			December 30,2011
	March 29, 2013			March 30, 2012			March 29, 2013			March 30, 2012			March 29, 2013			March 30, 2012
NET INCOME	$	148		$	339		$	575		$	1,307		$	723		$	1,646
NET LOSS	$	(6,567	)	$	(14,120	)	$	(2,115	)	$	(37,821	)	$	(8,682	)	$	(51,941	)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS		(1	)		(3	)		(7	)		(8	)		(8	)		(11	)
COMPREHENSIVE INCOME	$	147		$	336		$	568		$	1,299		$	715		$	1,635
	Twenty-six Weeks Ended						Twenty-six Weeks Ended						Twenty-six Weeks Ended
	December 28,2012			December 30,2011			December 28,2012			December 30,2011			December 28,2012			December 30,2011
NET INCOME (LOSS)	$	(122	)	$	779		$	336		$	2,692		$	214		$	3,471
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS		10(34	)		~~(36~~16	)		20(47	)		~~(66~~28	)		30(81	)		~~(102~~44	)
COMPREHENSIVE INCOME (LOSS)	$	(112	)	$	743		$	356		$	2,626		$	244		$	3,369
COMPREHENSIVE LOSS	$	(6,601	)	$	(14,104	)	$	(2,162	)	$	(37,793	)	$	(8,763	)	$	(51,897	)


	Thirty-nine Weeks Ended						Thirty-nine Weeks Ended						Thirty-nine Weeks Ended
	March 29, 2013			March 30, 2012			March 29, 2013			March 30, 2012			March 29, 2013			March 30, 2012

NET LOSS	$	(6,689	)	$	(13,341	)	$	(1,779	)	$	(35,129	)	$	(8,468	)	$	(48,470	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS		(24	)		(20	)		(27	)		(38	)		(51	)		(58	)

COMPREHENSIVE LOSS	$	(6,713	)	$	(13,361	)	$	(1,806	)	$	(35,167	)	$	(8,519	)	$	(48,528	)

See notes to unaudited condensed consolidated financial statements.

DYNAVOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)

																						Non-
	Common A shares				Common B shares					Additional			RetainedEarnings			AccumulatedOther			Non-			Non-ControllingInterest			Total
													Retained			Accumulated						Controlling
	Numberof Units		Amount		Numberof Units			Amount		Paid-inCapital			(AccumulatedDeficit)			ComprehensiveLoss			ControllingInterest			ShareholderNotes			Stockholders’Equity
	Common A shares				Common B shares					Additional			Earnings			Other			Non-			Interest			Total
BALANCE - July 1, 2011		9,383,335	$	94		100		$	—	$	22,228		$	3,535		$	(18	)	$	56,797		$	(87	)	$	82,549
	Number				Number					Paid-in			(Accumulated			Comprehensive			Controlling			Shareholder			Stockholders’
Equity-based compensation expense		—		—		—			—		1,672			—			—			—			—			1,672
	of Units		Amount		of Units			Amount		Capital			Deficit)			Loss			Interest			Notes			Equity
Equity distributions		—		—		—			—		(1,400	)		—			—			—			—			(1,400	)
BALANCE—July 1, 2011		9,383,335	$	94		100		$	—	$	22,228		$	3,535		$	(18	)	$	56,797		$	(87	)	$	82,549
Allocation of deferred tax assets and liabilities		—		—		—			—		187			—			—			—			—			187
Equity-based compensation expense		—		—		—			—		1,129			—			—			—			—			1,129
Adjustment to give effect of the tax receivable agreement with DynaVox Holdings		—		—		—			—		(1,217	)		—			—			—			—			(1,217	)
Equity distributions		—		—		—			—		(573	)		—			—			—			—			(573	)
Allocation of deferred tax assets and liabilities		—		—		—			—		146			—			—			—			—			146
Adjustment to give effect of the tax receivable agreement with DynaVox Holdings		—		—		—			—		(893	)		—			—			—			—			(893	)
Purchase of subsidiary shares from non-controlling interest		—		—		—			—		11			—			—			(18	)		—			(7	)
Exchange of subsidiary shares from non-controlling interest		1,~~110~~426,~~334~~836		1114		(710	)		—		34,~~103~~030			—			(3	)		(34,~~111~~041	)		—			—
Net income		—		—		—			—		—			779			—			2,692			—			3,471
Net loss		—		—		—			—		—			(13,341	)		—			(35,129	)		—			(48,470	)
Foreign currency translation adjustments		—		—		—			—		—			—			(3620	)		(6638	)		—			(~~102~~58	)
BALANCE—December 30, 2011		10,493,669	$	105		93		$	—	$	25,151		$	4,314		$	(57	)	$	56,294		$	(87	)	$	85,720
BALANCE - March 30, 2012		10,810,171	$	108		90		$	—	$	25,511		$	(9,806	)	$	(41	)	$	17,571		$	(87	)	$	33,256
BALANCE—June 29, 2012		11,053,531	$	111		90		$	—	$	24,304		$	(14,915	)	$	(60	)	$	14,712		$	(87	)	$	24,065
BALANCE - June 29, 2012		11,053,531	$	111		90		$	—	$	24,304		$	(14,915	)	$	(60	)	$	14,712		$	(87	)	$	24,065
Equity-based compensation expense		—		—		—			—		~~799~~1,088			—			—			—			—			~~799~~1,088
Equity distributions		—		—		—			—		(~~642~~1,517	)		—			—			—			—			(~~642~~1,517	)
Reduction of non-controlling interest shareholder notes		—		—		—			—		(10	)		—			—			—			20			10
Allocation of deferred tax assets and liabilities		—		—		—			—		41			—			—			—			—			41
Adjustment to give effect of the tax receivable agreement with DynaVox Holdings		—		—		—			—		(89	)		—			—			—			—			(89	)
Purchase of subsidiary shares from non-controlling interest		—		—		—			—		4			—			—			(3	)		—			1
Issuance of restricted Common A shares, net of shares withheld		231,187		2		—			—		(20	)		—			—			—			—			(18	)
Exchange of subsidiary shares from non-controlling interest		75,700		1		—			—		58			—			—			(59	)		—			—
Net income (loss)		—		—		—			—		—			(122	)		—			336			—			214
Net loss		—		—		—			—		—			(6,689	)		—			(1,779	)		—			(8,468	)
Foreign currency translation adjustments		—		—		—			—		—			—			10(24	)		20(27	)		—			30(51	)
BALANCE—December 28, 2012		11,360,418	$	114		90		$	—	$	24,441		$	(15,037	)	$	(50	)	$	15,009		$	(67	)	$	24,410
BALANCE - March 29, 2013		11,360,418	$	114		90		$	—	$	23,859		$	(21,604	)	$	(84	)	$	12,844		$	(67	)	$	15,062

See notes to unaudited condensed consolidated financial statements.

DYNAVOX INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Twenty-six Weeks Ended
	Thirty-nine Weeks Ended
	December 28,			December 30,
	March 29,2013			March 30,2012
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to the controlling and non-controlling interests	$	214		$	3,471
Net loss attributable to the controlling and non-controlling interests	$	(8,468	)	$	(48,470	)
Depreciation		1,~~086~~525			12,~~592~~325
Amortization of certain intangibles		~~597~~896			~~453~~681
Amortization of deferred financing costs		~~340~~510			~~340~~510
Equity-based compensation expense		~~799~~1,088			1,~~129~~672
Bad debt expense		~~733~~1,402			1,~~301~~928
Change in fair value of acquisition contingencies		910			427
Deferred taxes		~~233~~49,925			~~495~~(6,925	)
(Gain) loss on disposal of assets		2			(6	)
Change in payable to related parties pursuant to tax receivable agreement		(44,459	)		—
Loss (gain) on disposal of assets		69			(68	)
Impairment loss		1,994			62,107
Changes in operating assets and liabilities:
Trade receivables		2,~~041~~653			31,~~006~~777
Inventories		~~870~~1,964			(~~174~~175	)
Other assets		~~(239~~25	)		~~235~~450
Deferred revenue		(~~392~~592	)		(~~265~~304	)
Trade accounts payable		(12,~~420~~108	)		(1,~~830~~752	)
Accrued compensation		(12,~~632~~469	)		(~~562~~1,441	)
Accrued interest		84(10	)		8
Other-net		~~(219~~317	)		~~272~~451
Net cash provided by operating activities		34,~~106~~272			912,~~469~~801
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(~~114~~277	)		(~~296~~452	)
Proceeds from sale of property and equipment		—9			1280
Net cash used in investing activities		(~~114~~268	)		(~~284~~372	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on acquisition contingencies		(~~198~~270	)		(~~654~~976	)
Equity distributions		(~~642~~1,517	)		(~~573~~1,400	)
Repayments of debt agreements		(6,000	)		—
Redemption of management and common units		—(1	)		(7	)
Net cash used in financing activities		(6,840	)		(1,234	)
Cash used in financing activities		(7,788	)		(2,383	)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		30(51	)		(~~102~~58	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(3,818	)		7,849
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(3,835	)		9,988
CASH AND CASH EQUIVALENTS:
Beginning of period		17,944			12,171
End of period	$	14,~~126~~109		$	2022,~~020~~159
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net interest paid	$	~~529~~882		$	~~775~~1,171
Net income taxes paid	$	~~104~~150		$	~~220~~319

The Company had non-cash investing activities of $-3 and $20- for accrued capital costs during the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~ March 2829, 2013 ~~2012~~ and ~~December~~March 30, ~~2011~~2012, respectively.

See notes to unaudited condensed consolidated financial statements.

DYNAVOX INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except unit, share and per share amounts)

1. GENERAL

DynaVox Inc. (the “Corporation”) and subsidiaries design, manufacture, and distribute electronic and symbol-based augmentative communication equipment, software, and services in the United States and internationally. Products include assistive technology speech devices, proprietary symbols, books, and software programs to aid in the communication skills of individuals affected by speech disabilities as a result of traumatic, degenerative, or congenital conditions.

The Corporation was formed as a Delaware corporation on December 16, 2009 for the purpose of facilitating an initial public offering (“IPO”) of common equity and to become the sole managing member of DynaVox Systems Holdings LLC and subsidiaries (“DynaVox Holdings”). On April 21, 2010, a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) related to shares of Class A common stock of the Corporation was declared effective. The IPO closed on April 27, 2010, the Corporation had not engaged in any business or other activities except in connection with its formation and the IPO.

After the effective date of the registration statement but prior to the completion of the IPO, the limited liability company agreement of DynaVox Holdings was amended and restated to, among other things; modify its capital structure by replacing the different classes of interests previously held by the DynaVox Holdings owners to a single new class of units called “Holdings Units.” In addition, each Holdings Units unit holder received one share of the Corporation’s Class B common stock. These transactions are collectively referred to as the “Recapitalization Transactions.” The Corporation and the DynaVox Holdings owners also entered into an exchange agreement under which (subject to the terms of the exchange agreement, as amended) the Holdings Units unitholders have the right to exchange their Holdings Units for shares of the Corporation’s Class A common stock on a one-for-one basis, subject to customary conversation rate adjustments for stock splits, stock dividends and reclassifications. Notwithstanding the foregoing, for so long as Holdings Unit unitholders other than the Corporation hold in excess of 25% of the outstanding Holdings Units (including Holdings Units held by the Corporation), Holdings Unit unitholders shall only be entitled to effect exchanges on the second Friday or the last day of each fiscal month of the Corporation occurring following May 2, 2011, the date of the initial filing of the registration statement filed by the Corporation with the SEC to cover issuances of shares of Class A common stock upon exchange; provided that Holdings Unit unitholders may effect exchanges on a day that is not the second Friday or last day of a fiscal month of the Corporation during the one week period immediately following the effective date of such registration statement. The registration statement was declared effective on July 12, 2011.

Subsequent to the IPO and Recapitalization Transactions described above, the Corporation consolidated the financial results of DynaVox Holdings and its subsidiaries and reflected the ownership interest of the other members of DynaVox Holdings as a non-controlling interest in the Corporation’s consolidated financial statements beginning April 28, 2010. Non-controlling interest on the statement of operations represents the portion of earnings or loss attributable to the economic interest in the Corporation held by the non-controlling unitholders. Non-controlling interest on the balance sheet represents the portion of net assets of the Corporation attributable to the non-controlling unitholders, based on the portion of the Holdings Units owned by such unitholders.

Collectively, the Corporation and DynaVox Holdings are referred to as the “Company” and as such, references to the “Company” refer to the period subsequent to the IPO and Recapitalization Transactions.

Non-Controlling Interest

The table below sets forth the non-controlling interest ownership as of June 29, 2012 and ~~December~~March 2829, ~~2012~~2013 and reflects the exchange of 75,700 vested Holdings Units for Class A common stock during the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013.

	Non-controllingUnitholdersHoldings Units			DynaVox Inc.IssuedCommon Shares			Total*
June 29, 2012		18,803,832			11,056,335			29,860,167
December 28, 2012		18,728,132			11,371,820			30,099,952
March 29, 2013		18,724,123			11,371,820			30,095,943
Ownership percentage:
June 29, 2012		63.0	%		37.0	%		100.0	%
December 28, 2012		62.2	%		37.8	%		100.0	%
March 29, 2013		62.2	%		37.8	%		100.0	%

*	Assumes all of the holders of Holdings Units exchange their Holdings Units for shares of the Corporation’s Class A common stock on a one-for-one basis.

Tax Receivable Agreement

DynaVox Holdings has made and intends to make an election under Section 754 of the Internal Revenue Code (the “Code”) effective for each taxable year in which an exchange of Holdings Units into shares of Class A common stock occurs, which may result in an adjustment to the tax basis of the assets of DynaVox Holdings at the time of an exchange of Holdings Units. As a result of both the initial purchase of Holdings Units from the DynaVox Holdings owners in connection with the IPO and these subsequent exchanges, DynaVox Inc. will become entitled to a proportionate share of the existing tax basis of the assets of DynaVox Holdings. In addition, the purchase of Holdings Units and subsequent exchanges could result in increases in the tax basis of the assets of DynaVox Holdings that otherwise would not have been available. Both this proportionate share and these increases in tax basis may reduce the amount of tax that DynaVox Inc. would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

The Corporation entered into a tax receivable agreement (“TRA”) with the DynaVox Holdings owners that will provide for the payment by DynaVox Inc. to the DynaVox Holdings owners an amount equal to 85% of the amount of the benefits, if any, that DynaVox Inc. is deemed to realize as a result of (i) the existing tax basis in the intangible assets of DynaVox Holdings on the date of the IPO, (ii) these increases in tax basis and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of DynaVox Inc. and not of DynaVox Holdings. Payments are anticipated to be made annually over approximately 30 years, commencing from the date of each event that gives rise to the TRA benefits, beginning with the date of the closing of the IPO. The payments are made in accordance with the terms of the TRA. The timing and ultimate discharge of payments is subject to certain contingencies including DynaVox Inc. having sufficient taxable income to utilize the tax benefits defined in the TRA. For purposes of the tax receivable agreement, the benefit deemed realized by DynaVox Inc. will be computed by comparing the actual income tax liability of DynaVox Inc. (calculated with certain assumptions) to the amount of such taxes that DynaVox Inc. would have been required to pay had there been no increase to the tax basis of the assets of DynaVox Holdings as a result of the purchase or exchanges, had there been no tax benefit from the tax basis in the intangible assets of DynaVox Holdings on the date of the IPO and had DynaVox Inc. not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless DynaVox Inc. exercises its right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement or DynaVox Inc. breaches any of its material obligations under the tax receivable agreement in which case all obligations will generally be accelerated and due as if DynaVox Inc. had exercised its right to terminate the agreement.

AsDuring ofthe ~~December 28,~~thirty-nine ~~2012~~week ~~and~~period ~~June~~ended March 29, ~~2012~~2013, the ~~liability~~Company ~~representing~~recorded ~~the~~a ~~expected~~net ~~payments~~decrease ~~due~~of ~~relating~~$493 to ~~exchanges~~the ~~by DynaVox~~TRA ~~Holdings~~liability ~~owners~~resulting ~~under~~from ~~the~~an ~~TRA~~increase ~~was~~of $~~44,431~~82 ~~and~~related ~~$44,924,~~to ~~respectively.~~the ~~During~~exchange ~~the~~of ~~fiscal~~75,700 ~~year~~units ~~ending~~of ~~June~~DynaVox Holdings for Class ~~28,~~A ~~2013,~~Common ~~the~~Stock ~~Company~~and ~~expects~~a todecrease ~~pay~~of $~~492~~575 ofdue to the effect ~~total~~of ~~amount.~~a ~~Payments~~state ~~are~~deferred ~~anticipated~~tax torate bechange. The ~~made~~increase ~~annually~~of ~~over~~$82 30represents ~~years, commencing~~85% ~~from~~of the ~~date~~estimated oftax ~~each~~benefits ~~event~~related ~~that~~to ~~gives~~an ~~rise~~increase toin ~~the~~tax ~~TRA~~basis ~~benefits,~~resulting ~~beginning~~from ~~with~~these ~~the~~exchanges ~~date~~and ofother ~~the~~estimated ~~closing~~payments ofunder the ~~IPO~~TRA. ~~The~~This ~~payments~~has ~~are~~been ~~made~~recorded as ina ~~accordance~~$7 ~~with~~decrease to the ~~terms~~long-term ofdeferred ~~the~~tax ~~TRA.~~asset ~~The~~and ~~timing~~the ofremainder ~~payments~~has isbeen ~~subject~~recorded toas ~~certain~~an ~~contingencies including~~adjustment ~~DynaVox~~to ~~Inc~~equity. The ~~having~~$575 ~~sufficient~~related ~~taxable~~to ~~income~~the tostate ~~utilize~~deferred ~~all~~tax ofrate ~~the~~change ~~tax~~has ~~benefits~~been ~~defined~~recorded in ~~the~~other ~~TRA.~~income as a relief from an obligation.

During the thirty-nine week period ended March 30, 2012, the Company recorded an increase to the TRA liability of $5,005 related to the exchange of 1,426,836 units of DynaVox Holdings for Class A common stock. This increase represents 85% of the estimated tax benefits related to an increase in tax basis resulting from these exchanges and other estimated payments under the TRA. This has been recorded as a $3,788 increase to the long-term deferred tax asset and the remainder has been recorded as an adjustment to equity.

As of March 29, 2013 and June 29, 2012, the estimated liability representing the expected payments due under the TRA was $547 and $44,924, respectively. During the fiscal year ending June 28, 2013, the Company expects to pay the $547. During the third quarter of fiscal year 2013, the Company changed its estimate and reduced $43,884 of the estimated liability in connection with placing a substantial valuation allowance on its deferred tax assets as it was determined that it was more likely than not that the tax benefits would not be realized (See Note 7). The change in the liability was recorded as income through Other income (expense) – net on the condensed consolidated statement of operations. Future changes in our assessment of our ability to realize deferred tax assets would have an effect on our estimate of the TRA liability. If we were to determine that a reduction to our valuation allowance against our deferred tax assets was necessary because it was more likely than not that we would realize the tax benefits, we would record a corresponding increase to our TRA liability.

To determine the current amount of the payments due to DynaVox Holdings owners under the tax receivable agreement, the Company estimated the amount of taxable income that DynaVox Inc. has generated over the previous fiscal year. Next, the Company estimated the amount of the specified TRA deductions at year end. This was used as a basis for determining the amount of tax reduction that generates a TRA obligation. In turn, this was used to calculate the estimated payments due under the TRA that the Company expects to pay in the next fiscal year. These calculations are performed pursuant to the terms of the TRA.

The Company accounts for the income tax effects and corresponding TRA effects as a result of the initial purchase and sale of the units of DynaVox Holdings in connection with the IPO and subsequent exchanges of Holdings Units for the Company’s Class A common shares by recognizing a deferred tax asset for the estimated income tax effects of the increase in the tax basis of the assets owned by DynaVox Holdings, based upon enacted tax rates at the date of the transaction, less any tax valuation allowance the Company believes is required. The tax effects of transactions with stockholders that result in a change in the tax basis of the Company’s assets and liabilities will be recognized in equity.

During the twenty-six week period ended December 28, 2012, the Company recorded a net decrease of $493 to the TRA liability resulting from an increase of $82 related to the exchange of 75,700 units of DynaVox Holdings for Class A Common Stock and a decrease of $575 due to the effect of a state deferred tax rate change. The increase of $82 represents 85% of the estimated tax benefits related to an increase in tax basis resulting from these exchanges and other estimated payments under the TRA. This has been recorded as a $7 decrease to the long-term deferred tax asset and the remainder has been recorded as an adjustment to equity. The $575 related to the state deferred tax rate change has been recorded in other income as a relief from an obligation.

During the twenty-six week period ended December 30, 2011, the Company recorded an increase to the TRA liability of $4,268 related to the exchange of 1,110,334 units of DynaVox Holdings for Class A common stock. This increase represents 85% of the estimated tax benefits related to an increase in tax basis resulting from these exchanges and other estimated payments under the TRA. This has been recorded as a $3,375 increase to the long-term deferred tax asset and the remainder has been recorded as an adjustment to equity.

2. ~~ACCOUNTING~~OPERATING ~~POLICIES~~MATTERS

The Company has experienced a decline in revenue, earnings, and cash flows from historical levels. Due to this continued declining operating performance and limited visibility on future liquidity, our Board of Directors determined that, in order to preserve cash, the Company would not make a voluntary prepayment on its outstanding indebtedness during the third quarter necessary to maintain financial covenant compliance. A voluntary prepayment of $3,986 would have been required to maintain financial covenant compliance. Accordingly, the Company is in violation of the Net Senior Debt to EBITDA financial covenant under its credit agreement ( the “2008 Credit Facility”) and has received a Notice of Events of Default; Reservation of Rights (“Default Notice”) from GE Business Financial Services Inc., as Agent (the “Lenders Agent”). The Default Notice states that the lenders are not required to make further loans or incur further obligations under the revolving loan portion of the 2008 Credit Facility and are entitled to exercise any and all default-related rights and remedies under the agreement. Included in these rights and remedies, the holders of 50% or more of the outstanding principal amount under the 2008 Credit Facility, at any time, can accelerate our obligations under the agreement and require payment of the full outstanding principal amount plus accrued and unpaid interest. The Company does not have sufficient cash resources to pay the amount that would become payable in the event of an acceleration of these amounts.

The Company continues to engage in active and continuing discussions with its lenders to modify the 2008 Credit Facility (see Note 6) which would prevent the acceleration of the outstanding principal. Additionally, the Company has also engaged a financial and strategic adviser to assist it with an assessment of its operating cash flow and strategic alternatives. Last, the Company remains committed to its research and development activities and the launch of its new products.

At March 29, 2013, as a result of this default, the entire amount outstanding under the 2008 Credit Facility of $25,200 has been recorded as a current liability.

Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern; however, our default under the 2008 Credit Facility and the continuing decline of our operating performance and cash flows raise substantial doubt about our ability to do so. Other than described above, our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

3. ACCOUNTING POLICIES

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, all estimates and adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2012. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full fiscal year or for any future period. The June 29, 2012 financial information has been derived from the Company’s audited financial statements.

There have been no significant changes in our significant accounting policies and estimates that were disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2012.

Recently Issued Accounting Standards— – In July 2012, the Financial Accounting Standards Board (“FASB”) issued amendments to the existing guidance related to testing indefinite-lived intangible assets for impairment. Under the amendments, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. The amendments are effective for annual and interim impairment tests of indefinite-lived intangible assets performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company does not expect the adoption to have a significant impact on the Company’s consolidated financial statements.

Recently Adopted Accounting Standards – On June 30, 2012 the Company adopted changes that were issued by the FASB on the presentation of comprehensive income. These changes eliminate the current option to report comprehensive income and its components in the statement of equity, and allow two options for presenting the components of net income and comprehensive income: 1) in a single continuous financial statement: a statements of operations and comprehensive income or 2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of comprehensive income. The items that must be reported in comprehensive income or when an item of comprehensive income must be reclassified to net income were not changed. Management elected to present the two-statement option. Other than changes in presentation, the adoption of these changes had no impact on the Company’s consolidated financial statements.

3Recently Adopted Accounting Standards – On June 30, 2012 the Company adopted changes that were issued by the FASB on the presentation of comprehensive income. ~~BALANCE~~These ~~SHEET~~changes ~~ITEMS~~eliminate the current option to report comprehensive income and its components in the statement of equity, and allow two options for presenting the components of net income and comprehensive income: 1) in a single continuous financial statement: a statements of operations and comprehensive income or 2) in two separate but consecutive financial statements, consisting of an income statement followed by a separate statement of comprehensive income. The items that must be reported in comprehensive income or when an item of comprehensive income must be reclassified to net income were not changed. Management elected to present the two-statement option. Other than changes in presentation, the adoption of these changes had no impact on the Company’s consolidated financial statements.

~~Inventories~~On ~~as of~~ December 2829, 2012, ~~and~~the ~~June 29~~Company adopted changes that were issued by the FASB related to the reclassification of amounts out of accumulated comprehensive income by component. Under the amendments, an ~~2012~~entity ~~consist~~is required to present, either on the face of the ~~following:~~statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The adoption of these changes had no impact on the Company’s consolidated financial statements as we had no reclassifications from accumulated other comprehensive income (loss).

	December 28,		June 29,
	2012		2012
Raw Materials	$	2,231	$	3,073
Work in progress		10		16
Finished Goods		2,290		2,312
Inventories	$	4,531	$	5,401

4. BALANCE SHEET ITEMS

~~The~~Inventories ~~components of property and equipment~~ as of ~~December~~March 2829, ~~2012~~2013 and June 29, 2012 ~~are~~consist asof ~~follows~~the following:

	December 28,			June 29,
	March 29,2013			June 29,2012
	2012			2012
Raw Materials	$	1,675		$	3,073
Molds, machinery and equipment	$	8,683		$	8,690
Work in progress		11			16
Computer equipment and purchased software		5,132			5,037
Finished Goods		1,751			2,312
Furniture, fixtures and office equipment		1,336			1,326
Inventories	$	3,437		$	5,401
Leasehold improvements		658			652
Total property and equipment — gross		15,809			15,705
Less accumulated depreciation		(13,943	)		(12,866	)
Construction in process		53			51
Property and equipment — net	$	1,919		$	2,890

The components of property and equipment as of March 29, 2013 and June 29, 2012 are as follows:


	March 29, 2013			June 29, 2012

Molds, machinery and equipment	$	8,486		$	8,690
Computer equipment and purchased software		5,057			5,037
Furniture, fixtures and office equipment		1,248			1,326
Leasehold improvements		349			652

Total property and equipment - gross		15,140			15,705
Less accumulated depreciation		(13,785	)		(12,866	)
Construction in process		112			51

Property and equipment - net	$	1,467		$	2,890

4.The ~~GOODWILL~~Company ~~AND~~recorded ~~INTANGIBLE~~an ~~ASSETS~~impairment charge of $94 related to the abandonment of certain leasehold improvements in the third quarter of fiscal 2013.

5. GOODWILL AND INTANGIBLE ASSETS

The Company’s identifiable intangible assets with indefinite and finite lives are detailed below:

	December 28, 2012								June 29, 2012
	March 29, 2013								June 29, 2012
	Gross		Accumulated				Net		Gross		Accumulated				Net
	GrossCarryingAmount		AccumulatedImpairmentLoss		AccumulatedAmortization		NetCarryingAmount		GrossCarryingAmount		AccumulatedImpairmentLoss		AccumulatedAmortization		NetCarryingAmount
	Carrying		Impairment		Accumulated		Carrying		Carrying		Impairment		Accumulated		Carrying
	Amount		Loss		Amortization		Amount		Amount		Loss		Amortization		Amount
Goodwill	$	60,846	$	60,846	$	—	$	—	$	60,846	$	60,846	$	—	$	—
Acquired software technology		3,253		127		2,~~462~~571		~~664~~555		3,253		127		2,245		881
Commercial computer software		311		175		136		—		311		175		136		—
Acquired patent technology		4,330		2,523		1,~~427~~617		~~380~~190		4,330		2,523		1,047		760
Developed patent technology		244		244		—		—		244		244		—		—
Trade name		100		42		58		—		100		42		58		—
Trade names		2,300		2,042		58		200		100		42		58		—
Symbols and trade names (indefinite live)		2523,~~300~~100		43,~~000~~900		—		2119,~~300~~200		25,300		4,000		—		21,300
	$	33,538	$	79,~~111~~011	$	4,~~083~~382	$	2220,~~344~~145	$	33,538	$	7,111	$	3,486	$	22,941

Long-lived assets, which include fixed assets and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or group of assets may not be recoverable. Intangibles with indefinite-lives are reviewed at least annually, or when events or other changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

The Company uses the end of its fiscal year for the annual test. In accordance with its policy of conducting its annual impairment test of intangibles with indefinite lives as well as giving consideration to the impairment indicators relating to intangibles with indefinite lives and finite-lives, the Company performed the test for recoverability of the indefinite-lived and finite-lived asset group to be held, and used, as of June 29, 2012 and March 30, 2012. As a result, the Company performed a test for each asset grouping and determined that an impairment had occurred and an asset impairment loss of $66,901 was recorded for the fiscal year ended June 29, 2012, of which $60,846 related to goodwill, $3,300 related to indefinite-lived intangible assets, and $2,755 was related to finite-lived intangible assets. ~~During~~There ~~the~~was ~~first~~$62,107 ~~and second quarters~~ of ~~fiscal~~the ~~2013,~~total nocharge ~~impairment indicators were identified~~ for ~~intangibles~~fiscal ~~with~~year ~~indefinite~~2012 ~~lives~~that ~~and finite lives; therefore, no interim impairment testing~~ was ~~performed~~recorded ~~for~~during the ~~Company’s~~third ~~remaining~~quarter ~~indefinite~~of ~~and~~fiscal ~~finite~~year ~~lived intangibles~~2012.

~~Amortization~~During ~~expense related to intangibles for~~ the ~~thirteen~~third ~~week~~quarter ~~periods~~of ~~ended~~fiscal ~~December 28~~2013, ~~2012~~the ~~and~~Company ~~December 30,~~determined ~~2011~~there ~~was~~were ~~$298~~indicators ~~and~~of ~~$226,~~potential ~~respectively.~~impairment ~~Amortization~~of ~~expense~~intangibles ~~related~~with indefinite tolives. ~~intangibles~~These ~~for~~indicators ~~the~~include ~~twenty-six~~a ~~week~~decline ~~periods~~in ~~ended~~revenue, ~~December 28~~earnings, ~~2012~~ and ~~December 30,~~ ~~2011~~cash ~~was~~flows ~~$597~~from ~~and~~historical ~~$453,~~levels ~~respectively.~~coupled ~~Estimated~~with ~~amortization~~a ~~expense~~change ~~for~~in the ~~remainder~~manner ofthat ~~fiscal~~one ~~year~~of ~~2013~~its ~~and~~trade ~~each~~names ~~subsequent~~will ~~two~~be ~~fiscal~~used ~~years~~prospectively ~~is as follows: 2013—$596; 2014—$281;~~ and ~~2015—$167.~~uncertainty ~~All~~surrounding ~~intangibles with~~the ~~finite~~Company’s ~~lives~~ability ~~will~~to becontinue ~~fully~~as ~~amortized~~a ingoing ~~the fiscal year 2015~~concern.

The test for recoverability of an indefinite-lived asset group to be held, and used, is performed by comparing the carrying amount of the asset to the fair value. The fair value of indefinite-lived intangibles, both trade names and symbols, was estimated by using a relief from royalty method (a discounted cash flow methodology). Significant assumptions under this method include royalty rates and the discount rate. Royalty rates ranging from 2% to 20% were utilized for trade names and a rate of 8% coupled with a fixed rate per device was utilized for symbols. The Company utilized a discount rate of 16.5% for both trade names and symbols. ~~LONG~~The Company determined that the fair value of the symbols exceeded its carrying value and no impairment charge was necessary. The Company determined that an impairment had occurred for the trade names and an impairment loss of $1,900 was recorded which was equal to the excess of the carrying value over the fair value. Additionally, the Company determined that one of the indefinite-~~TERM~~lived ~~DEBT~~trade names had a finite life due to the refinement of a business strategy. The finite-lived intangible asset will be amortized over one year.

~~Long-term~~Amortization ~~debt~~expense asrelated ofto ~~December~~intangibles for the thirteen week periods ended March 2829, 2013 and March 30, 2012 was $298 and $227, ~~June~~respectively. Amortization expense related to intangibles for the thirty-nine week periods ended March 29, 2013 and March 30, 2012 ~~consists~~was of$896 and $681, respectively. Estimated amortization expense for the ~~following~~remainder of fiscal year 2013 and each subsequent two fiscal years is as follows: 2013 – $347; 2014 – $431; and 2015 – $167. All intangibles with finite lives will be fully amortized in the fiscal year 2015.

	December 28,			June 29,
	2012			2012
2008 Credit Facility		25,200			31,200
Total debt		25,200			31,200
Less current installments		(825	)		—
Long-term debt — less current installments	$	24,375		$	31,200

The current scheduled payments under the 2008 Credit Facility require the Company to pay $0.8 million on September 30, 2013 and three equal quarterly installments of $8.1 million beginning on December 31, 2013.

2008 Credit Facility

On June 23, 2008, the Company entered into a secured credit facility (“2008 Credit Facility”) with GE Business Financial Services Inc. (formerly known as Merrill Lynch Capital) and BMO Capital Markets Financing Inc. (formerly known as Harris NA), as amended. As of December 28, 2012 and June 29, 2012, the 2008 Credit Facility provides $52,000 of term loans, up to $12,925 of revolving loans and letters of credit and up to $12,000 available for restricted distributions provided the Company is in compliance with certain financial and non-financial covenants. Principal amortization began September 30, 2008, with final maturity on June 23, 2014. Advances under the revolving component of the 2008 Credit Facility are due in one installment on June 23, 2013.

6. LONG-TERM DEBT

Long-term debt as of March 29, 2013 and June 29, 2012 consists of the following:


	March 29, 2013			June 29, 2012
2008 Credit Facility		25,200			31,200

Total debt		25,200			31,200
Less amounts callable		(25,200	)		—

Long-term debt - less amounts callable	$	—		$	31,200

2008 Credit Facility

On June 23, 2008, the Company entered into a secured credit facility (“2008 Credit Facility”) with GE Business Financial Services Inc. (formerly known as Merrill Lynch Capital) and BMO Capital Markets Financing Inc. (formerly known as Harris NA). The 2008 Credit Facility, as amended, provides for a $52,000 term loan facility that matures on June 23, 2014 and a revolving credit facility with a $12,925 aggregate loan commitment amount available that matures on June 23, 2013. As of March 29, 2013, $25,200 was outstanding under the term loan facility and there were no borrowings outstanding or funds available under the revolving credit facility.

Effective April 27, 2010, the agent and lenders under the 2008 Credit Facility consented to DynaVox Holdings the transfer of all of its obligations under the 2008 Credit Facility to a newly formed wholly-owned subsidiary of DynaVox Holdings that became the immediate holding Company parent of DynaVox Systems LLC upon the consummation of the IPO (Note 1). All obligations under the 2008 Credit Facility are unconditionally guaranteed by the immediate holding Company parent of DynaVox Systems LLC and each of DynaVox Systems LLC’s existing and future wholly-owned domestic subsidiaries. The 2008 Credit Facility and the related guarantees are secured by substantially all of DynaVox Systems LLC’s present and future assets and all present and future assets of each guarantor on a first lien basis.

The 2008 Credit Facility provides the option of borrowing at London InterBank Offered Rate (LIBOR), plus a credit spread (4.2% as of both ~~December~~March 2829, ~~2012~~2013 and June 29, 2012) or the Prime rate, plus a credit spread (6.3% as of both ~~December~~March 2829, ~~2012~~2013 and June 29, 2012) for all term loans ~~and draws under the revolver~~.

Credit spreads for each term or revolver loan and the unused revolving credit facility fee vary according to the Company’s ratio of net total debt to EBITDA (as defined) after December 31, 2008. As of ~~December~~March 2829, ~~2012~~2013 and June 29, 2012, the Company’s credit spreads were as follows:

	December 28, 2012						June 29, 2012
	March 29, 2013						June 29, 2012
	Prime			LIBOR			Prime			LIBOR
2008 Credit Facility		3.00	%		4.00	%		3.00	%		4.00	%
Revolver draw under 2008 Credit Facility		~~3.00~~N/A	%		~~4.00~~N/A	%		3.00	%		4.00	%

At ~~December~~March 2829, ~~2012~~2013 and June 29, 2012, the commitment fee was 0.375% on the unused portion of the revolving credit facility.

~~Revolver~~Financial ~~Draw~~Covenants ~~Under~~and ~~2008~~Covenant ~~Credit~~Violation ~~Facility~~

AtThe ~~December 28,~~2008 ~~2012~~Credit ~~and~~Facility ~~June 29~~requires the Company to comply with certain financial covenants, ~~2012~~including maximum Capital Expenditures, ~~the~~minimum Fixed-Charge ~~Company~~Coverage ~~had~~ratio, nomaximum ~~outstanding~~Net ~~letters~~Senior ofDebt ~~credit~~to ~~and~~EBITDA ~~the~~ratio ~~amount~~and ~~available~~maximum ~~from~~Net ~~the revolving~~Total ~~credit~~Debt ~~facility~~to ~~was~~EBITDA ~~$12~~ratio,~~925~~ and places certain restrictions on ~~both~~acquisitions ~~days~~and payment of dividends.

~~Financial~~Due ~~Covenants~~to the continued declining operating performance and limited visibility on future liquidity, our Board of Directors determined that, in order to preserve cash, the Company would not make a voluntary prepayment on its outstanding indebtedness during the third quarter necessary to maintain financial covenant compliance. A voluntary prepayment of $3,986 would have been required to maintain financial covenant compliance. Accordingly, the Company is in violation of the Net Senior Debt to EBITDA financial covenant under the 2008 Credit Facility and has received a Default Notice from the Lenders Agent. The Default Notice states that the lenders are not required to make further loans or incur further obligations under the revolving loan portion of the credit agreement and are entitled to exercise any and all default-related rights and remedies under the agreement. Included in these rights and remedies, the holders of 50% or more of the outstanding principal amount under the 2008 Credit Facility, at any time, can accelerate our obligations under the agreement and require payment of the full outstanding principal amount plus accrued and unpaid interest. Additionally, the interest rate on the debt could be increased to the default rate of our current rate plus 2%. The Company does not have sufficient cash resources to pay the amount that would become payable in the event of an acceleration of these amounts.

~~The~~At ~~2008 Credit Facility requires the Company to comply with certain financial covenants~~March 29, ~~including maximum capital expenditures~~2013, ~~minimum fixed-charge~~as ~~coverage~~a ~~ratio,~~result ~~net~~of ~~senior~~this ~~debt maximum leverage ratio and net total debt maximum leverage ratio~~default, ~~and~~the ~~places~~entire ~~certain restrictions on acquisitions and payment of dividends. The Company was in compliance with all financial covenants as~~amount ~~required~~outstanding under the 2008 Credit Facility, asof ~~amended~~$25,200 athas ~~December 28,~~been ~~2012~~recorded ~~and~~as ~~June 29,~~a ~~2012~~current liability.

The 2008 Credit Facility contains certain mandatory prepayments, including an excess cash flow provision. As a result of a $5,000 voluntary prepayment in fiscal 2012 no excess cash flow payment is required for fiscal 2013. Additionally, in the first quarter of fiscal 2013 the Company made a voluntary prepayment of $6,000.

6. INCOME TAXES

The Company’s effective tax rate is summarized in the following table:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	December 28,			December 30,			December 28,			December 30,
	2012			2011			2012			2011
Income tax expense (benefit)	$	(22	)	$	275		$	1,005		$	634
Effective income tax rate		(3.14%	)		14.32	%		82.44	%		15.44	%

The tax provision for the current year period is based on an estimate of the Company’s annualized income tax rate. The effective tax rate is calculated by dividing the provision for income taxes by income before income taxes. The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiaries operate as a limited liability company which is not subject to federal or state income tax. Accordingly, a portion of the Company’s earnings are not subject to corporate level taxes. This favorable impact is partially offset by the impact of certain permanent items, primarily attributable to certain entertainment and lobbying expenses that are not deductible for tax purposes. During the thirteen and twenty-six weeks ended December 28, 2012, the Company recorded discrete items that resulted in income tax expense (benefit) which related to interest associated with the reserve for uncertainties in income tax positions and the effect of changes to state deferred tax rates. The effect of changes to the deferred tax rates resulted in $242 of discrete additional tax benefit and $598 of discrete additional tax expense, which represents (35%) and 49% of the thirteen weeks and twenty-six weeks ended December 28, 2012 effective tax rate, respectively.

The Company continues to engage in active and continuing discussions with its lenders and their advisers. There can be no assurance that we can reach such resolution, obtain sufficient financing or enter into other transactions to satisfy our obligations in a timely manner, or at all. The Company has also engaged a financial and strategic adviser to assist it with an assessment of its operating cash flow and strategic alternatives.

In the event of an acceleration of our obligations and our failure to pay the amount that would then become due, the holders of the 2008 Credit Facility could seek to foreclose on our assets. Should this occur, we would likely need to seek protection under the provisions of the U.S. Bankruptcy Code. See Note 2 – Operating Matters.

7. INCOME TAXES

The Company’s effective tax rate is summarized in the following table:


	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	March 29, 2013			March 30, 2012			March 29, 2013			March 30, 2012
Income tax expense (benefit)	$	49,151		$	(7,248	)	$	50,156		$	(6,614	)
Effective income tax rate		121.45	%		12.25	%		120.31	%		12.01	%

The tax provision for the current year period is based on an estimate of the Company’s annualized income tax rate. The effective tax rate is calculated by dividing the provision for income taxes by income before income taxes. The Company’s effective tax rate includes a rate benefit attributable to the fact that the Company’s subsidiaries operate as a limited liability company which is not subject to federal or state income tax. Accordingly, a portion of the Company’s earnings are not subject to corporate level taxes. This favorable impact is partially offset by the impact of certain permanent items, primarily attributable to certain entertainment and lobbying expenses that are not deductible for tax purposes. During the thirteen and thirty-nine weeks ended March 29, 2013, the Company recorded a substantial valuation allowance on our deferred tax assets related to the Company for $49,360 as it was determined that it was more likely than not that the tax benefits would not be realized. The Company also recorded discrete items that resulted in income tax expense (benefit) which related to interest associated with the reserve for uncertainties in income tax positions, and a tax benefit related to research and development, other permanent provision to return items, and the effect of changes to state deferred tax rates.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is summarized as follows:

Balance as of June 29, 2012	$	66
Increases in prior period tax positions		57
Balance as of December 28, 2012	$	71
Balance as of March 29, 2013	$	73

The Company recognizes interest and penalties related to income taxes as a component of corporate income tax expense.

The Company files income tax returns with federal, state, local, and foreign jurisdictions. U.S. federal and state tax returns associated with fiscal years 2009 —– ~~2011~~2012 are currently open for examination. Foreign tax returns associated with fiscal years 2008 —– ~~2011~~2012 also remain open under the statute.

78. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Fair value is an exit price and the exit price should reflect all the assumptions that market participants would use in pricing the asset or liability.

The Company’s fair value measurements are subject to the management, direction, and control of the Chief Financial Officer (CFO). The CFO utilizes a number of resources to assist with the determination of fair value measurements including employees of the Company with relevant valuation expertise and external valuation specialists. The CFO reviews fair value measurements on a quarterly basis in connection with the Company’s routine closing process and performance of internal control activities.

Accounting standards established three different valuation techniques; market approach, income approach, and cost approach. The Company uses the market and income approaches to value assets and liabilities for which the measurement attribute is fair value.

Valuation techniques used to measure fair value are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1— – Inputs to the valuation methodology are based on quoted prices for an identical asset or liability in an active market.

Level 2— – Inputs to the valuation methodology are based on quoted prices for a similar asset or liability in an active market, quoted prices for an identical or similar asset or liability in an inactive market, or model- derived valuations for which all significant inputs are observable or can be corroborated by observable market data.

Level 3— – Inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

Valuation of assets and liabilities requires consideration of market risks in our valuations that other market participants may consider. Specifically, consideration was given to the Company’s non-performance risk and counterparty credit risk to develop appropriate risk-adjusted discount rates used in our fair value measurements. The Company utilized the following valuation methodologies to measure our financial assets and liabilities:

Cash equivalents: Cash equivalents include investments in money market funds. Investments in this category can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short-term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. The carrying amounts approximate fair value because of the short maturity of the instruments.

Acquisition-related contingent consideration: Contingent consideration recorded from the Company’s acquisition of Eye Response Technologies, Inc. in fiscal 2010 includes guaranteed minimum royalty and consulting payments due to the previous owner. The amount recorded for the guaranteed minimum royalty payments represents the fair value of expected consideration to be paid based on the Company’s forecasted sales of eye products over a three-year period. Expected consideration was valued based on three possible scenarios for projected sales of applicable products (the guaranteed minimum payment, a conservative forecasted sales case, and an optimistic forecasted sales case). Each case was assigned a probability, a discount rate was applied to future payments, and the aggregate result of the three scenarios was summarized to determine the fair value to be recorded. Acquisition related contingent consideration also includes a consulting agreement due to the previous owner related to future service during the three year period. The amount recorded represents the fair value of contractual consideration expected to be paid. The Company considers the acquisition related contingencies fair value measurements to be Level 3 inputs within the fair value hierarchy.

1617

The following table presents assets and liabilities measured at fair value on a recurring basis at ~~December~~March 2829, ~~2012~~2013 and June 29, 2012:

	As of December 28, 2012
	As of March 29, 2013
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets
Cash equivalents	$	~~255~~256	$	—	$	—	$	~~255~~256
Total assets	$	~~255~~256	$	—	$	—	$	~~255~~256
Liabilities
Acquisition -related contingent considerations	$	—	$	—	$	1,405	$	1,405
Acquisition - related contingent considerations	$	—	$	—	$	1,334	$	1,334
Total liabilities	$	—	$	—	$	1,~~405~~334	$	1,~~405~~334

	As of June 29, 2012
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets
Cash equivalents	$	255	$	—	$	—	$	255
Total assets	$	255	$	—	$	—	$	255
Liabilities
Acquisition -related contingent considerations	$	—	$	—	$	1,594	$	1,594
Acquisition - related contingent considerations	$	—	$	—	$	1,594	$	1,594
Total liabilities	$	—	$	—	$	1,594	$	1,594

The following table represents the change in the acquisition-related contingent consideration liabilities during the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013:

Balance as of June 29, 2012	$	1,594
Losses included in earnings (1)		910
Settlements		(~~198~~270	)
Balance as of December 28, 2012	$	1,405
Balance as of March 29, 2013	$	1,334

(1)	Amounts were recorded to interest expense and other income (expense)-net on the condensed consolidated statement of operations.

The carrying amounts reflected in the condensed consolidated balance sheets for cash, trade accounts receivable, and trade accounts payable approximate their respective fair values based on the short-term nature of these instruments. At ~~December~~March 2829, ~~2012~~2013 and June 29, 2012, the fair value of the Company’s debt instruments approximated their respective carrying ~~value~~ value as the debt was comprised of variable rate debt. The fair value of the Company’s long-term debt was based upon borrowing rates then available to the Company for similar debt instruments with like terms and maturities. This is considered a ~~level~~ level 2 measurement in the fair value hierarchy.

8During the thirteen and thirty-nine weeks ended March 29, 2013, the Company recorded an impairment loss of $1,900 relating to impairment of indefinite-lived intangible assets (See Note 5). ~~EQUITY~~During the thirteen and thirty-~~BASED~~nine ~~COMPENSATION~~weeks ended March 30, 2012 the Company recorded an impairment loss of $62,107 relating to impairment of goodwill and finite-lived intangible assets. These non-financial assets were measured at fair value on a nonrecurring basis subsequent to their initial recognition. We consider the fair value of these intangible assets to be level 3 measurements due to the presence of significant inputs that are unobservable and based on management’s estimates. Note 5 contains a discussion of the valuation methodologies used to measure these intangible assets.

The following table presents assets measured at fair value on a nonrecurring basis at March 29, 2013 and June 29, 2012. There were no nonrecurring fair value measurements of liabilities.


	As of March 29, 2013
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets
Trade names	$	—	$	—	$	200	$	200
Symbols and trade names (indefinite life)	$	—	$	—	$	800	$	800

Total assets	$	—	$	—	$	1,000	$	1,000


	As of June 29, 2012
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets
Acquired software technology	$	—	$	—	$	130	$	130
Acquired patent technology		—		—		760		760
Symbols and trade names (indefinite life)		—		—		9,700		9,700

Total assets	$	—	$	—	$	10,590	$	10,590

9. EQUITY-BASED COMPENSATION

For a detailed description of past equity-based compensation activity, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2012. There have been no significant changes in the Company’s equity-based compensation accounting policies and assumptions from those that were disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2012.

17The Company recorded stock compensation expense related to stock option awards, restricted stock and Holding Unit awards as follows:


	Thirteen Weeks Ended
	March 29, 2013										March 30, 2012
	Cost of Sales		Selling and Marketing		Research and Development		General and Administrative		Total		Cost of Sales		Selling and Marketing		Research and Development		General and Administrative		Total
Holding Units	$	—	$	2	$	1	$	7	$	10	$	—	$	8	$	2	$	6	$	16
Options		6		29		51		160		246		5		25		69		391		490
Restricted Stock		1		8		8		17		34		—		—		—		37		37

Total	$	7	$	39	$	60	$	184	$	290	$	5	$	33	$	71	$	434	$	543


	Thirty-nine Weeks Ended
	March 29, 2013										March 30, 2012
	Cost of Sales		Selling and Marketing		Research and Development		General and Administrative		Total		Cost of Sales		Selling and Marketing		Research and Development		General and Administrative		Total
Holding Units	$	—	$	5	$	3	$	20	$	28	$	—	$	22	$	8	$	20	$	50
Options		15		114		173		558		860		16		129		203		1,167		1,515
Restricted Stock		4		51		49		96		200		—		—		—		107		107

Total	$	19	$	170	$	225	$	674	$	1,088	$	16	$	151	$	211	$	1,294	$	1,672

~~The~~A ~~Company~~summary ~~recorded~~of ~~stock~~the ~~compensation~~Company’s ~~expense~~stock ~~related~~option toactivity ~~stock~~under ~~option~~the ~~awards,~~2010 ~~restricted~~Long-Term Incentive ~~stock~~Plan ~~and~~(“2010 ~~management~~Plan”) ~~and~~for ~~director~~the ~~unit~~thirty-nine ~~awards~~weeks ended March 29, 2013 is as follows:

	Thirteen Weeks Ended
	Options			Range ofExercisePrices		Weighted-AverageExercisePrices				Weighted-AverageRemainingContractual Life				AggregateIntrinsicValue
	December 28, 2012																	December 30, 2011
Outstanding - June 29, 2012		1,358,550		$1.21-15.00		$	11.61				8.3			$	—
				Selling				Research				General								Selling		Research		General
Granted		—		—			—				—				—
	Cost of			and				and				and						Cost of		and		and		and
Exercised		—		—			—				—				—
	Sales			Marketing				Development				Administrative				Total		Sales		Marketing		Development		Administrative		Total
Forfeited		(298,350	)	4.10-15.00			—				—				—
Holding Units	$	—		$	2			$	1			$	7			$	10	$	—	$	7	$	3	$	7	$	17
Outstanding - March 29, 2013		1,060,200		1.21-15.00		$	10.86				7.7			$	—
Options		6			48				61				199				314		7		64		71		392		534
Exercisable - March 29, 2013		337,225		$5.47-15.00		$	13.66				7.3			$	—
Restricted Stock		4			43				41				77				165		—		—		—		36		36
Total	$	10		$	93			$	103			$	283			$	489	$	7	$	71	$	74	$	435	$	587

	Twenty-six Weeks Ended
	December 28, 2012										December 30, 2011
			Selling		Research		General						Selling		Research		General
	Cost of		and		and		and				Cost of		and		and		and
	Sales		Marketing		Development		Administrative		Total		Sales		Marketing		Development		Administrative		Total
Holding Units	$	—	$	4	$	2	$	14	$	20	$	—	$	14	$	6	$	14	$	34
Options		9		85		121		397		612		11		104		134		776		1,025
Restricted Stock		4		43		41		79		167		—		—		—		70		70
Total	$	13	$	132	$	164	$	490	$	799	$	11	$	118	$	140	$	860	$	1,129

As of March 29, 2013, there was $2,330 of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 2.3 years.

A summary of the Company’s restricted stock ~~option activity~~ under the 2010 ~~Long-Term Incentive~~ Plan ~~(“2010 Plan”)~~ for the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013 is as follows:

	Options			Range ofExercisePrices		Weighted-AverageExercisePrices		Weighted-AverageRemainingContractual Life		AggregateIntrinsicValue
	RestrictedShares ofClass ACommonStock			Weighted-AverageGrantFair Value		Weighted-AverageRemainingContractual Life		AggregateFair Value
Outstanding — June 29, 2012		1,358,550		$	1.21-15.00	$	11.61		8.3	$	—
Non-vested Outstanding - June 29, 2012		2,804		$	5.35		1.2	$	3
Granted		—1,100,000			—0.48		—		—527		—
Exercised		—			—		—		—		—
Vested		(273,902	)		0.50				138
Forfeited		(~~247~~63,~~825~~750	)		40.~~10-15.00~~48		—		—31		—
Outstanding — December 28, 2012		1,110,725			1.21-15.00	$	10.97		7.9	$	—
Non-vested Outstanding - March 29, 2013		765,152		$	0.49		2.6	$	421
Exercisable — December 28, 2012		355,400		$	5.47-15.00	$	13.75		7.5	$	—

As of ~~December~~March 2829, ~~2012~~2013, there was $~~2,755~~315 of unrecognized compensation expense related to non-vested restricted stock ~~option awards~~ that is expected to be recognized over a weighted-average period of 2.5 6 years.

A summary of the ~~Company’s~~ ~~restricted~~changes ~~stock~~in non-vested ~~under~~Holdings ~~the~~Units ~~2010~~outstanding ~~Plan~~during ~~for~~ the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013 is asdetailed ~~follows~~in the following table below:

	RestrictedShares ofClass ACommonStock			Weighted-AverageGrantFair Value		Weighted-AverageRemainingContractual Life		AggregateFair Value
	Number ofAwards			Weighted-AveragePer UnitGrant DateFair Value		AggregateIntrinsic Value
Non-vested Outstanding — June 29, 2012		2,804		$	5.35		1.2	$	3
						(in thousands)
Granted		1,100,000			0.48		—		527
Holding Units:
Vested		(273,902	)		0.50		—		138
Non-vested Outstanding - June 29, 2012		46,817		$	3.36	$	—
Forfeited		—			—		—		—
Granted		—			—		—
Non-vested Outstanding — December 28, 2012		828,902		$	0.49		2.6	$	265
Vested		(19,602	)		3.24		—
Forfeited		(4,010	)		2.59		—
Redeemed		—			—		—
Non-vested Outstanding - March 29, 2013		23,205		$	3.98	$	—

Non-vested Holdings Units that were service-based retained their original vesting date and unrecognized compensation expense associated with them will be expensed according to the original schedule. As of ~~December~~March 2829, ~~2012~~2013, there was $~~348~~24 of unrecognized compensation expense related to non-vested ~~restricted~~ ~~stock~~Holdings Units that is expected to be recognized over a weighted-average vesting period of 21.6 2 years.

1820

A10. ~~summary~~NET ofINCOME ~~the~~(LOSS) ~~changes~~PER inSHARE ~~non-vested Holdings Units outstanding during the twenty-six weeks ended December 28, 2012 is detailed in the following table below:~~

	Number ofAwards			Weighted-AveragePer UnitGrant DateFair Value		AggregateIntrinsic Value
						(in thousands)
Holding Units:
Non-vested Outstanding — June 29, 2012		46,817		$	3.36	$	—
Granted		—			—		—
Vested		(13,577	)		3.21		—
Forfeited		(535	)		2.60		—
Redeemed		—			—		—
Non-vested Outstanding — December 28, 2012		32,705		$	3.43	$	—

Non-vested Holdings Units that were service-based retained their original vesting date and unrecognized compensation expense associated with them will be expensed according to the original schedule. As of December 28, 2012, there was $33 of unrecognized compensation expense related to non-vested Holdings Units that is expected to be recognized over a weighted-average vesting period of 1.4 years.

9. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted net income (loss) per common share:

	Thirteen Weeks Ended						~~Twenty~~Thirty-~~six~~nine Weeks Ended
	December 28,			December 30,			December 28,			December 30,
	March 29,2013			March 30,2012			March 29,2013			March 30,2012
	2012			2011			2012			2011
Numerator:
Numerator for basic and diluted net income (loss) per Class A common share- net income (loss) attributable to DynaVox Inc.	$	~~148~~(6,567	)	$	~~339~~(14,120	)	$	(~~122~~6,689	)	$	~~779~~(13,341	)
Denominator:
Denominator for basic net income (loss) per Class A common share-weighted average shares		11,~~347~~360,~~792~~418			10,~~400~~642,~~682~~642			11,214,338			10,~~234~~354,~~088~~917
Effect of dilutive securities:
Options and restricted stock		—			—			—			—
Denominator for diluted net income (loss) per common share-adjusted weighted average shares		11,~~347~~360,~~792~~418			10,~~400~~642,~~682~~642			11,214,338			10,~~234~~354,~~088~~917
Basic net income (loss) attributable to DynaVox Inc. per common share	$	(0.0158	)	$	0(1.0333	)	$	(0.0160	)	$	0(1.0829	)
Diluted net income (loss) attributable to DynaVox Inc. per common share	$	(0.0158	)	$	0(1.0333	)	$	(0.0160	)	$	0(1.0829	)

Weighted-average shares of stock options which were anti-dilutive and thus not included in the computation of weighted-average diluted common share amounts were 1,~~120~~080,~~356~~009 and 1,~~123~~178,~~121~~483 for the thirteen and ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013, respectively, and 1,~~563~~536,~~532~~857 and 1,~~574~~560,~~273~~354 for the thirteen and ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012, respectively. Weighted-average shares of restricted stock which were anti-dilutive and thus not included in the computation of weighted-average diluted common share amounts were ~~778~~815,~~270~~592 and ~~387~~493,~~713~~058 for the thirteen and ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013, respectively, and 15,~~316~~317 and 14,~~186~~564 for the thirteen and ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012, respectively.

The shares of Class B common stock do not share in the earnings or losses of DynaVox Inc. and are therefore not participating securities. Accordingly, basic and diluted net income per share of Class B common stock has not been presented.

1011. COMMITMENTS AND CONTINGENCIES

Restructuring – In June 2012, the Company entered into a separation agreement with its former Chief Executive Officer to provide benefits as defined in the original employment agreement. In accordance with the separation agreement, the Company agreed to pay an aggregate amount of $1,000 in severance, to be paid over an 18-month period, commencing with a payment of $250 on December 12, 2012, and the remaining $750 payable in equal installments over the period. In addition to the severance payment, the Company will provide continued health benefits for 18 months and all amounts credited to this individual’s account in an executive retirement plan became fully vested. The Company has recorded a total of $~~770~~627 and $1,075 in other liabilities and other long-term liabilities on the Company’s consolidated balance sheet at ~~December~~March 2829, ~~2012~~2013 and June 29, 2012, respectively.

19In March 2013, the Company entered into a separation agreement with its former Chief Legal Officer to provide benefits as defined in the original employment agreement. In accordance with the separation agreement, the Company agreed to pay an aggregate amount of $225 in severance, to be paid over a 12-month period, commencing with a payment of $113 on September 5, 2013, and the remaining $112 payable in equal installments over the next six months. The Company has recorded a liability of $225 in other liabilities on the Company’s consolidated balance sheet at March 29, 2013.

Leases – In February 2013, the Company signed a lease amendment for our facility in Pittsburgh, Pennsylvania which will extend the lease for five years with the Company’s option for an additional five years after the initial period. The annual rent expense is approximately $618.

Purchase Commitments – In March 2013, the Company recorded a charge for $251 related to open purchase order commitments for certain slower moving inventory. The $251 is recorded in other liabilities at March 29, 2013 in the Company’s condensed consolidated balance sheet.

Other Matters – From time to time, we may be involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normal course of our business. In management’s opinion, resolution of these matters is not expected to have a material adverse impact on the Company’s results of operations, cash flows or its financial position. However, the results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially affect our results of operations, cash flows or financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors. The Company has recorded liabilities of $14 as of March 29, 2013 and $495 as of June 29, 2012 for contract disputes and product liability matters. Also, during the thirty-nine weeks ended March 29, 2013, the Company received a payment of $98 for a product liability matter. This gain has been recorded as a reduction to cost of sales on the condensed consolidated statement of operations.

Other Matters – From time to time, we may be involved in a variety of claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes and other matters relating to various claims that arise in the normal course of our business12. InSUBSEQUENT ~~management’s opinion,~~EVENTS resolution of these matters is not expected to have a material adverse impact on the Company’s results of operations, cash flows or its financial position. However, the results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially affect our results of operations, cash flows or financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors. The Company has recorded liabilities of $16 as of December 28, 2012 and $495 as of June 29, 2012 for contract disputes and product liability matters. Also, during the thirteen weeks ended December 28, 2012, the Company received a payment of $98 for a product liability matter. This gain has been recorded as a reduction to cost of sales on the condensed consolidated statement of operations.

~~11.~~On ~~SUBSEQUENT~~April 15, ~~EVENTS~~2013, the Company’s Class A common stock was delisted from the NASDAQ Global Select Market and began trading on the OTC Markets OTCQB marketplace on April 16, 2013.

In22 ~~January 2013, the Company terminated the employment of 26 employees across the various business functions for which the Company incurred $131 in severance termination payments.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion in conjunction with our unaudited condensed consolidated financial statements included elsewhere herein. The financial information set forth and discussed below is unaudited, but in the opinion of management, reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of such information. The Company’s results of operations for a particular quarter may not be indicative of results expected during the other quarters or for the entire year. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those listed under the “Forward-Looking Statements” section above. These risks and uncertainties are described in more detail in our Annual Report on Form 10-K for the fiscal year ended June 29, 2012, as they may be updated by Quarterly Reports on Form 10-Q subsequently filed with the SEC, including Item 1A. Risk Factors of this report, and could cause our actual results to differ materially from any future performance suggested below.

We operate on a fiscal calendar that results in a given fiscal year consisting of a 52-week or 53-week period ending on the Friday closest to June 30th of each year. For example, references to “fiscal year 2013” refer to the 52-week period ending on June 28, 2013. Fiscal year 2013, fiscal year 2012 and fiscal year 2011 each consists of 52-week periods.

Overview

Sales of our speech generating technologies are our largest source of revenue. In fiscal years 2012 and 2011, sales of speech generating technologies produced approximately 84% and 81%, respectively, of our net sales. The pricing levels at which third party payors, including Medicare, Medicaid and private insurers, are willing to provide coverage for speech generating technology significantly influences our sales of speech generating technologies because a significant portion of the speech generating devices that we sell are funded by such third-party payors.

Our other primary source of revenue is sales of special education software. In fiscal years 2012 and 2011, sales of special education software produced approximately 16% and 19%, respectively, of our net sales. Our software products are generally purchased by special education teachers and are generally funded by schools, which receive funding from federal, state and local sources. The level of funding available for special education and educational technology is an important driver of our software sales. Currently, revenue from sales of our software products is generated primarily from up-front fees that we collect on the initial sale of our authoring tools.

We believe that reduced ~~year-over-year~~ domestic government funding ~~for~~since the ~~past~~beginning of fiscal ~~two~~year ~~years~~2011, particularly more constrained state and local government funding of school budgets, together with technology advances such as tablet computers has adversely affected our product sales in the United States during this time period.

Beginning in the second quarter of fiscal year 2012 we experienced a funding shift, as an alternative payor in a certain geographic region elected to discontinue its role as primary payor for speech generating devices and assumed the role of secondary payor behind other third party payors, such as Medicare, Medicaid and private insurance. For the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 2829, ~~2012~~2013, we recorded $3.4 million less in net device sales as a result of the funding shift as compared to the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 30, ~~2011~~2012. Our expectation is that we will continue to supply a portion of ~~patients~~ patients impacted by the funding shift with devices in the future through other third party payors, which historically have averaged between three and six months for final authorization compared to approximately 30 days for this specific alternative ~~payor~~ payor and which may have different reimbursement guidelines than this specific alternative payor.

Our cost of sales as a percentage of net sales is influenced by the mix of our net sales between speech generating technologies and special education software, with the gross margin on our special education software sales being moderately higher.

Our primary operating expenses are selling and marketing, research and development and general and administrative.

21Due to the continued declining operating performance and limited visibility on future liquidity, our Board of Directors determined that, in order to preserve cash, the Company would not make a voluntary prepayment on its outstanding indebtedness during the third quarter necessary to maintain financial covenant compliance. A voluntary prepayment of $4.0 million would have been required to maintain financial covenant compliance. Accordingly, the Company is in violation of the Net Senior Debt to EBITDA financial covenant under the credit agreement (the “2008 Credit Facility”) and has received a Notice of Events of Default; Reservation of Rights (“Default Notice”) from GE Business Financial Services Inc., as Agent (the “Lenders Agent”). The Default Notice states that the lenders are not required to make further loans or incur further obligations under the revolving loan portion of the credit agreement and are entitled to exercise any and all default-related rights and remedies under the agreement. The Company continues to engage in active and continuing discussions with its lenders.

In connection with our ongoing discussions with the lenders, in April 2013, the Company engaged a financial and strategic adviser to assist it with an assessment of its operating cash flow and strategic alternatives. There can be no assurance that we can reach a resolution with the lenders, obtain sufficient financing or enter into other transactions to satisfy our obligations in a timely manner, or at all. If we are unable to resolve our situation with our lenders and/or to raise sufficient additional funds, we would be required to reduce operating expenses by, among other things, curtailing significantly or delaying or eliminating part or all of our new product development programs and/or scaling back our commercial operations. In addition, at any time, the holders of 50% or more of the outstanding principal amount under the 2008 Credit Facility can accelerate our obligations under the agreement and require payment of the full outstanding principal amount plus accrued and unpaid interest. Also, the interest rate on the debt could be increased to the default rate of our current rate plus 2%. We do not have sufficient cash resources to pay the amount that would become payable in the event of an acceleration of these amounts, and even if we could obtain additional financing, it is unlikely that we could obtain an amount sufficient to repay the outstanding indebtedness under the 2008 Credit Facility in full. In the event of an acceleration of our obligations and our failure to pay the amount that would then become due, the holders of the 2008 Credit Facility could seek to foreclose on our assets, as a result of which we would likely need to seek protection under the provisions of the U.S. Bankruptcy Code. In that event, we could seek to reorganize our business, or the Company or a trustee appointed by the court could be required to liquidate our assets. In either of these events, whether the stockholders receive any value for their shares is highly uncertain. See “Liquidity and Capital Resources” and “Part II – Item 1A. Risk Factors – We are in default under our 2008 Credit Facility and our lenders have the right to accelerate our obligations at any time, which raises substantial doubt about our ability to continue as a going concern.”

Components of Results of Operations

Net Sales

Our sales are recorded net of product returns and an allowance for discounts and adjustments at the time of the sale based upon contractual arrangements with insurance companies, Medicare allowable billing rates and state Medicaid rates. Our net sales are derived from the sales of speech generating devices and special education software and content. The following table summarizes our net sales by product categories for the periods indicated below both in dollars and as a percentage of net sales:

	Thirteen Weeks Ended						~~Twenty~~Thirty-~~six~~nine Weeks Ended
	December 28,			December 30,			December 28,			December 30,
	March 29,2013			March 30,2012			March 29,2013			March 30,2012
	2012			2011			2012			2011
	(Amounts in thousands)						(Amounts in thousands)
Net Sales
Speech generating devices	$	1412,~~891~~532		$	20,~~065~~684		$	3042,~~169~~701		$	4060,~~131~~815
Special education software		2,~~663~~395			3,~~160~~343			68,~~017~~412			912,~~276~~619
	$	1714,~~554~~927		$	2324,~~225~~027		$	3651,~~186~~113		$	4973,~~407~~434
Percentage of net sales
Speech generating devices		84.80	%		86.41	%		83.45	%		8182.28	%
Special education software		1516.20	%		13.69	%		16.65	%		1817.82	%
		100.0	%		100.0	%		100.0	%		100.0	%

A majority of our net sales for devices are generated by our direct sales efforts for products that are shipped to clients and billed to Medicare (national), Medicaid (local) and private insurance companies as well as products that are shipped and directly billed to school districts, evaluation centers and Department of Veterans Affairs centers. Special education software sales for the ~~twenty~~thirty-~~six~~nine weeks ended ~~December~~March 30, ~~2011~~2012 includes a large international order of approximately $1.4 million.

Our business has historically been seasonal as we have realized a higher portion of net sales, net income, and operating cash flows in the second half of the fiscal year and especially in the fourth fiscal quarter (second calendar quarter). However, fiscal year 2012 fourth quarter and second half sales did not follow our historical trend. Fourth quarter sales in fiscal year 2012 represented 24% of total annual sales compared to 27%, 24% and 25% in the first, second and third quarters of fiscal year 2012, respectively. Second half of fiscal year 2012 sales represented 49% of total annual sales.

Cost of Sales

Cost of sales includes the direct labor and indirect costs of the final assembly operations performed at our facility in Pittsburgh, the cost of the component materials used in the final assembly, quality control testing, certain royalties, the distribution costs of our special education software center and other third-party costs. Our cost of sales is substantially higher in higher volume quarters, generally increasing as net sales increase. Changes in the mix of our products, or the mix between devices and software, may also impact our overall cost of sales. We review our inventory levels on an ongoing basis in order to identify potentially obsolete products and record any adjustments to our reserve as a component of cost of sales.

Operating Expenses

Selling and Marketing. Selling and marketing expenses consist primarily of salaries, commissions, benefits and other personnel related expenses for employees engaged in field sales, front-end technical support to assist the sales process, sales operations (order authorization and processing), marketing and external advertising and promotion.

Research and Development. Our research and development expenses consist primarily of compensation of employees associated with the development, design and testing of new products, product enhancements and new applications for our existing products. We expense most of our research and development costs as they are incurred. Certain patent technology costs are capitalized and amortized over the estimated useful life of the patent related asset.

General and Administrative. General and administrative expenses consist primarily of salaries, benefits and other personnel related expenses for employees engaged in finance, legal, human resources and executive management. Other costs include outside legal and accounting fees, ~~investor relations,~~ risk management (insurance) and other administrative costs.

Amortization of Certain Intangible Assets. We have finite-lived intangible assets composed of acquired software technology, acquired patents, internally developed patents, and trade names which are typically amortized on a straight-line basis over their estimated useful lives. Acquired software technology is typically amortized over three to 10 years, acquired patents are amortized over the life of the patent, internally developed patents are amortized over their useful life, and trade names are amortized over three years. Amortization related to acquired software technology and trade names is included in cost of sales. Amortization of patents is included in operating expenses. In connection with the impairment charges taken in the third quarter of fiscal year 2013, the Company determined that one of the indefinite-lived trade names had a finite life due to the refinement of a business strategy. The finite-lived intangible asset of $0.2 million will be amortized over one year beginning in the fourth quarter of fiscal year 2013. Additionally, in connection with the impairment charges taken in the fourth quarter of fiscal year 2012, we reduced the useful lives of certain acquired software technology and acquired patents to one year.

22Impairment Loss. Long-lived assets, which include fixed assets and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or group of assets may not be recoverable. Intangible assets with indefinite-lives are reviewed at least annually, or when events or other changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Equity-Based Compensation

We estimate the grant date fair value of stock options for our Class A common stock using the Black-Scholes valuation model. Significant assumptions we use in the model are: (i) an expected dividend yield of 0% based on our expectation of not paying dividends for the foreseeable future; (ii) the expected volatility based on the historical volatility of our Class A common stock; (iii) a risk-free interest rate based on the U.S. Treasury yield curve in effect at the time of the grant; and (iv) a weighted-average expected term using the “simplified method”. The “simplified method” calculates the expected term as the average of the vesting term and original contractual term of the options.

Interest Expense

Interest expense consists primarily of interest on borrowings under our credit facilities.

Other Income (Expense) – net

Other income (expense) – net consists primarily of changes to the payable to related parties pursuant to the tax receivable agreement primarily as a result of change in estimates.

Income Taxes

We are subject to entity level taxation in certain states, and certain domestic and foreign subsidiaries are subject to entity level U.S. and foreign income taxes. In addition, DynaVox Inc. is subject to U.S. federal, state, local and foreign income taxes with respect to its allocable share of any taxable income of DynaVox Systems Holdings LLC (“DynaVox Holdings”) and is taxed at the prevailing corporate tax rates. During the thirteen and thirty-nine weeks ended March 29, 2013, the Company recorded a substantial valuation allowance on our deferred tax assets related to DynaVox Inc. for $49.4 million as it was determined that it was more likely than not that the tax benefits would not be realized.

Adjusted EBITDA

Adjusted EBITDA represents income (loss) before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and other adjustments noted in the table below. We present Adjusted EBITDA because:

•

Adjusted EBITDA is used by management in managing our business as an indicator of our operating performance;

•

our compliance with certain covenants in our credit agreement is measured based on Adjusted EBITDA; and

•

targets for Adjusted EBITDA are among the measures we use to evaluate our management’s performance for purposes of determining their compensation under our management incentive bonus plan.

Our management uses Adjusted EBITDA principally as a measure of our operating performance and believes that Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies in industries similar to ours. We also believe Adjusted EBITDA is useful to our management and investors as a measure of comparative operating performance from period to period. Our management also uses Adjusted EBITDA for planning purposes, including the preparation of our annual operating budget and financial projections. Adjusted EBITDA, however, does not represent and should not be considered as an alternative to net income (loss) or cash flow from operating activities, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies. Although we use Adjusted EBITDA as a measure to assess the operating performance of our business, Adjusted EBITDA has significant limitations as an analytical tool because it excludes certain material costs. For example, it does not include interest expense, which has been a necessary element of our costs. Because we use capital assets, depreciation expense is a necessary element of our costs and ability to generate revenue. In addition, the omission of the substantial amortization expense associated with our intangible assets or any impairment loss further limits the usefulness of this measure. Adjusted EBITDA also does not include the payment of taxes, which is also a necessary element of our operations. Adjusted EBITDA also does not include expenses incurred in connection with equity-based compensation to our employees, certain costs relating to restructuring and acquisitions and debt refinancing fees. Because Adjusted EBITDA does not account for these expenses, its utility as a measure of our operating performance has material limitations. Because of these limitations management does not view Adjusted EBITDA in isolation or as a primary performance measure and also uses other measures, such as net income (loss), net sales, gross profit and income from operations, to measure operating performance.

Non-Controlling Interest

The Company is the sole managing member of, and has a controlling equity interest in, DynaVox Holdings. After the effective date of the registration statement for our IPO, but prior to the completion of the IPO, the limited liability company agreement of DynaVox Holdings was amended and restated to, among other things; modify its capital structure by replacing the different classes of interests previously held by the DynaVox Holdings owners to a single new class of units (the “Holdings Units”.) In addition, each holder of Holdings Units received one share of the Company’s Class B common stock. DynaVox Inc. and the DynaVox Holdings owners also entered into an exchange agreement under which (subject to certain of its terms) the holders of Holdings Units have the right to exchange their Holdings Units for shares of the Company’s Class A common stock on a one-for-one basis, subject to customary rate adjustments for stock splits, stock dividends and reclassifications.

23As the sole managing member of DynaVox Holdings, the Company operates and controls all of the business and affairs of DynaVox Holdings and, through DynaVox Holdings and its subsidiaries, conducts our business. The Company consolidates the financial results of DynaVox Holdings and its subsidiaries, and records non-controlling interest for the economic interest in the Company held by the non-controlling unitholders. Non-controlling interest on the condensed consolidated statement of operations represents the portion of earnings or loss attributable to the economic interest in the Company held by the non-controlling unitholders. Non-controlling interest on the condensed consolidated balance sheet represents the portion of net assets of the Company attributable to the non-controlling unitholders, based on the portion of the Holdings Units owned by such unitholders. The non-controlling interest ownership percentage as of March 29, 2013 is calculated as follows:


	Non-controlling Unitholders Holdings Units			DynaVox Inc. Outstanding Common A Shares			Total*
March 29, 2013		18,724,123			11,371,820			30,095,943
		62.2	%		37.8	%		100.0	%

As the sole managing member of DynaVox Holdings, the Company operates and controls all of the business and affairs of DynaVox Holdings and, through DynaVox Holdings and its subsidiaries, conducts our business. The Company consolidates the financial results of DynaVox Holdings and its subsidiaries, and records non-controlling interest for the economic interest in the Company held by the non-controlling unitholders. Non-controlling interest on the condensed consolidated statement of operations represents the portion of earnings or loss attributable to the economic interest in the Company held by the non-controlling unitholders. Non-controlling interest on the condensed consolidated balance sheet represents the portion of net assets of the Company attributable to the non-controlling unitholders, based on the portion of the Holdings Units owned by such unitholders. The non-controlling interest ownership percentage as of December 28, 2012 is calculated as follows:

	Non-controllingUnitholdersHoldingsUnits			DynaVox Inc.OutstandingCommon AShares			Total*
December 28, 2012		18,728,132			11,371,820			30,099,952
		62.2	%		37.8	%		100.0	%

*	Assumes all of the holders of Holdings Units exchange their Holdings Units for shares of the Company’s Class A common stock on a one-for-one basis.

2426

Results of Operations

The following table summarizes key components of our results of operations for all periods presented both in dollars and percentage of net sales. The results of operations and following discussion present statement of operation line items down to income before income taxes, as well as Adjusted EBITDA.

	Thirteen Weeks Ended												~~Twenty~~Thirty-~~six~~nine Weeks Ended
	December 28,			% of Net			December 30,			% of Net			December 28,			% of Net			December 30,			% of Net
	March 29,2013			% of NetSales			March 30,2012			% of NetSales			March 29,2013			% of NetSales			March 30,2012			% of NetSales
	2012			Sales			2011			Sales			2012			Sales			2011			Sales
	(unaudited)												(unaudited)
	(Dollars in thousands)												(Dollars in thousands)
Net Sales	$	1714,~~554~~927			100.0	%	$	2324,~~225~~027			100.0	%	$	3651,~~186~~113			100.0	%	$	4973,~~407~~434			100.0	%
Costs of goods sold		4,~~786~~479			2730.30	%		6,~~580~~649			2827.37	%		914,~~974~~453			2728.63	%		1320,~~766~~415			27.98	%
Gross profit		1210,~~768~~448			7270.70	%		1617,~~645~~378			7172.73	%		2636,~~212~~660			7271.47	%		3553,~~641~~019			72.12	%
Operating Expenses:
Selling and marketing		65,~~043~~204			34.49	%		87,~~041~~868			3432.67	%		1318,~~165~~369			3635.49	%		1725,~~604~~472			3534.67	%
Research and development		1,~~730~~726			911.96	%		1,~~520~~540			6.54	%		35,~~464~~190			910.62	%		35,~~711~~251			7.52	%
General and administrative		34,~~408~~267			1928.46	%		4,~~458~~388			1918.23	%		711,~~543~~810			2023.81	%		813,~~834~~222			1718.90	%
Amortization of certain intangibles		~~191~~192			1.13	%		110			0.5	%		~~383~~575			1.1	%		~~220~~330			0.4	%
Total operating expenses		11,372			64.8	%		14,129			60.8	%		24,555			67.9	%		30,369			61.5	%
Impairment loss		1,994			13.4	%		62,107			258.5	%		1,994			3.9	%		62,107			84.6	%
Income from operations		1,396			8.0	%		2,516			10.8	%		1,657			4.6	%		5,272			10.7	%
Total operating expenses		13,383			89.7	%		76,013			316.4	%		37,938			74.2	%		106,382			144.9	%
Income (loss) from operations		(2,935	)		-19.7	%		(58,635	)		-244.0	%		(1,278	)		-2.5	%		(53,363	)		-72.7	%
Other Income (Expense):
Interest income		422			0.01	%		97			0.0	%		1133			0.01	%		1522			0.0	%
Interest expense		(~~449~~460	)		-23.61	%		(~~573~~574	)		-2.54	%		(~~966~~1,426	)		-2.78	%		(1,~~142~~716	)		-2.3	%
Other income (expense) — net		(250	)		-1.4	%		(31	)		-0.1	%		517			1.4	%		(40	)		-0.1	%
Other income (expense) - net		43,842			293.7	%		13			0.1	%		44,359			86.8	%		(27	)		0.0	%
Total other income (expense) — net		(695	)		-4.0	%		(595	)		-2.6	%		(438	)		-1.2	%		(1,167	)		-2.4	%
Total other income (expense) - net		43,404			290.8	%		(554	)		-2.3	%		42,966			84.1	%		(1,721	)		-2.3	%
Income before income taxes	$	701			4.0	%	$	1,921			8.3	%	$	1,219			3.4	%	$	4,105			8.3	%
Income (loss) before income taxes	$	40,469			271.1	%	$	(59,189	)		-246.3	%	$	41,688			81.6	%	$	(55,084	)		-75.0	%

Thirteen Weeks Ended

~~Twenty~~Thirty-~~six~~nine Weeks Ended

December 28,

December 30,

December 28,

December 30,

March 29,

March 30,

March 29,

March 30,

2012(unaudited)

2011(unaudited)

2012(unaudited)

2011(unaudited)

2013

2012

2013

2012

(Unaudited)

(Dollars in thousands)

Adjusted EBITDA (1)

~~2,764~~647

45,~~206~~038

45,~~433~~079

813,~~703~~741

(1) Adjusted EBITDA represents income (loss) before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and the other adjustments noted in the table below.

	Adjusted EBITDA Reconciliation
	Thirteen Weeks Ended						~~Twenty~~Thirty-~~six~~nine Weeks Ended
	December 28,			December 30,			December 28,			December 30,
	March 29,			March 30,			March 29,			March 30,
	2012			2011			2012			2011
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
	(Dollars in thousands)						(Dollars in thousands)
Income before income taxes	$	701		$	1,921		$	1,219		$	4,105
Income (loss) before income taxes	$	40,469		$	(59,189	)	$	41,688		$	(55,084	)
Depreciation		~~492~~439			~~778~~733			1,~~086~~525			12,~~592~~325
Amortization of certain intangibles		298			~~226~~228			~~597~~896			~~453~~681
Interest income		(422	)		(97	)		(1133	)		(1522	)
Interest expense		~~449~~460			~~573~~574			~~966~~1,426			1,~~142~~716
Other expense (income), net (1)		~~250~~52			(829	)		~~(555~~72	)		(635	)
Equity-based compensation		~~489~~290			~~587~~543			~~799~~1,088			1,~~129~~672
Employee severance and other costs		~~107~~497			603			~~278~~775			~~148~~151
Other adjustments (2)		(18	)		78			54			155
Impairment loss		1,994			62,107			1,994			62,107
Adjusted EBITDA	$	2,764		$	4,206		$	4,433		$	8,703
Tax receivable agreement (2)		(43,884	)		—			(44,459	)		—
Other adjustments (3)		54			75			107			230
Adjusted EBITDA	$	647		$	5,038		$	5,079		$	13,741

(1) ~~Includes other (income) expense, net recognized as a result of a increase/decrease in an obligation related to state tax rates.~~ Excludes realized foreign currency gains and losses.

(2) Includes ~~certain~~other expense (income), net recognized as a result of changes to the estimated amounts payable to related parties pursuant to ~~other~~the ~~taxes~~tax receivable agreement.

25(3) Includes certain amounts related to other taxes.

Thirteen Week Period Ended ~~December~~March 2829, ~~2012~~2013 Compared to the Thirteen Week Period Ended ~~December~~March 30, ~~2011~~2012

Net Sales

Net sales decreased 2437.49%, or $59.71 million, to $1714.69 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from $2324.20 million for the thirteen week period ended ~~December~~ March 30, ~~2011~~ 2012. The decrease in device sales was $58.2 million, or 2539.84%. Software sales decreased $0.59 million, or 1528.74%, in the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 compared to the thirteen week period ended ~~December~~March 30, ~~2011~~ 2012. As previously disclosed, we ~~experienced~~have continued to experience a softening of demand, ~~as compared to our previous historical growth rates,~~ for both our speech generating devices and software products ~~beginning~~that inbegan ~~fiscal year 2011. Although demand improved~~ in ~~the first quarter of~~ fiscal year ~~2012 as net sales increased 21.4% compared to the first quarter of fiscal year~~ 2011~~, we experienced less demand in the second, third and fourth quarters of fiscal year 2012 as net sales decreased 9~~.~~0%,~~ ~~16.2% and 26.1%, respectively, compared to the second, third and fourth quarters of fiscal year 2011, respectively.~~ We believe that reduced ~~year-over-year~~ domestic government funding since the beginning of fiscal year 2011, and particularly more constrained state and local government funding of school budgets, together with technology advances such as tablet computers has continued to adversely ~~affected~~affect our product sales in the United States during the thirteen week period ended ~~December~~March 2829, ~~2012~~2013.

Beginning in the second quarter of fiscal year 2012, we experienced a funding shift, as an alternative payor in a certain geographic region elected to discontinue its role as primary payor for speech generating devices and assumed the role of secondary payor behind other third party payors, such as Medicare, Medicaid and private insurance. For the second quarter of fiscal year 2013, we recorded $1.0 million less in net device sales as a result of the funding shift as compared to the second quarter of fiscal year 2012. Our expectation is that we will continue to supply a portion of patients impacted by the funding shift with devices in the future through other third party payors, which historically have averaged between three and six months for final authorization compared to approximately 30 days for this specific alternative payor and which may have different reimbursement guidelines than this specific alternative payor.

Gross Profit and Gross Margin

Gross profit decreased 2339.39%, or $36.9 million, to $1210.84 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from $1617.64 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012. The $36.9 million decrease in gross profit was due mainly to lower device sales of $58.2 million and lower education software sales of $0.59 million. Gross margin ~~increased 100~~decreased 230 basis points to 7270.70% for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from 7172.73% for the thirteen week period ended ~~December~~March 30, ~~2011~~2012. Gross margin ~~increased~~decreased primarily as a result of decreased costs driven by a favorable outcome related to a product liability matter in the amount of $0.2 million, a $0.1 million reduction in cost as a result of changes to our benefits programs during the quarter and lower ~~royalty costs of $0.1 million offset to some degree by lower~~ sales volume. ~~In connection with a Company-wide workforce reduction~~ in ~~January~~both ~~2013,~~devices ~~the Company reduced its manufacturing assembling~~ and ~~support~~education ~~staff. The annual compensation, payroll tax~~ software and ~~estimated~~changes ~~benefits~~within ~~costs associated with~~ the ~~terminated employees~~mix isof ~~approximately~~product $0sales.1 ~~million.~~

Operating Expenses

Selling and Marketing. Selling and marketing expenses decreased 2433.89%, or $2.7 million, to $65.02 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from $87.09 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012. The $2.07 million decrease consists primarily of $0.7 million of lower advertising expense, $0.49 million of lower wages, and abenefits, a $0.3 million reduction in sales related travel functions and $0.26 million of lower variable compensation. The ~~decrease also reflects a $0.3 million reduction in expense as a result of changes to our benefit programs during the quarter. The~~ lower advertising expense reflects a $0.5 million reduction for a direct to consumer marketing initiative that we discontinued at the beginning of fiscal year 2013. Selling and marketing expenses totaled 34.49% and 3432.67% of net sales for the thirteen week periods ended ~~December~~March 2829, ~~2012~~2013 and ~~December~~March 30, ~~2011~~2012, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its selling and marketing staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $1.2 million.

Research and Development. Research and development expenses increased 1312.81%, or $0.2 million, to $1.7 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from $1.5 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012. This increase was due primarily to a $0.2 million increase in internal development ~~resources,~~ $0resources.1 ~~million increase in outside professional services offset to some degree by a $0.1 million reduction in expense as a result of changes to our benefit programs during the quarter.~~ Research and development expenses totaled 911.96% and 6.54% of net sales for the thirteen week periods ended ~~December~~March 2829, ~~2012~~2013 and ~~December~~March 30, ~~2011~~2012, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its research and development staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $0.4 million.

General and Administrative. General and administrative expenses decreased 232.68%, or $10.1 million, to $3.4.3 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 from $4.54 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012. The net decrease includes a $0.32 million reduction in ~~bad~~personnel ~~debt~~related ~~expense,~~expenses and $0.2 million of lower equity-based compensation ~~and~~offset by a $0.13 million ~~reduction~~increase in ~~expense as a result~~ ~~of changes to our benefit programs during the quarter. Depreciation expense decreased $0.1 million while outside professional services decreased $0.2 million and~~ severance ~~decreased $0~~costs.1 ~~million.~~ These expenses as a percentage of net sales were 19 28.46% and 1918.23% for the thirteen week periods ended ~~December~~March 2829, ~~2012~~2013 and ~~December~~March 30, ~~2011~~2012, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its general and administrative staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $0.2 million.

Amortization of Certain Intangibles. Amortization of certain intangibles increased $0.1 million, from $0.1 million to $0.2 million, for the thirteen week period ended ~~December~~March 2829, ~~2012~~ 2013 compared to the thirteen week period ended ~~December~~March 30, ~~2011~~2012. The increase in amortization expense for the ~~second~~third quarter of fiscal year 2013 as compared to the same period of the prior fiscal year was a result of the estimated remaining lives of acquired patent and certain software intangible assets being revised downward as of June 29, 2012, offset partially by impairment charges in fiscal year 2012 related to certain finite-lived intangible assets.

~~Income~~Impairment ~~From Operations~~Loss. ~~Income~~The ~~from~~impairment ~~operations~~loss ~~was~~of $12.40 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 ~~compared~~ was the result of a $1.9 million impairment of indefinite-lived intangible assets and $0.1 million of impairment related to the abandonment of certain leasehold improvements. The impairment loss of $262.51 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012 was the result of a $60.8 ~~The~~million ~~change~~impairment inof ~~income~~goodwill ~~from~~and ~~operations~~$1.3 ~~was~~million ~~due~~of toimpairment ~~the~~related ~~reasons~~to ~~discussed~~finite-lived ~~above~~intangibles.

~~Interest~~Loss ~~Expense~~From Operations. ~~Interest~~Loss ~~expense~~from ~~decreased~~operations ~~$0.1 million~~was to $02.5 9 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~2013 compared to a loss from operations of $058.6 million for the thirteen week period ended ~~December~~March 30, ~~2011 primarily as a result of the $5~~2012.0 ~~million~~The ~~voluntary~~change ~~debt repayment~~ in ~~the~~loss ~~fourth~~from ~~quarter~~operations ofwas ~~fiscal~~due ~~year~~to ~~2012 and~~ the ~~$6.0~~reasons ~~million~~discussed ~~voluntary debt repayment in the first quarter of fiscal year 2013~~above.

~~Other~~Interest ~~Income (~~Expense~~) – net~~. Interest ~~Net other~~ expense ~~increased~~decreased $0.21 million to $0.5 million for the thirteen week period ended ~~December~~March 2829, ~~2012~~ 2013 from $0.6 million for the thirteen week period ended ~~December~~March 30, ~~2011~~2012 primarily as a result of the $5.0 ~~The~~million voluntary ~~increase~~debt ~~was~~repayment ~~primarily~~in the ~~result~~fourth quarter of afiscal ~~change~~year in2012 and the ~~deferred~~$6.0 ~~tax~~million ~~rate~~voluntary ~~applicable~~debt torepayment in the ~~tax~~first ~~receivable~~quarter ~~agreement~~of ~~liability~~fiscal year 2013.

~~Adjusted~~28 EBITDA. Adjusted EBITDA decreased $1.4 million to $2.8 million for the second quarter of fiscal year 2013 compared to $4.2 million for the second quarter of fiscal year 2012. The $1.4 million decrease was primarily a net result of the $5.7 million decrease in net sales, a $1.8 million reduction in cost of goods sold and $2.8 million of lower operating expenses. Equity-based compensation and depreciation and amortization expense were $0.1 million and $0.2 million, respectively, lower in the second quarter of fiscal year 2013 as compared to the second quarter of fiscal year 2012. Adjusted EBITDA represents income before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and the other adjustments noted in the table above.

~~Twenty-Six~~Other ~~Week~~Income ~~Period~~(Expense) ~~Ended~~– ~~December~~net. Net other income was $43.8 million for the thirteen week period ended March 2829, ~~2012~~2013 ~~Compared~~compared to net other income of less than $0.1 million for the ~~Twenty-Six~~thirteen ~~Week~~week ~~Period~~period ~~Ended December~~ended March 30, ~~2011~~2012. The increase was primarily the result of a $43.9 million change in the estimated amounts payable to related parties pursuant to the tax receivable agreement in connection with recording a valuation allowance on deferred tax assets of $49.4 million.

Income Tax Expense (Benefit). Income tax expense was $49.1 million for the thirteen week period ended March 29, 2013 compared to an income tax benefit of $7.2 million for the thirteen week period ended March 30, 2012. The change was primarily the result of a $49.4 million valuation allowance recorded on deferred tax assets during the thirteen week period ended March 29, 2013 coupled with a tax benefit of $7.2 million recorded during the thirteen week period ended March 30, 2012 related to a $59.2 million loss before income taxes.

Adjusted EBITDA. Adjusted EBITDA decreased $4.4 million to $0.6 million for the third quarter of fiscal year 2013 compared to $5.0 million for the third quarter of fiscal year 2012. The $4.4 million decrease was primarily a net result of the $9.1 million decrease in net sales, a $2.2 million reduction in cost of goods sold and $2.7 million of lower operating expenses, excluding the impairment loss in the prior year. Equity-based compensation and depreciation and amortization expense were $0.3 million and $0.2 million, respectively, lower in the third quarter of fiscal year 2013 as compared to the third quarter of fiscal year 2012. During the third quarter of fiscal year 2013, the Company changed its estimate relating to amounts payable to related parties pursuant to tax receivable agreement and reduced this liability by $43.9 million. Adjusted EBITDA represents income (loss) before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and the other adjustments noted in the table above.

Thirty-nine Week Period Ended March 29, 2013 Compared to the Thirty-nine Week Period Ended March 30, 2012

Net Sales

Net sales decreased 2630.84%, or $1322.23 million, to $3651.21 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013 from $4973.4 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 30, ~~2011~~2012. The decrease in device sales was $1018.01 million, or 2429.8%. Software sales decreased $34.2 million, or 3533.13%, in the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013 compared to the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 30, ~~2011~~2012. Software sales for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012 included a large international order of approximately $1.4 million. Excluding the large international order, overall net sales and software sales decreased $1120.89 million and $12.98 million, or 2428.75% and 2322.82%, respectively. As previously disclosed, we ~~experienced~~continued ato experience a softening of demand, ~~as compared to our previous historical growth rates,~~ for both our speech generating devices and software products ~~beginning~~that inhad ~~fiscal~~begun ~~year 2011. Although demand improved~~ in ~~the first quarter of~~ fiscal year ~~2012 as net sales increased 21.4% compared to the first quarter of fiscal year~~ 2011~~, we experienced less demand in the second, third and fourth quarters of fiscal year 2012 as net sales decreased 9~~.~~0%,~~ ~~16.2% and 26.1%, respectively, compared to the second, third and fourth quarters of fiscal year 2011, respectively.~~ We believe that reduced ~~year-over-year~~ domestic government funding since the beginning of fiscal year 2011, and particularly more constrained state and local government funding of school budgets, together with technology advances such as tablet computers ~~has~~continued to adversely ~~affected~~affect our product sales in the United States during the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013.

~~Beginning~~Also, beginning in the second quarter of fiscal year 2012, we experienced a funding shift, as an alternative payor in a certain geographic region elected to discontinue its role as primary payor for speech generating devices and assumed the role of secondary payor behind other third party payors, such as Medicare, Medicaid and private insurance. For the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013, we recorded $3.4 million less in net device sales as a result of the funding shift as compared to the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 30, ~~2011~~2012. Our expectation is that we will continue to supply a portion of patients impacted by the funding shift with devices in the future through other third party payors, which historically have averaged between three and six months for final authorization compared to approximately 30 days for this specific alternative payor and which may have different reimbursement guidelines than this specific alternative payor.

Gross Profit and Gross Margin

Gross profit decreased 2630.59%, or $916.43 million, to $2636.27 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 2829, ~~2012~~2013 from $3553.60 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012. The $916.43 million decrease in gross profit was due mainly to lower device sales of $1018.01 million and lower education software sales of $34.2 million compared to the prior year. Gross margin ~~increased~~decreased 3050 basis points to 7271.47% for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013 from 72.12% for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 30, ~~2011~~2012. Gross margin ~~increased~~decreased primarily as a result of ~~decreased~~lower ~~costs~~volume ~~driven~~and ~~by a favorable outcome related to a~~ product ~~liability~~mix ~~matter~~slightly ~~in the amount of $0.2 million, a $0.1 million reduction in cost as a result of changes to our benefits programs and lower royalty costs of $0.5 million~~ offset ~~to some degree~~ by ~~lower sales volume. In connection with~~ a ~~Company-wide~~decrease ~~workforce reduction~~ in ~~January 2013,~~royalties ~~the Company reduced its manufacturing assembling~~ and ~~support~~personnel ~~staff. The annual compensation, payroll tax and estimated benefits~~ costs ~~associated with the terminated employees is approximately $0~~.1 ~~million.~~

Operating Expenses

Selling and Marketing. Selling and marketing expenses decreased 2527.29%, or $7.1 million, to $1318.24 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~ March 2829, ~~2012~~2013 from $1725.65 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012. The $47.41 million decrease consists primarily of $12.42 million of lower advertising expense, $12.15 million of lower wages, and benefits, $1.04 million of lower variable compensation and a $0.58 million reduction in sales related travel functions. The ~~decrease also reflects a $0.3 million reduction in expense as a result of changes to our benefit programs during the first half of fiscal year 2013. The~~ lower advertising expense reflects a $01.95 million reduction for a direct to consumer marketing initiative that we discontinued at the beginning of fiscal year 2013. Selling and marketing expenses totaled 3635.49% and 3534.67% of net sales for the ~~twenty~~ thirty-~~six~~nine week periods ended ~~December~~March 2829, ~~2012~~2013 and ~~December~~March 30, ~~2011~~2012, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its selling and marketing staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $1.2 million.

Research and Development. Research and development expenses decreased 6.7%, or $0.2 million, to $3.5 million for the twenty-six week period ended December 28, 2012 from $3.7 million for the twenty-six week period ended December 30, 2011. This decrease was due primarily to a $0.1 million reduction in expense as a result of changes to our benefit programs and $0.1 million of lower variable compensation. Research and development expenses totaled 9.6% and 7.5% of net sales for the twenty-six week periods ended December 28, 2012 and December 30, 2011, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its research and development staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $0.4 million.

General and Administrative. General and administrative expenses decreased 14.6%, or $1.3 million, to $7.5 million for the twenty-six week period ended December 28, 2012 from $8.8 million for the twenty-six week period ended December 30, 2011. The net decrease includes a $0.6 million reduction in bad debt expense, $0.4 million of lower equity-based compensation and a $0.1 million reduction in expense as a result of changes to our benefit programs during the period. Depreciation expense decreased $0.3 million while outside professional services increased $0.3 million and severance decreased $0.1 million. These expenses as a percentage of net sales were 20.8% and 17.9% for the twenty-six week periods ended December 28, 2012 and December 30, 2011, respectively. In connection with a Company-wide workforce reduction in January 2013, the Company reduced its general and administrative staff. The annual compensation, payroll taxes and estimated benefit costs associated with the terminated employees is approximately $0.2 million.

Amortization of Certain Intangibles. Amortization of certain intangibles increased $0.2 million, from $0.2 million to $0.4 million, for the twenty-six week period ended December 28, 2012 compared to the twenty-six week period ended December 30, 2011. The increase was primarily a result of the estimated remaining lives of acquired patent and certain software intangible assets being revised downward as of June 29, 2012, offset partially by impairment charges in fiscal year 2012 related to certain finite-lived intangible assets.

Income From Operations. Income from operations was $1.7 million for the twenty-six week period ended December 28, 2012 compared to $5.3 million for the twenty-six week period ended December 30, 2011. The change in income from operations was due to the reasons discussed above.

Interest Expense. Interest expense decreased $0.1 million to $1.0 million for the thirteen week period ended December 28, 2012 from $1.1 million for the twenty-six week period ended December 30, 2011 primarily as a result of a $5.0 million voluntary debt repayment in the fourth quarter of fiscal year 2012 and a $6.0 million voluntary debt repayment in the first quarter of fiscal year 2013.

Other Income (Expense) – net. Net other income increased $0.6 million for the twenty-six week period ended December 28, 2012 from $0 for the twenty-six week period ended December 30, 2011. The increase was primarily the result of a change in the deferred tax rate applicable to the tax receivable agreement liability.

Adjusted EBITDA. Adjusted EBITDA decreased $4.3 million to $4.4 million for the first half of fiscal year 2013 compared to $8.7 million for the first half of fiscal year 2012. The $4.3 million decrease was primarily a net result of the $13.2 million decrease in net sales, a $3.8 million reduction in cost of goods sold and $5.8 million of lower operating expenses. Equity-based compensation and depreciation and amortization expense were $0.3 million and $0.4 million, respectively, lower in the first half of fiscal year 2013 as compared to the first half of fiscal year 2012. Adjusted EBITDA represents income before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and the other adjustments noted in the table above.

Research and Development. Research and development expenses decreased 1.2%, or $0.1 million, to $5.2 million for the thirty-nine week period ended March 29, 2013 from $5.3 million for the thirty-nine week period ended March 30, 2012. This decrease was due primarily to a $0.1 million reduction in expense as a result of changes to our benefit programs. Research and development expenses totaled 10.2% and 7.2% of net sales for the thirty-nine week periods ended March 29, 2013 and March 30, 2012, respectively.

General and Administrative. General and administrative expenses decreased 10.7%, or $1.4 million, to $11.8 million for the thirty-nine week period ended March 29, 2013 from $13.2 million for the thirty-nine week period ended March 30, 2012. The decrease includes a $0.6 million reduction in bad debt expense and $0.6 million of lower equity-based compensation. Depreciation expense decreased $0.3 million. These expenses as a percentage of net sales were 23.1% and 18.0% for the thirty-nine week periods ended March 29, 2013 and March 30, 2012, respectively.

Amortization of Certain Intangibles. Amortization of certain intangibles increased $0.3 million, from $0.3 million to $0.6 million, for the thirty-nine week period ended March 29, 2013 compared to the thirty-nine week period ended March 30, 2012. The increase was primarily a result of the estimated remaining lives of acquired patent and certain software intangible assets being revised downward as of June 29, 2012, offset partially by impairment charges in fiscal year 2012 related to certain finite-lived intangible assets.

Impairment Loss. The impairment loss of $2.0 million for the thirty-nine week period ended March 29, 2013 was the result of a $1.9 million impairment of indefinite-lived intangible assets and $0.1 million of impairment related to the abandonment of certain leasehold improvements. The impairment loss of $62.1 million for the thirty-nine week period ended March 30, 2012 was the result of a $60.8 million impairment of goodwill and $1.3 million of impairment related to finite-lived intangibles.

Loss From Operations. Loss from operations was $1.3 million for the thirty-nine week period ended March 29, 2013 compared to a loss of $53.4 million for the thirty-nine week period ended March 30, 2012. The change in loss from operations was due to the reasons discussed above

Interest Expense. Interest expense decreased $0.3 million to $1.4 million for the thirteen week period ended March 29, 2013 from $1.7 million for the thirty-nine week period ended March 30, 2012 primarily as a result of a $5.0 million voluntary debt repayment in the fourth quarter of fiscal year 2012 and a $6.0 million voluntary debt repayment in the first quarter of fiscal year 2013.

Other Income (Expense) – net. Net other income was $44.4 million for the thirty-nine week period ended March 29, 2013 compared to net other (expense) of less than $0.1 million for the thirty-nine week period ended March 30, 2012. The increase was primarily the result of a $43.9 million change in the estimated payable to related parties pursuant to the tax receivable agreement in connection with recording a valuation allowance on deferred tax assets of $49.4 million.

Income Tax Expense (Benefit). Income tax expense was $50.2 million for the thirty-nine week period ended March 29, 2013 compared to an income tax benefit of $6.6 million for the thirty-nine week period ended March 30, 2012. The change was primarily the result of a $49.4 million valuation allowance recorded on deferred tax assets during the thirty-nine week period ended March 29, 2013 coupled with a tax benefit of $6.6 million recorded during the thirty-nine week period ended March 30, 2012 related to a $55.1 million loss before income taxes.

Adjusted EBITDA. Adjusted EBITDA decreased $8.6 million to $5.1 million for the first thirty nine weeks of fiscal year 2013 compared to $13.7 million for the same period of fiscal year 2012. The $8.6 million decrease was primarily a net result of the $22.3 million decrease in net sales, a $6.0 million reduction in cost of goods sold and $8.5 million of lower operating expenses excluding the impairment loss. Equity-based compensation and depreciation and amortization expense were both $0.6 million lower in the first thirty-nine weeks of fiscal year 2013 as compared to the first thirty-nine weeks of fiscal year 2012. During the first thirty-nine weeks of fiscal year 2013, the Company changed its estimate relating to amounts payable to related parties pursuant to tax receivable agreement and reduced this liability by $43.9 million. Adjusted EBITDA represents income (loss) before income taxes, interest income, interest expense, impairment loss, depreciation, amortization and the other adjustments noted in the table above.

Liquidity and Capital Resources

The primary sources of cash are existing cash and cash equivalents, and cash flow from operations. As noted below and ~~borrowings~~as a result of the event of default, at any time, the holders of 50% or more of the outstanding principal amount under the ~~$12~~2008 Credit Facility can accelerate our obligations under the agreement and require payment of the full outstanding principal amount plus accrued and unpaid interest.~~9 million~~ We do not have sufficient cash resources to ~~revolving~~pay ~~loan~~the ~~portion~~amount that would become payable in the event of ~~our~~an ~~credit~~acceleration ~~facility~~of these amounts, and even if we could obtain additional financing, it is unlikely that we could obtain an amount sufficient to repay the outstanding indebtedness under the 2008 Credit Facility in full.

	As of
	December 28,		December 30,
	2012		2011
	(Amounts in thousands)
Cash and cash equivalents	$	14,126	$	20,020
Revolving loan availability	$	12,925	$	12,925

Our primary cash needs are to fund normal working capital requirements, capital expenditures, repay our indebtedness (interest and principal payments) and for tax distributions to members, including any payments made under the Tax Receivable Agreement. Any borrowings under the revolving loan facility are either at the London InterBank Offered Rate (LIBOR), plus a credit spread or the Prime rate, plus a credit spread, at the Company’s option. The credit spread is determined based on the then current predefined leverage ratio of the Company. The $12.9 million of availability is subject to the Company’s compliance with certain contractual financial and non-financial covenants.

As part of the IPO and related transactions, we entered into a tax receivable agreement with the DynaVox Holdings and subsidiaries owners that provides for the payment from time to time by DynaVox Inc. to the DynaVox Holdings owners of 85% of the amount of the benefits, if any, that DynaVox Inc. is deemed to realize as a result of (i) the existing tax basis in the intangible assets of DynaVox Holdings on the date of the IPO, (ii) an increase in the tax basis of the assets of DynaVox Holdings that otherwise would not have been available, and (iii) certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of DynaVox Inc. and not of DynaVox Holdings. For purposes of the tax receivable agreement, the benefit deemed realized by DynaVox Inc. will be computed by comparing the actual income tax liability of DynaVox Inc. (calculated with certain assumptions) to the amount of such taxes that DynaVox Inc. would have been required to pay had there been no increase to the tax basis of the assets of DynaVox Holdings as a result of the purchase or exchanges, had there been no tax benefit from the tax basis in the intangible assets of DynaVox Holdings on the date of the IPO and had DynaVox Inc. not entered into the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or expired, unless DynaVox Inc. exercises its right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under the agreement or DynaVox Inc. breaches any of its material obligations under the tax receivable agreement in which case all obligations will generally be accelerated and due as if DynaVox Inc. had exercised its right to terminate the agreement.

The Company currently finances its working capital needs, planned capital expenditures, debt repayments and tax distributions to members, including any payments under the Tax Receivable Agreement through a combination of existing cash and cash equivalents, net cash provided by operating activities and availability under our senior credit facility, of which $25.2 million is outstanding at December 28, 2012. The current scheduled payments under the senior credit facility require the Company to pay $0.8 million on September 30, 2013 and three equal quarterly installments of $8.1 million beginning on December 31, 2013. In addition, the availability of funds under the senior credit facility requires the Company to comply with certain covenants, including a covenant of net senior debt to Adjusted EBITDA. The senior secured credit agreement provides the Company the ability to prepay at any time, without penalty, and at its discretion for any reason, including maintaining compliance with covenants, and reducing the outstanding debt in direct order of maturity. During the first twenty-six weeks of fiscal year 2013, the Company made a prepayment of $6.0 million.

Unless net sales trends that we have experienced since 2011 improve over the remainder of fiscal year 2013 and into fiscal year 2014, the Company expects it will not have enough funds to make all the scheduled quarterly payments beginning on December 31, 2013 and to make all the additional prepayments to maintain covenant compliance. The Company has initiated the process to either restructure, or refinance, its $25.2 million of outstanding debt. We are uncertain as of the date of this report as to our ability to restructure or refinance the $25.2 million of outstanding debt. If we cannot restructure or refinance the debt we may incur an event of default within the next twelve months, in which case all amounts then outstanding under the credit agreement would be accelerated and we would no longer have access to our revolving credit facility. We would also be required to reclassify on our balance sheet amounts currently shown as long-term debt under the credit facility to short-term debt. In such a situation, there can be no assurance that we would be able to obtain alternative financing with terms that are acceptable to us or at all. In addition, if the Company is determined to be in default of its credit agreement it would impair our ability to maintain sufficient working capital. The inability to make our scheduled debt repayments, or to refinance or restructure our debt, would have a material adverse effect on the solvency of the Company and our ability to continue as a going concern. See “Part II – Item 1A – Risk Factors – Our use of leverage may expose us to substantial risks, including an event of default if we cannot restructure or refinance our debt. We may not be able to make our scheduled payments of outstanding debt and if we are unable to restructure or refinance this debt, our lenders may seek remedies under an event of default.”

WeAlso, ~~may~~the ~~require~~lenders ~~additional~~are ~~liquidity~~not asrequired ~~we continue~~ to ~~execute~~make ~~our~~further ~~business~~loans ~~strategy.~~or ~~We anticipate~~incur ~~that~~further toindebtedness under the ~~extent~~revolving ~~that~~loan weportion ~~require~~of ~~additional liquidity, it will be funded through~~ the ~~incurrence~~2008 ofCredit indebtedness, additional equity financings or a combination of these potential sources of liquidity, although no assurance can be given that such forms of capital will be available to us or available to us on terms which are acceptable, at such timeFacility.


	As of
	March 29, 2013		March 30, 2012
	(Amounts in thousands)

Cash and cash equivalents	$	14,109	$	22,159
Revolving loan availability		N/A	$	12,925

While we believe that our current cash resources, together with anticipated revenues from product sales, would be sufficient to fund our operations, they are not sufficient to fund both our operations and full repayment of the outstanding principal under the 2008 Credit Facility. In addition, we have based this estimate on assumptions that may prove to be wrong, including assumptions with respect to the level of revenues from sales of new products currently under development, and we could exhaust our available financial resources sooner than we currently expect. The sufficiency of our current cash resources, and our need for additional capital and the timing thereof, will depend on many factors, including primarily the amount of revenues that we receive from sales of these new products.

The Company financed its working capital needs, planned capital expenditures, debt repayments and tax distributions to members, including any payments under the Tax Receivable Agreement, through a combination of existing cash and cash equivalents, net cash provided by operating activities and availability under our senior credit facility, of which $25.2 million was outstanding at March 29, 2013. The current scheduled payments under the senior credit facility require the Company to pay $0.8 million on September 30, 2013 and three equal quarterly installments of $8.1 million beginning on December 31, 2013, but such payments may be accelerated as described below. In addition, the availability of funds under the senior credit facility requires the Company to comply with certain covenants, including a covenant of Net Senior Debt to Adjusted EBITDA, which the Company has defaulted on as of March 29, 2013. The senior secured credit agreement provides the Company the ability to prepay at any time, without penalty, and at its discretion for any reason, including maintaining compliance with covenants, and reducing the outstanding debt in direct order of maturity. During the first thirty-nine weeks of fiscal year 2013, the Company made a prepayment of $6.0 million.

Due to the continued declining operating performance and limited visibility on future liquidity, our Board of Directors determined that, in order to preserve cash, the Company would not make a voluntary prepayment on its outstanding indebtedness under the 2008 Credit Facility that would have been due on or before March 29, 2013 to maintain financial covenant compliance. A voluntary prepayment of $4.0 million would have been required to maintain financial covenant compliance. Accordingly, the Company is in violation of the Net Senior Debt to EBITDA financial covenant under its 2008 Credit Facility and has received a Default Notice from the Lenders Agent. The Default Notice states that the lenders are not required to make further loans or incur further obligations under the revolving loan portion of 2008 Credit Facility and are entitled to exercise any and all default-related rights and remedies under the 2008 Credit Facility. The Company continues to engage in active and continuing discussions with its lenders.

All obligations under the 2008 Credit Facility are unconditionally guaranteed by the immediate holding Company parent of DynaVox Systems LLC and each of DynaVox Systems LLC’s existing and future wholly-owned domestic subsidiaries. The 2008 Credit Facility and the related guarantees are secured by substantially all of DynaVox Systems LLC’s present and future assets and all present and future assets of each guarantor on a first lien basis. In the event of an acceleration of our obligations and our failure to pay the amount that would then become due, the holders of the 2008 Credit Facility could seek to foreclose on our assets, as a result of which we would likely need to seek protection under the provisions of the U.S. Bankruptcy Code. In that event, we could seek to reorganize our business, or the Company or a trustee appointed by the court could be required to liquidate our assets. In either of these events, whether the stockholders receive any value for their shares is highly uncertain. If we needed to liquidate our assets, we might realize significantly less from them than the value that could be obtained in a transaction outside of a bankruptcy proceeding. The funds resulting from the liquidation of our assets would be used first to pay off the debt owed to secured and unsecured creditors, including the lenders under the 2008 Credit Facility, before any funds would be available to pay our stockholders. If we are required to liquidate under the federal bankruptcy laws, it is unlikely that stockholders would receive any value for their shares.

As a result of this default, we have reclassified on our balance sheet amounts previously shown as long-term debt under the 2008 Credit Facility to short-term debt.

Subsequent to March 29, 2013, in connection with our default under the 2008 Credit Facility, the financial institution that maintains our general cash operating accounts extended the float period on incoming receipts. Generally, the float period was 1 to 2 days and now will be 4 to 6 days. This is not expected to have a material impact on our liquidity.

Our condensed consolidated financial statements included elsewhere in this Quarterly Report have been prepared assuming that we will continue as a going concern; however, our default under the 2008 Credit Facility and the continuing decline of our operating performance and cash flows raise substantial doubt about our ability to do so. Other than described above, our financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

The inability to refinance or restructure our debt would have a material adverse effect on the solvency of the Company and our ability to continue as a going concern. See “Part II – Item 1A – Risk Factors – We are in default under our 2008 Credit Facility and our lenders have the right to accelerate our obligations at any time, which raises substantial doubt about our ability to continue as a going concern.”

We may require additional liquidity as we continue to execute our business strategy, which may not be available to us.

Cash Flow

A summary of cash flows from operating, investing and financing activities for the periods indicated are shown in the following table:

	Twenty-six Weeks Ended
	Thirty-nine Weeks Ended
	December 28,2012			December 30,2011
	March 29,2013			March 30,2012
	(Amounts in thousands)
Cash flow summary
Provided by operating activities	$	34,~~106~~272		$	912,~~469~~801
Used in investing activities		(~~114~~268	)		(~~284~~372	)
Used in financing activities		(67,~~840~~788	)		(12,~~234~~383	)
Effect of exchange rate changes on cash		30(51	)		(~~102~~58	)
Increase (decrease)	$	(3,~~818~~835	)	$	79,~~849~~988

Operating Activities

Our operations consist of all the activities required to provide products to our customers. The net cash provided by these activities is dependent upon the timing of receipt of payment from our private pay and publicly funded customers and the timing of payment to our vendors, employees, taxing authorities and landlord, among others.

~~The~~33 principal factors impacting net cash provided by operating activities are the operation of our business and the management of our working capital as shown below for the twenty-six week periods ended December 28, 2012 and December 30, 2011:

	Twenty-six Weeks Ended
	December 28,2012			December 30,2011
	(Amounts in thousands)
Operating activities
Net income	$	214		$	3,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,023			2,385
Equity-based compensation expense		799			1,129
Bad debt expense		733			1,301
Change in fair value of acquisition contingencies		9			4
Deferred taxes		233			495
Gain (loss) on disposal of assets		2			(6	)
		4,013			8,779
Changes in operating assets and liabilities		(907	)		690
Net cash provided by operating activities	$	3,106		$	9,469

The principal factors impacting net cash provided by operating activities are the operation of our business and the management of our working capital as shown below for the thirty-nine week periods ended March 29, 2013 and March 30, 2012:


	Thirty-nine Weeks Ended
	March 29,			March 30,
	2013			2012
	(Amounts in thousands)
Operating activities
Net loss	$	(8,468	)	$	(48,470	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,931			3,516
Equity-based compensation expense		1,088			1,672
Bad debt expense		1,402			1,928
Change in fair value of acquisition contingencies		10			27
Deferred taxes		49,925			(6,925	)
Change in payable to related tax receivable agreement		(44,459	)		—
Gain (loss) on disposal of assets		69			(68	)
Impairment loss		1,994			62,107

		4,492			13,787
Changes in operating assets and liabilities		(220	)		(986	)

Net cash provided by operating activities	$	4,272		$	12,801

The most significant components of changes in operating assets and liabilities are trade receivables, inventories; trade accounts payable and accrued expenses and other current liabilities as shown below:

	Twenty-six Weeks Ended
	Thirty-nine Weeks Ended
	December 28,2012			December 30,2011
	March 29,			March 30,
	2013			2012
	(Amounts in thousands)
Changes in operating assets and liabilities details:
Trade receivables	$	2,~~041~~653		$	31,~~006~~777
Inventories		~~870~~1,964			(~~174~~175	)
Trade accounts payable		(12,~~420~~108	)		(1,~~830~~752	)
Accrued expenses and other current liabilities		(13,~~940~~071	)		(~~819~~1,737	)
Other		~~(458~~342	)		~~507~~901
Changes in operating assets and liabilities	$	(~~907~~220	)	$	~~690~~(986	)

Our net cash provided by operating activities for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 2829, ~~2012~~2013 was $34.13 million compared to $912.58 million for the ~~twenty~~thirty-~~six~~nine week period ended ~~December~~March 30, ~~2011~~2012. The $68.45 million net decrease consisted primarily of $38.63 million of lower net income (after adjusting for ~~depreciation~~impairment loss, depreciation and amortization and deferred taxes in both periods), a $0.65 million reduction in bad debt expense and $0.36 million less in equity-based compensation and ana ~~unfavorable~~favorable change in the net components of operating assets and liabilities of $10.68 million.

Investing Activities

Investing activities for the ~~twenty~~thirty-~~six~~nine week periods ended ~~December~~March 2829, ~~2012~~2013 and ~~December~~March 30, ~~2011~~2012 consisted mainly of capital expenditures.

	Twenty-six Weeks Ended
	Thirty-nine Weeks Ended
	December 28,2012			December 30,2011
	March 29,2013			March 30,2012
	(Amounts in thousands)
Investing activities
Capital expenditures	$	(~~114~~277	)	$	(~~296~~452	)
Proceeds from sale of property and equipment		—9			1280
Net cash used in investing activities	$	(~~114~~268	)	$	(~~284~~372	)

~~Cash~~34 ~~used in investing activities was $0.1 million in the first half of fiscal year 2013 compared to $0.3 million in the first half of fiscal year 2012.~~

Management anticipates that capital expenditures during fiscal year 2013 will be approximately $0.5 million of which $0.1 million have already been incurred.

Financing Activities

Net cash used in financing activities was $6.8 million in the twenty-six week period ended December 28, 2012 compared to $1.2 million in the twenty-six week period ended December 30, 2011. Cash used in financing activities consists primarily of shareholder distributions, payment of acquisition contingencies and repayments of our outstanding indebtedness.

	Twenty-six Weeks Ended
	December 28,2012			December 30,2011
	(Amounts in thousands)
Financing activities
Payment on acquisition contingencies	$	(198	)	$	(654	)
Equity distributions		(642	)		(573	)
Repayment of debt agreements		(6,000	)		—
Redemption of management and common units		—			(7	)
Net cash used in financing activities	$	(6,840	)	$	(1,234	)

The $5.6 million increase in cash used in financing activities was primarily a result of $6.0 million in voluntary debt repayments during the twenty-six weeks ended December 28, 2012 compared to no debt repayment during the twenty-six weeks ended December 30, 2011.

Cash used in investing activities was $0.3 million in the first thirty-nine weeks of fiscal year 2013 compared to $0.4 million in the same period of fiscal year 2012.

Management anticipates that capital expenditures during fiscal year 2013 will be approximately $0.4 million of which $0.3 million have already been incurred.

Financing Activities

Net cash used in financing activities was $7.8 million in the thirty-nine week period ended March 29, 2013 compared to $2.4 million in the thirty-nine week period ended March 30, 2012. Cash used in financing activities consists primarily of shareholder distributions, payment of acquisition contingencies and repayments of our outstanding indebtedness.


	Thirty-nine Weeks Ended
	March 29, 2013			March 30, 2012
	(Amounts in thousands)
Financing activities
Payment on acquisition contingencies	$	(270	)	$	(976	)
Equity distributions		(1,517	)		(1,400	)
Repayment of debt agreements		(6,000	)		0
Redemption of management and common units		(1	)		(7	)

Net cash used in financing activities	$	(7,788	)	$	(2,383	)

The $5.4 million increase in cash used in financing activities was primarily a result of $6.0 million in voluntary debt repayments during the thirty-nine weeks ended March 29, 2013 compared to no debt repayment during the thirty-nine weeks ended March 30, 2012 offset by a $0.7 million reduction in payments on acquisition contingencies.

Financing Agreements

As discussed above, as of ~~December~~March 2829, ~~2012~~2013, we were not in compliance inwith ~~all~~the ~~material~~Net ~~respects~~Senior ~~with~~Debt ~~all~~to EBITDA ratio of our financial covenants contained in our ~~financing~~2008 ~~agreements~~Credit Facility, as amended. ~~The~~Accordingly, we ~~current~~have ~~scheduled~~received ~~payments~~a ~~under~~Default ~~the~~Notice ~~senior~~that ~~credit facility~~states ~~require~~that the ~~Company~~lenders are not required to ~~pay~~make ~~$0.8~~further ~~million~~loans onor ~~September~~incur ~~30,~~further ~~2013~~obligations ~~and~~under ~~three~~the ~~equal~~revolving ~~quarterly~~loan ~~installments~~portion of ~~$8.1~~our ~~million~~2008 ~~beginning~~Credit onFacility ~~December~~and ~~31,~~are ~~2013~~entitled to exercise any and all default-related rights and remedies under the agreement.

Senior Secured Credit Facility

DynaVox Systems LLC, a wholly-owned subsidiary of DynaVox Systems Holdings LLC, entered into a third amended and restated senior secured credit facility (2008 Credit Facility), dated as of June 23, 2008, with a syndicate of financial institutions, including GE Business Financial Services Inc. (formerly known as Merrill Lynch Business Financial Services Inc.), as administrative agent. OnThe ~~February 5,~~2008 ~~2010,~~Credit ~~certain terms of our credit facility were amended to~~Facility, ~~among other items, increase our available revolving loans and letters of credit and increase the amount available for restricted distributions,~~ as ~~defined in the credit facility. The credit facility, as so~~ amended, provides for a $52.0 million term loan facility that matures on June 23, 2014 and a revolving credit facility with a $12.9 million aggregate loan commitment amount available, including a $5.0 million sub-facility for letters of credit and a $2.0 million sub-facility for swingline loans, that matures on June 23, 2013. As of ~~December~~March 2829, ~~2012~~2013, $25.2 million was outstanding under the term loan facility and there were no borrowings outstanding or funds available under the revolving credit facility.

OnIn ~~March 4~~general, ~~2010,~~borrowings weunder ~~entered~~the ~~into~~2008 aCredit ~~second~~Facility ~~amendment~~bear tointerest, at our ~~credit facility~~option, ~~which~~at ~~became~~either ~~effective~~(1) the Base Rate (as defined in ~~April 2010.~~the As2008 ~~part~~Credit ofFacility) ~~the~~plus ~~amendment,~~a ~~the~~margin ~~agent~~of ~~and~~between 3.00-3.75% (depending on the ~~lenders~~ratio ~~under~~of ~~our~~net ~~credit~~total ~~facility consented~~debt to ~~DynaVox~~Adjusted ~~Systems~~EBITDA ~~Holdings~~(as ~~LLC’s~~defined ~~transfer~~in ofthe ~~all~~2008 ofCredit ~~its~~Facility)), ~~obligations~~or ~~under~~(2) a ~~the~~rate ~~credit~~based ~~facility~~on toLIBOR plus a ~~newly~~margin ~~formed~~of ~~wholly~~between 4.00-~~owned~~4.75% ~~subsidiary~~(depending on the ratio of ~~DynaVox~~net ~~Systems~~total ~~Holdings~~debt ~~LLC~~to ~~that~~Adjusted ~~became~~EBITDA). ~~the~~We ~~immediate~~incur ~~holding~~an ~~company~~annual ~~parent~~commitment fee of ~~DynaVox Systems LLC~~0.375% ~~The~~or ~~lenders~~0.5% ~~further~~(depending ~~waived~~on the ~~requirement~~ratio of ~~any~~net ~~prepayment~~total debt to Adjusted EBITDA) of the ~~credit~~unused ~~facility~~portion ~~with~~of ~~proceeds~~the ~~from~~revolving ~~our~~credit ~~IPO~~facility. ~~and~~Such borrowing ~~consented~~rates could be increased to the ~~repayment~~default inrate ~~full~~ of our ~~senior~~current ~~subordinated~~rate ~~notes~~plus ~~and~~2% ~~the~~as ~~indebtedness~~a ~~outstanding~~result ~~under~~of ~~certain~~our ~~other notes~~non-compliance ~~payable~~ with ~~proceeds~~our ~~from~~Net ~~our~~Senior ~~IPO~~Debt to EBITDA ratio covenant as of March 29, 2013.

OnCommencing ~~December~~on September 2130, ~~2010,~~2008 weand ~~entered~~ending ~~into~~on aJune 23, ~~third~~2014, ~~amendment~~on tothe ~~our~~last ~~credit~~date ~~facility which became effective immediately. As part~~ of ~~the~~each ~~amendment~~quarter, ~~the~~we ~~agent~~are ~~and~~required ~~the~~to ~~lenders~~repay borrowings under ~~our credit facility consented to~~ the ~~modification~~term ofloan ~~the~~facility ~~calculation~~in ofincreasing ~~the~~percentages ~~Fixed~~per ~~Charge~~year, ~~Coverage~~beginning ~~Ratio~~at ~~(as~~2.5%, ~~defined~~with ~~below) for~~ the ~~12-month~~remaining ~~period~~balance ~~ended December 31, 2010~~ to ~~exclude~~be ~~from~~repaid ~~the~~on ~~definition of restricted cash distributions a $10.0 million distribution made by~~ the ~~Company~~applicable inmaturity ~~March 2010~~date. InIf ~~addition,~~our ~~the~~ratio ~~third amendment modified the calculation~~ of ~~the ratios of~~ net ~~senior debt to Adjusted EBITDA and net~~ total debt to Adjusted EBITDA byas ~~limiting~~of the ~~ability~~end of ~~the~~any ~~Company~~fiscal year tois ~~net~~greater ~~cash~~than ~~and~~or ~~cash~~equal ~~equivalents~~to ~~from~~1.50 ~~total~~to ~~debt~~1.00, ~~and~~the ~~senior~~2008 ~~debt~~Credit toFacility ~~only~~requires ~~any~~a ~~12-month~~mandatory ~~period~~prepayment in ~~which~~an ~~Adjusted~~amount ~~EBITDA~~equal ~~for~~to ~~such~~between ~~period is greater than $30~~25.0 ~~million,~~-75.0% ~~whereupon~~(depending on the ~~amount~~ratio of ~~cash~~net ~~and~~total ~~cash~~debt ~~equivalents~~to ~~that~~Adjusted ~~may~~EBITDA) beof soExcess ~~netted~~Cash isFlow ~~limited~~(as todefined ~~$5.0~~in ~~million. The~~ the credit facility) ~~was~~for ~~further~~such ~~amended~~fiscal byyear. ~~requiring~~No ~~the~~mandatory ~~Company~~prepayment towas ~~provide~~required ~~the~~for ~~agent~~fiscal ~~and~~year ~~lenders~~2012 ~~monthly~~as ~~financial~~a ~~statements~~result ~~within 30 days~~ of the ~~end~~$5.0 ofmillion ~~each~~voluntary ~~month~~debt ~~commencing~~repayment ~~with~~made ~~the~~on ~~month ended November~~June 3029, ~~2010~~2012.

On35 December 14, 2011, we entered into a fourth amendment to our credit facility which became effective immediately. The amendment modified the calculation of the ratios of net senior debt to Adjusted EBITDA and net total debt to Adjusted EBITDA by allowing us to utilize cash and cash equivalents of up to $5.0 million to reduce total debt and senior debt and to derive net senior debt and net total debt without the imposition of additional conditions or requirements. The amendment also allows DynaVox Systems LLC to make a restricted payment of a maximum of $5.0 million in the aggregate to DynaVox Inc. to repurchase shares of its equity interests provided that before and after giving effect to such restricted payment, no event of default shall have occurred and be continuing. Prior to any repurchase of its shares, DynaVox Inc. intends to seek approval from its Board of Directors. No such approval has been sought or received at this time.

All obligations under the credit facility are unconditionally guaranteed by the immediate holding company parent of DynaVox Systems LLC and each of DynaVox Systems LLC’s existing and future wholly-owned domestic subsidiaries. The credit facility and the related guarantees are secured by substantially all of DynaVox Systems LLC’s present and future assets and all present and future assets of each guarantor on a first lien basis.

In general, borrowings under the credit facility bear interest, at our option, at either (1) the Base Rate (as defined in the credit facility) plus a margin of between 3.00-3.75% (depending on the ratio of net total debt to Adjusted EBITDA (as defined in the credit facility)), or (2) a rate based on LIBOR plus a margin of between 4.00-4.75% (depending on the ratio of net total debt to Adjusted EBITDA). We incur an annual commitment fee of 0.375% or 0.5% (depending on the ratio of net total debt to Adjusted EBITDA) of the unused portion of the revolving credit facility.

No principal payments will be due on the revolving credit facility until the applicable maturity date. Commencing on September 30, 2008 and ending on June 23, 2014, on the last date of each quarter, we are required to repay borrowings under the term loan facility in increasing percentages per year, beginning at 2.5%, with the remaining balance to be repaid on the applicable maturity date. If our ratio of net total debt to Adjusted EBITDA as of the end of any fiscal year is greater than or equal to 1.50 to 1.00, the credit facility requires a mandatory prepayment in an amount equal to between 25.0-75.0% (depending on the ratio of net total debt to Adjusted EBITDA) of Excess Cash Flow (as defined in the credit facility) for such fiscal year. No mandatory prepayment was required for fiscal year 2012 as a result of the $5.0 million voluntary debt repayment made on June 29, 2012.

The ~~credit~~2008 ~~facility~~Credit Facility requires DynaVox Systems LLC to maintain certain financial ratios at the end of each fiscal quarter. These include a maximum ratio of ~~net~~Net ~~senior~~Senior ~~debt~~Debt to Adjusted EBITDA for the preceding twelve-month period of 2.00 to 1.00, a maximum ratio of net total debt to Adjusted EBITDA for the preceding twelve-month period of 4.00 to 1.00 and ana ~~original~~ minimum Fixed Charge Coverage Ratio for the preceding twelve-month period of 1.~~20 to 1.00, which minimum Fixed Charge Coverage Ratio increased to 1.25 to 1.00 as of the last day of the first quarter of fiscal year 2012 and then increased to 1.~~30 to 1.00 ~~as of the last day of the first quarter of fiscal year 2013~~. In addition, the credit facility provides for a maximum amount of Capital Expenditures in each fiscal year. The Capital Expenditures limit for fiscal year 2013 is $12.5 million which includes a $5.5 million carryover from the prior fiscal year.

AsThe ratio of Net ~~December 28,~~Senior ~~2012,~~Debt to Adjusted EBITDA for a twelve-month period is calculated by dividing Net Senior Debt as of the last day of such twelve-month period (calculated by subtracting the aggregate amount of subordinated debt permitted under the 2008 Credit Facility from net total debt (as defined below)) by Adjusted EBITDA for such twelve-month period. The ratio of net ~~senior~~total debt to Adjusted EBITDA for ~~the~~a twelve-month period ~~then~~is ~~ended~~calculated ~~was~~by ~~1.62~~dividing tonet ~~1.00,~~total debt as of the ~~ratio~~last day of ~~net~~such twelve-month period by Adjusted EBITDA for such twelve-month period. Net total debt tois ~~Adjusted~~defined ~~EBITDA~~as the sum of the average daily principal balance under the revolving credit facility for the ~~twelve~~one-month period ~~then~~ending ~~ended~~on ~~was~~such 1date plus the outstanding principal balance of the term loan under the 2008 Credit Facility plus the outstanding principal balance of all other debt.62 Net total debt may be reduced by up to 1$5.000 million of cash and ~~the~~cash ~~Fixed~~equivalents. ~~Charge~~As ~~Coverage~~of ~~Ratio~~March 29, 2013, Net Senior Debt and net total debt were both $20.2 million and Adjusted EBITDA for the twelve-month period then ended was 2$8.451 tomillion, 1and as discussed below, the Company was in default.~~00.~~

The ~~ratio~~Fixed ofCharge ~~net~~Coverage ~~senior~~Ratio ~~debt to Adjusted EBITDA for a twelve-month period~~ is calculated by dividing ~~net~~operating ~~senior~~cash ~~debt~~flow asby of the ~~last~~sum ~~day~~ of ~~such~~cash ~~twelve-month~~interest ~~period~~expense (~~calculated~~net byof ~~subtracting~~interest ~~the~~income), ~~aggregate~~net ~~amount~~cash oftaxes ~~subordinated~~paid, ~~debt~~scheduled ~~permitted~~principal ~~under~~payments ~~the~~on ~~credit~~all ~~facility~~debt and ~~from~~restricted ~~net~~cash ~~total~~distributions ~~debt~~ (aswhich ~~defined~~items ~~below))~~totaled by$4.9 ~~Adjusted~~million ~~EBITDA~~ for ~~such~~the twelve~~-month~~ ~~period.~~months ~~The~~ended ~~ratio~~March 29, of2013). ~~net~~Operating ~~total~~cash ~~debt~~flow ~~to Adjusted EBITDA for a twelve-month period~~ is ~~calculated~~defined ~~by dividing net total debt~~ as ~~of the last day of such twelve-month period by~~ Adjusted EBITDA for ~~such~~a twelve-month period. ~~Net~~less ~~total debt~~any isunfinanced ~~defined~~capital asexpenditures ~~the sum of the average daily principal balance under the revolving credit facility~~ for ~~the one~~such twelve-month period ~~ending on such date plus the outstanding principal balance of the term loan under the credit facility plus the outstanding principal balance of all other debt~~. ~~Net~~Operating ~~total debt may be reduced by up to $5.0 million of~~ cash ~~and~~flow ~~cash equivalents. As of December 28, 2012, net senior debt and net total debt were both $20.2 million and Adjusted EBITDA~~ for the twelve~~-month period~~ ~~then~~months ended March 29, 2013 was $127.58 million.

~~The~~Capital Expenditures ~~Fixed~~are ~~Charge Coverage Ratio is~~ calculated bybased ~~dividing~~on the ~~sum~~amount ofcapitalized ~~cash~~during ~~interest expense~~the ~~(net~~fiscal ofyear ~~interest~~less ~~income),~~ net cash ~~taxes~~proceeds ~~paid,~~of ~~scheduled~~asset ~~principal~~dispositions ~~payments~~or onproceeds ~~all~~from ~~debt~~property ~~and~~insurance ~~restricted~~policies ~~cash~~received ~~distributions~~during ~~(which items totaled $5.0 million for~~ the ~~twelve~~fiscal ~~months ended December 28, 2012) by operating cash flow~~year. ~~Operating cash~~Capital ~~flow~~Expenditures ~~is defined as Adjusted EBITDA~~ for athe ~~twelve~~first thirty-~~month~~nine ~~period~~weeks ~~less~~of ~~any~~fiscal ~~unfinanced~~year ~~capital~~2013, ~~expenditures~~as ~~for~~defined ~~such~~in ~~twelve-month period. Operating cash flow for~~ the ~~twelve months ended December 28~~agreement, ~~2012~~were ~~was~~ $120.23 million.

~~Capital~~As ~~Expenditures~~of ~~are~~March 29, ~~calculated~~2013, ~~based on~~ the ~~amount~~ratio of ~~capitalized~~Net ~~during~~Senior ~~the~~Debt ~~fiscal~~to ~~year~~Adjusted ~~less~~EBITDA ~~net~~for ~~cash~~the ~~proceeds~~twelve-month ofperiod ~~asset~~then ~~dispositions or~~ended ~~proceeds~~was ~~from~~2.49 ~~property~~to ~~insurance~~1.00, ~~policies~~the ~~received~~ratio ~~during~~of ~~the~~net ~~fiscal~~total ~~year.~~debt ~~Capital~~to ~~Expenditures~~Adjusted EBITDA for the ~~first twenty~~twelve-~~six~~month ~~weeks~~period ofthen ~~fiscal~~ended ~~year~~was ~~2013,~~2.49 asto ~~defined~~1.00 inand the ~~agreement,~~Fixed ~~were~~Charge ~~$0.~~Coverage Ratio for the twelve-month period then ended was 1.57 ~~million~~to 1.00.

~~Our~~We ~~ability~~are toin ~~maintain~~violation ~~our~~of ~~compliance~~the ~~with~~Net ~~these~~Senior ~~covenants~~Debt isto ~~dependent~~EBITDA ~~upon our~~ financial ~~performance~~covenant and, accordingly, ~~which~~have isreceived ~~influenced by~~ a ~~number of~~Default ~~factors,~~Notice ~~including~~from the ~~levels~~Lenders ofAgent. ~~government~~The ~~funding~~Default inNotice states that the ~~U.S.~~lenders ~~and~~are ~~key~~not ~~international~~required ~~markets.~~to ~~Violation~~make offurther ~~any~~loans or incur further obligations under the revolving loan portion of the ~~covenants~~2008 ~~described~~Credit ~~above~~Facility ~~would~~and ~~result~~are entitled into anexercise ~~event~~any ofand all default-related rights and remedies under the ~~credit~~2008 ~~facility~~Credit Facility. The Company continues to engage in active and continuing discussions with its lenders.

~~The~~In ~~credit~~connection ~~facility~~with ~~also~~our ~~contains~~ongoing ~~affirmative~~discussions with the lenders, in April 2013, the Company engaged a financial and ~~negative~~strategic ~~covenants~~adviser ~~customarily~~to assist ~~found~~it inwith ~~loan~~an ~~agreements~~assessment ~~for~~of ~~similar~~its ~~transactions~~operating cash flow and strategic alternatives. There can be no assurance that we can reach a resolution with the lenders, obtain sufficient financing or enter into other transactions to satisfy our obligations in ~~including~~a timely manner, ~~but~~or ~~not~~at ~~limited~~all. If we are unable to, ~~restrictions~~resolve onour situation with our ~~ability~~lenders and/or to ~~incur~~raise ~~indebtedness~~sufficient additional funds, ~~create~~we ~~liens~~would onbe ~~assets,~~required ~~incur~~to ~~certain~~reduce ~~contingent~~operating ~~obligations~~expenses by, ~~engage~~among inother ~~mergers~~things, curtailing significantly or ~~consolidations,~~delaying ~~change~~or eliminating ~~the~~part ~~nature~~or all of our ~~business~~new product development programs and/or scaling back our commercial operations. In addition, ~~dispose~~at ofany ~~assets~~time, ~~make~~the ~~certain~~holders of 50% or more of the outstanding principal amount under the 2008 Credit Facility can accelerate our ~~investments,~~obligations ~~engage~~under inthe ~~transactions~~agreement ~~with~~and ~~affiliates,~~require ~~enter~~payment ~~into~~of ~~negative~~the ~~pledges,~~full ~~pay~~outstanding ~~dividends~~principal oramount ~~make~~plus ~~other~~accrued ~~restricted~~and ~~payments,~~unpaid ~~modify~~interest. ~~certain~~Also, ~~payments~~the orinterest ~~modify~~rate ~~certain~~on the debt ~~documents,~~could ~~and~~be ~~modify~~increased to the default rate of our ~~constituent~~current ~~documents~~rate ifplus ~~the~~2%. ~~modification~~We do not have ~~materially~~sufficient ~~adversely~~cash ~~affects~~resources to pay the ~~interests~~amount that would become payable in the event of an acceleration of these amounts, and even if we could obtain additional financing, it is unlikely that we could obtain an amount sufficient to repay the outstanding ~~lenders~~indebtedness under the 2008 Credit Facility in full.

~~The~~All ~~credit~~obligations ~~facility~~under ~~contains~~the ~~customary~~2008 ~~events~~Credit Facility are unconditionally guaranteed by the immediate holding company parent of ~~default,~~DynaVox Systems LLC and each of DynaVox Systems LLC’s existing and future wholly-owned domestic subsidiaries. The 2008 Credit Facility and the related guarantees are secured ~~including~~by ~~defaults~~substantially ~~based~~all of DynaVox Systems LLC’s present and future assets and all present and future assets of each guarantor on a first lien basis. In the event of an acceleration of our obligations and our failure to pay ~~principal,~~the ~~reimbursement~~amount ~~obligations,~~that ~~interest~~would then become due, ~~fees~~the orholders ~~other~~of ~~obligations~~the 2008 Credit Facility could seek to foreclose on our assets, as a ~~material~~result ~~inaccuracy~~ of ~~representations~~which ~~and~~we ~~warranties;~~would ~~breach~~likely need to seek protection under the provisions of ~~covenants;~~the ~~failure~~U.S. toBankruptcy ~~pay~~Code. ~~other~~In ~~indebtedness~~that ~~and~~event, ~~cross defaults;~~we ~~failure~~could seek to ~~comply~~reorganize our ~~with~~business, ~~ERISA~~or the Company or ~~labor~~a ~~laws;~~trustee ~~change~~appointed by the court could be required to liquidate our assets. In either of ~~control~~these events;, ~~events~~whether ofthe ~~bankruptcy~~stockholders ~~and~~receive ~~insolvency;~~any ~~material~~value ~~judgments;~~for their shares is highly uncertain. If we needed to liquidate our assets, we might realize significantly less from them than the ~~passive~~value ~~holding~~that ~~company~~could ~~status~~be obtained in a transaction outside of ~~the~~a ~~immediate~~bankruptcy ~~holding~~proceeding. ~~company~~The ~~parent~~funds resulting from the liquidation of ~~DynaVox~~our ~~Systems~~assets ~~LLC~~would ~~and~~be ~~DynaVox~~used first to pay off the debt owed to ~~International~~secured ~~Holdings~~and unsecured creditors, ~~Inc.~~ including the lenders under the 2008 Credit Facility, abefore ~~wholly~~any ~~owned~~funds ~~subsidiary~~would ofbe ~~DynaVox~~available ~~Systems~~to ~~LLC;~~pay ~~and~~our anstockholders. ~~impairment~~If ofwe ~~collateral~~are required to liquidate under the federal bankruptcy laws, it is unlikely that stockholders would receive any value for their shares.

~~Upon the~~36 occurrence of an event of default, including in the event of non-compliance with the financial ratios described above, the lenders would have the ability to accelerate all amounts then outstanding under the credit facility, except that, upon bankruptcy and insolvency events of default, such acceleration is automatic. Upon the occurrence, and during the continuance, of an event of default under the credit facility, we would no longer have access to our revolving credit facility and we would have to reclassify on our balance sheet amounts currently shown as long-term debt under the credit facility to short-term debt. Under these circumstances, we may not be able to pay our debt or borrow sufficient funds to refinance it on terms that are acceptable to us or at all.

The 2008 Credit Facility also contains affirmative and negative covenants customarily found in loan agreements for similar transactions, including, but not limited to, restrictions on our ability to incur indebtedness, create liens on assets, incur certain contingent obligations, engage in mergers or consolidations, change the nature of our business, dispose of assets, make certain investments, engage in transactions with affiliates, enter into negative pledges, pay dividends or make other restricted payments, modify certain payments or modify certain debt documents, and modify our constituent documents if the modification materially adversely affects the interests of the lenders.

The 2008 Credit Facility contains customary events of default, including defaults based on a failure to pay principal, reimbursement obligations, interest, fees or other obligations, a material inaccuracy of representations and warranties; breach of covenants; failure to pay other indebtedness and cross defaults; failure to comply with ERISA or labor laws; change of control events; events of bankruptcy and insolvency; material judgments; the passive holding company status of the immediate holding company parent of DynaVox Systems LLC and DynaVox International Holdings, Inc., a wholly owned subsidiary of DynaVox Systems LLC; and an impairment of collateral.

Upon the occurrence of an event of default, including in the event of non-compliance with the financial ratios described above, the lenders have the ability to accelerate all amounts then outstanding under the 2008 Credit Facility, except that, upon bankruptcy and insolvency events of default, such acceleration is automatic. Upon the occurrence, and during the continuance, of an event of default under the 2008 Credit Facility, as is currently the case, we no longer have access to our revolving credit facility and we have to reclassify on our balance sheet amounts currently shown as long-term debt under the credit facility to short-term debt. Accordingly, we have reclassified on our balance sheet amounts previously shown as long-term debt under the 2008 Credit Facility to short-term debt.

If we are unable to refinance or restructure our debt, we would have a material adverse effect on our solvency and ability to continue as a going concern. See “Part II – Item 1A – Risk Factors – We are in default under our 2008 Credit Facility and our lenders have the right to accelerate our obligations at any time, which raises substantial doubt about our ability to continue as a going concern.”

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements requires estimates and judgments that affect the reported amounts of our assets, liabilities, revenue and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies consist of revenue recognition, trade receivables and related allowances, intangible assets, equity-based compensation, and deferred tax asset valuation, descriptions of which are included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2012, filed with the Securities and Exchange Commission (the “SEC”) on September 26, 2012.

Off- Balance Sheet Arrangements

We are not a party to any off- balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information regarding quantitative and qualitative disclosures about market risk is not required pursuant to Item 305(e) of Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~December~~March 2829, ~~2012~~2013. ~~The~~ The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are ~~designed~~ designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated ~~and~~ and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~Management~~38 recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 28, 2012, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended December 28, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 29, 2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Management has not identified any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended March 29, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

As of the date of this report, there were no material proceedings underway. In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation. In management’s opinion, resolution of those matters is not expected to have a material adverse impact on the Company’s results of operations, cash flows or its financial position. However, the results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially affect our results of operations, cash flows or financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 29, 2012 and our Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2012, which is updated as set forth below.

~~Our~~We ~~use~~are ofin ~~leverage may expose us to substantial risks, including an event of~~ default ifunder weour ~~cannot~~credit ~~restructure~~agreement orand ~~refinance~~ our lenders ~~debt.~~have Wethe ~~may~~right ~~not be able~~ to ~~make~~accelerate our ~~scheduled~~obligations ~~payments~~at ofany ~~outstanding~~time, ~~debt~~which ~~and~~raises ifsubstantial wedoubt ~~are~~about ~~unable to restructure or refinance this debt,~~ our ~~lenders~~ability ~~may~~to ~~seek~~continue ~~remedies~~as ~~under~~a angoing ~~event of default~~concern.

AsDue ofto ~~December~~the ~~28,~~continued ~~2012,~~declining weoperating ~~had~~performance anand ~~aggregate~~limited ofvisibility ~~$25.2~~on ~~million~~future ~~of long-term debt outstanding (including current installments)~~liquidity, ~~which consisted~~our ~~entirely~~Board of ~~borrowings~~Directors ~~under~~determined ~~our~~that, ~~$52.0~~in ~~million~~order ~~term~~to ~~loan~~preserve ~~under our senior secured credit facility. Moreover~~cash, wethe ~~had~~Company nowould ~~borrowings~~not ~~under~~make ~~our~~a ~~revolving~~voluntary prepayment ~~credit~~on ~~facility~~its asoutstanding ~~of December 28, 2012. We may incur additional~~ indebtedness inunder the ~~future.~~ ~~Scheduled~~2008 ~~payments~~Credit ~~under~~Facility ~~the~~that ~~senior~~would ~~credit~~have ~~facility~~been asdue ofon ~~December~~or ~~28,~~before ~~2012~~March 29, ~~require~~2013 ~~the~~to ~~Company~~maintain tofinancial ~~pay~~covenant $0compliance.8 ~~million~~A onvoluntary ~~September~~prepayment ~~30, 2013 and three equal quarterly installments~~ of $84.10 million ~~beginning~~would onhave ~~December~~been ~~31,~~required ~~2013. Unless net~~to ~~sales~~maintain ~~trends~~financial ~~that~~covenant wecompliance. ~~have~~Accordingly, ~~experienced~~the ~~since~~Company ~~2011~~is ~~improve~~in ~~over~~violation ~~the remainder~~ of ~~fiscal~~the ~~year~~Net ~~2013~~Senior ~~and~~Debt ~~into fiscal year 2014, we expect we will not have enough funds~~ to ~~make~~EBITDA ~~all~~financial ~~the~~covenant ~~scheduled~~under ~~quarterly~~its ~~payments~~2008 ~~beginning~~Credit ~~December~~Facility ~~31,~~and ~~2013~~has orreceived toa ~~make additional~~Default ~~prepayments~~Notice tofrom ~~maintain~~as ~~covenant compliance. While we have initiated~~ the ~~process~~Lenders ~~to either restructure, or refinance, our $25~~Agent.2 ~~million~~The ofDefault ~~outstanding~~Notice states ~~debt~~that ~~we are uncertain as of~~ the ~~date~~lenders ofare ~~this~~not ~~report~~required as to ~~our~~make ~~ability~~further toloans ~~restructure~~ or ~~refinance~~ ~~our~~incur ~~outstanding~~further ~~debt.~~obligations Ifunder ~~we cannot restructure or refinance~~ the ~~debt~~revolving weloan ~~may~~portion ~~incur an event~~ of ~~default within~~ the ~~next~~2008 ~~twelve~~Credit ~~months.~~Facility Inand ~~that~~are ~~event,~~entitled ~~we will be required~~ to ~~seek~~exercise anany ~~amendment~~and orall ~~waiver~~default-related ~~from~~rights ~~our~~and ~~lenders~~remedies under ~~our~~the ~~financing~~2008 ~~agreements~~Credit Facility. IfThe weCompany ~~are~~continues ~~unable~~ to ~~obtain~~engage anin ~~amendment~~active orand ~~waiver,~~continuing ~~the~~discussions ~~lenders~~with ~~would~~its ~~have the right to exercise remedies specified in the senior credit agreement~~lenders.

In ~~addition,~~connection wewith our ~~are~~ongoing ~~exposed~~discussions towith ~~other~~the ~~risks~~lenders, ~~associated~~in ~~with~~April 2013, the ~~use~~Company ofengaged ~~leverage.~~a ~~For~~financial ~~example,~~and astrategic ~~substantial~~adviser ~~portion~~to assist it with an assessment of ~~our~~its operating cash flow ~~could~~and strategic alternatives. There can be ~~required~~no ~~for debt~~assurance ~~service~~that ~~and,~~we ascan reach a resolution ~~result~~with the lenders, ~~would~~obtain ~~not~~sufficient befinancing ~~available~~or ~~for~~enter into other transactions to satisfy our ~~operations~~obligations in a timely manner, or ~~other~~at ~~purpose~~all. ~~Our~~If ~~leverage~~we ~~also~~are ~~makes~~unable itto ~~more~~resolve ~~difficult~~our ~~for~~situation uswith our lenders and/or to ~~withstand~~raise ~~adverse~~sufficient ~~economic~~additional funds, ~~conditions~~we orwould ~~business~~be ~~plan~~required ~~variances~~to reduce operating expenses by, toamong ~~take~~other ~~advantage~~things, curtailing significantly or delaying or eliminating part or all of our new ~~business opportunities,~~product development programs and/or toscaling ~~make~~back ~~necessary~~our ~~capital~~commercial ~~expenditures~~operations. ~~The~~In ~~existing~~addition, ~~senior~~at any ~~secured~~time, ~~credit~~holders ~~agreement~~of ~~contains~~50% ~~covenant~~or ~~restrictions~~more ~~that~~of ~~limit~~the ~~our~~outstanding ~~ability~~principal toamount ~~conduct~~under ~~our~~the ~~business,~~2008 ~~including~~Credit ~~restrictions~~Facility oncan accelerate our ~~ability~~obligations tounder ~~incur~~the ~~additional indebtedness.~~agreement ~~Our~~at ~~ability~~any totime ~~maintain~~and ~~our~~require ~~compliance~~payment ~~with~~of ~~these~~the ~~covenants~~full isoutstanding ~~dependent~~principal ~~upon~~amount ~~our~~plus ~~financial~~accrued ~~performance~~and unpaid interest. Also, ~~which~~the isinterest ~~influenced~~rates byon athe ~~number~~debt ofcould ~~factors,~~be ~~including~~increased to the ~~levels~~default rate of ~~government~~our ~~funding~~current inrate ~~the~~plus U2%.S. ~~and~~We ~~key~~do ~~international~~not ~~markets. Violation~~have ofsufficient ~~any~~cash ofresources ~~these~~to ~~covenants~~pay the amount that would ~~result~~become payable in anthe event of ~~default~~an acceleration of these amounts, and even if we could obtain additional financing, it is unlikely that we could obtain an amount sufficient to repay the outstanding indebtedness under the ~~credit~~2008 ~~facility~~Credit Facility in full.

~~Upon~~39 the occurrence of an event of default under our existing senior credit agreement, including in the event of non-compliance with the financial ratios required thereunder, the lenders would have the ability to accelerate all amounts then outstanding under the credit facility, except that, upon bankruptcy and insolvency events of default, such acceleration is automatic. Upon the occurrence, and during the continuance, of an event of default under the credit facility, we would no longer have access to our revolving credit facility and we would have to reclassify on our balance sheet amounts currently shown as long-term debt under the 2008 Credit Facility to short-term debt. Under these circumstances, we may not be able to pay our debt or borrow sufficient funds to refinance it on terms that are acceptable to us or at all. For a more detailed discussion of our senior secured credit facility, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Agreements.”

IfAll obligations under the ~~market~~2008 ~~price~~Credit Facility are unconditionally guaranteed by the immediate holding Company parent of ~~our~~DynaVox ~~common~~Systems LLC ~~stock~~and iseach ~~not~~of ~~quoted~~DynaVox Systems LLC’s existing and future wholly-owned domestic subsidiaries. The 2008 Credit Facility and the related guarantees are secured by substantially all of DynaVox Systems LLC’s present and future assets and all present and future assets of each guarantor on a ~~national~~first ~~exchange,~~lien basis. In the ~~market~~event ~~price~~of an acceleration of our ~~common~~ ~~stock~~obligations and our ~~reputation~~failure ~~may~~to bepay ~~negatively~~the ~~impacted~~amount ~~and~~that would then become due, the holders of the 2008 Credit Facility could seek to foreclose on our ~~ability~~assets, as a result of which we would likely need to ~~raise~~seek ~~future~~protection ~~capital~~under ~~may~~the beprovisions ~~impaired~~of the U.S. Bankruptcy Code. In ~~addition~~that event, inwe ~~light~~could ofseek ~~not~~to ~~being~~reorganize ~~quoted~~our onbusiness, or the Company or a ~~national~~trustee ~~exchange,~~appointed by the court could be required to liquidate our ~~Board~~assets. ~~may~~In ~~deregister~~either of these events, whether the stockholders receive any value for their shares is highly uncertain. If we needed to liquidate our ~~Class~~assets, Awe ~~common~~might ~~stock~~realize significantly ~~which~~less from them than the value that could be obtained in a transaction outside of a bankruptcy proceeding. The funds resulting from the liquidation of our assets would be used first to pay off the debt owed to secured and unsecured ~~suspend~~creditors, including the lenders under the 2008 Credit Facility, before any funds would be available to pay our ~~SEC~~stockholders. ~~reporting~~If ~~requirements~~we are required to liquidate under the federal bankruptcy laws, it is unlikely that stockholders would receive any value for their shares.

~~The~~While ~~Company~~we ~~has~~believe ~~received~~that ~~written~~our ~~notices~~current ~~from~~cash ~~The~~resources, ~~NASDAQ~~together ~~Stock~~with ~~Market~~anticipated ~~LLC~~revenues from product sales, ~~(“NASDAQ”)~~would ~~indicating~~be ~~that~~sufficient ~~the~~to ~~Company~~fund isour operations, they are not insufficient ~~compliance~~to ~~with~~fund both our operations and full repayment of the $1outstanding principal under the 2008 Credit Facility.00 ~~minimum~~In ~~bid~~addition, ~~price~~we ~~and~~have based this estimate on assumptions that may prove to be wrong, including assumptions with respect to the $5level ~~million~~of ~~minimum~~revenues ~~market~~from ~~value~~sales of ~~publicly~~new ~~held~~products ~~shares~~currently ~~(“MVPHS”)~~under ~~requirements~~development, ~~for~~and ~~continued~~we ~~listing~~could onexhaust ~~the~~our ~~NASDAQ~~available ~~Global~~financial ~~Select~~resources sooner than we currently expect. The sufficiency of our current cash ~~Market~~resources, asand ~~set~~our ~~forth~~need infor ~~Listing~~additional ~~Rules~~capital ~~5450(a)(1)~~ and ~~5450(b)(1)(C)~~the timing thereof, ~~respectively~~will depend on many factors, including primarily the amount of revenues that we receive from sales of these new products.

InAs ~~accordance with Listing Rule 5810(c)(3)(A), the Company has~~ a ~~grace~~result ~~period~~ of ~~180~~this ~~calendar days~~default, orwe ~~until~~have ~~April 1,~~reclassified ~~2013,~~on toour ~~regain~~balance ~~compliance~~sheet ~~with~~amounts ~~the~~previously ~~minimum~~shown ~~bid~~as ~~price~~long-term ~~requirement.~~debt Tounder ~~regain compliance,~~ the ~~closing~~2008 ~~bid price of the Company’s Class A common stock~~Credit ~~must~~Facility ~~meet~~to orshort-term ~~exceed $1~~debt.00 ~~per~~Our ~~share~~consolidated ~~for~~financial atstatements ~~least~~included ~~ten~~elsewhere ~~consecutive~~in ~~business~~this ~~days~~Quarterly ~~during~~Report ~~this~~have ~~180-day~~been ~~grace~~prepared ~~period.~~assuming Ifthat ~~the~~we ~~Company~~will iscontinue ~~not~~as ina ~~compliance~~going byconcern; ~~April 1~~however, ~~2013,~~our ~~the~~default ~~Company~~under ~~may~~the be2008 ~~afforded~~Credit aFacility ~~second~~and ~~180 calendar day grace period if it~~the ~~transfers~~continuing ~~the~~decline ~~listing~~ of ~~its~~our ~~Class A~~operating ~~common~~performance ~~stock~~and tocash ~~The~~flows ~~NASDAQ~~raise ~~Capital~~substantial ~~Market.~~doubt Toabout ~~qualify,~~our ~~the~~ability ~~Company would be required~~ to ~~meet~~do ~~the~~so. ~~continued~~Other ~~listing~~than ~~requirement~~described ~~for~~above, ~~market~~our ~~value~~financial ofstatements ~~publicly~~do ~~held~~not ~~shares~~include ~~and~~any ~~all~~adjustments ~~other~~to ~~initial~~reflect ~~listing~~the ~~standards for~~possible ~~The~~future ~~NASDAQ~~effects ~~Capital~~on ~~Market, except for~~ the recoverability ~~minimum~~and ~~bid~~classification ~~price.~~of Inassets ~~addition,~~or the ~~Company~~amounts ~~would~~and beclassification ~~required to notify NASDAQ~~ of ~~its~~liabilities ~~intent~~that tomay ~~cure~~result ~~the~~should ~~minimum~~we ~~bid~~be ~~price~~unable ~~deficiency~~to bycontinue ~~effecting~~as a ~~reverse~~going ~~stock split, if necessary~~concern.

InThe ~~addition,~~inability ~~in accordance with Listing Rule 5810(c)(3)(D), the Company has a grace period of 180 calendar days, or until May 6, 2013,~~ to ~~regain~~refinance ~~compliance with the MVPHS requirement. To regain compliance, the MVPHS of the Company’s Class A common stock must meet~~ or ~~exceed~~restructure $5our ~~million~~debt ~~for~~would athave ~~least~~a ~~ten~~material ~~consecutive~~adverse ~~business~~effect ~~days~~on ~~during this 180-day grace period. Alternatively,~~ the ~~Company~~solvency ~~may apply to transfer the listing~~ of ~~its Class A common stock to The NASDAQ Capital Market. To qualify,~~ the Company ~~would~~and beour ~~required~~ability to ~~meet~~continue ~~the~~as ~~continued~~a ~~listing~~going ~~requirements for that market~~concern.

IfFor ~~the~~a ~~Company~~more ~~does~~detailed ~~not~~discussion ~~regain~~of ~~compliance~~our ~~within~~2008 ~~the~~Credit ~~allotted compliance period(s)~~Facility, ~~including~~see ~~any~~“Item ~~extensions~~2. ~~that may be granted by NASDAQ, NASDAQ will provide notice that the Company~~Management’s ~~Class A~~Discussion ~~common~~and ~~stock~~Analysis ~~will~~of beFinancial Condition ~~subject~~and toResults ~~delisting.~~of ~~The~~Operations ~~Company~~– ~~would~~Liquidity ~~then be entitled to appeal the NASDAQ Staff’s determination to a NASDAQ Listing Qualifications Panel~~ and ~~request~~ aCapital ~~hearing~~Resources.”

~~The~~As ~~Company has considered available options to resolve~~ the ~~noncompliance~~market ~~with~~price ~~the~~of ~~minimum~~our ~~bid~~Class A ~~price~~common ~~and~~stock ~~MVPHS~~is ~~requirements.~~no ~~The~~longer ~~Company~~quoted ~~has~~on ~~determined to not effect~~ a ~~reverse~~national ~~stock~~exchange, ~~split to cure~~ the ~~minimum~~market ~~bid~~ price ~~deficiency and does not intend on transferring the listing~~ of ~~its~~our ~~Class A~~ common stock toand ~~The~~our ~~NASDAQ~~reputation ~~Capital~~may ~~Market~~be innegatively ~~order~~impacted ~~to qualify~~and ~~for~~our aability ~~second 180 calendar day grace period in an attempt~~ to ~~cure~~raise ~~either~~future ~~the~~capital ~~minimum~~may ~~bid~~be ~~price deficiency or the MVPHS deficiency~~impaired. ~~There~~In ~~can~~addition, beour noBoard ~~assurance~~has ~~that~~decided ~~the Company will be able~~ to ~~regain~~deregister ~~compliance~~our ~~with either the minimum bid price~~Class A orcommon ~~MVPHS~~stock ~~requirements,~~which or will ~~otherwise~~suspend beour inSEC ~~compliance~~reporting ~~with other NASDAQ listing criteria~~requirements.

IfOn ~~our~~April 15, 2013, the Company’s Class A common stock ~~were~~ was delisted from the NASDAQ Global Select Market, ~~among~~and ~~other~~began ~~things~~trading on the OTC Markets OTCQB marketplace on April 16, ~~this~~2013. This delisting could result in a number of negative implications, including reduced price and liquidity in our common stock as a result of the loss of market efficiencies associated with NASDAQ and the loss of federal preemption of state securities laws, as well as the potential loss of confidence by suppliers, customers and employees, the loss of institutional investor interest, the loss of the ability to raise future capital, less coverage by analysts, fewer business development opportunities and greater difficulty in obtaining financing. ~~In addition, in light of not being quoted on a national exchange, our Board may deregister our Class A common stock which would suspend our SEC reporting requirements.~~

IfIn weaddition, ~~fail~~in tolight ~~comply~~of ~~with~~not ~~the~~being ~~Health~~quoted ~~Insurance~~on ~~Portability~~a national exchange and ~~Accountability~~given the increasing cost and resource demands of being a public company, our Board has decided to deregister our Class A common stock under the Exchange Act and “go dark.” We will not be eligible to deregister until after the end of ~~1996~~the fiscal year 2013. Once we become eligible to deregister, we intend to file a Form 15 with the SEC and our obligation to file reports (~~HIPAA~~including periodic reports and proxy statements), with the SEC will cease although we ~~could~~ will be ~~subject~~required to ~~enforcement~~file ~~actions~~an Annual Report on Form 10-K for the fiscal year 2013. Subject to satisfaction of certain regulatory requirements, the Company expects deregistration of its Class A common stock to become effective 90 days after the filing of Form 15.

~~Federal~~The ~~and~~Company ~~state~~intends ~~laws~~to ~~protect~~deregister ~~the~~its ~~confidentiality~~Class A ofcommon ~~certain~~stock ~~patient~~because ~~health information,~~the ~~including~~Company ~~patient~~believes ~~medical records, and restrict~~ the ~~use~~incremental ~~and~~cost ~~disclosure~~ of ~~patient~~compliance ~~health~~with ~~information~~the provisions byof ~~healthcare providers. In particular, in April 2003,~~ the ~~U.S.~~Sarbanes-Oxley ~~Department~~Act of ~~Health~~2002 and ~~Human~~other ~~Services~~public ~~published~~company ~~patient~~reporting ~~privacy~~requirements ~~rules under~~outweighs ~~HIPAA~~any ~~and,~~discernable inbenefit ~~April~~to ~~2005,~~the ~~published~~Company ~~security~~or ~~rules~~its ~~for~~shareholders ~~protected~~from ~~health~~continued ~~information. The HIPAA privacy and security rules govern the use~~registration, ~~disclosure~~ and ~~security of protected health information by “Covered Entities,” which are healthcare providers~~ that ~~submit~~continuing ~~electronic~~to ~~claims,~~incur ~~health~~such ~~plans~~costs ~~and~~is ~~healthcare~~not ~~clearinghouses.~~in ~~Through~~the ~~our~~best interests ~~sales~~ of ~~speech~~the ~~generating~~Company ~~technologies,~~or weits ~~are a Covered Entity~~shareholders. WeFactors ~~are~~influencing ~~committed to maintaining~~ the ~~security and privacy of patients~~Company’ ~~health~~s ~~information~~decision ~~and~~to ~~believe~~deregister ~~that~~its weClass A ~~meet~~common ~~the~~shares ~~expectations~~include of the ~~HIPAA~~following: rules. While we believe we are and will be in compliance with all HIPAA standards, there is no guarantee that we will not be subject to enforcement actions, which can be costly and interrupt regular operations of our business.

On• ~~January 17, 2013,~~ the ~~Office~~ever ~~for~~increasing ~~Civil Rights of the Department of Health and Human Services released a major final rule modifying the HIPAA Privacy~~accounting, ~~Security,~~legal ~~Breach~~ and ~~Enforcement~~administrative ~~Rules,~~costs ~~including revisions made by the Health Information Technology for Economic and Clinical Health Act. While we are still reviewing the extensive provisions~~ of ~~the~~preparing ~~rule, it generally appears to expand privacy~~ and ~~security~~filing ~~requirements~~periodic ~~for~~reports ~~business associates of entities that receive protected health information, increase penalties for noncompliance,~~ and ~~strengthen requirements for reporting of breaches, among~~ other ~~changes. The~~filings ~~rule is effective March 23, 2013, and covered entities and business associates must comply~~ with the ~~applicable~~SEC ~~requirements of this final rule by September 23, 2013. We cannot determine at this time the cost of compliance with the new requirements~~ ;

~~Governmental~~• ~~compliance is critical to~~ the ~~operation of~~amount ~~our business. As legislators and regulatory bodies increase scrutiny~~ of ~~our~~time ~~industry,~~senior ~~there~~management ~~may~~is berequired ~~adverse~~to ~~statements~~devote orto ~~charges~~matters ~~against~~related usto ~~by regulators or elected officials. Regardless of~~ the ~~factual~~Company’s ~~basis,~~public ~~such~~reporting ~~allegations can result in investigation by regulators~~obligations, ~~legislators,~~compared ~~and law enforcement officials, or in lawsuits. Responding~~ to ~~such allegations can be costly and~~ time ~~consuming.~~concentrating ~~Adverse publicity can have a negative impact~~ on ~~our~~the ~~reputation,~~Company’s ~~which could adversely affect our~~ business; and ~~the results of operations.~~

•

the already limited trading volume and liquidity in the Company’s Class A common shares.

As a result of the deregistration, investors will have significantly less information about the Company and may find it more difficult to dispose of or obtain accurate quotations as to the market value of the Company’s Class A common stock. In addition, the Company expects there will be a substantial decrease in the liquidity in the Class A common stock and that the ability of shareholders to sell the Company’s securities in the secondary market may be materially limited. Further, the market’s interpretation of the Company’s motivation for “going dark” could vary from cost savings, to negative changes in the Company’s prospects, to serving insider interests, all of which may affect the overall price and liquidity of the Company’s Class A common stock and its ability to raise capital on terms acceptable to the Company or at all.

The risks described in our Form 10-K, as updated, are not the only risks facing us. Additional risks and uncertainties, not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

~~None~~As discussed above, as of March 29, 2013, we were not in compliance with the Net Senior Debt to EBITDA ratio of our financial covenants contained in our 2008 Credit Facility, as amended. For more information, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Not Applicable.

Item 6. Exhibits

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.


Exhibit Number		Description of Exhibit

3.1		Restated Certificate of Incorporation of DynaVox Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Registration Statement on Form S-1 filed by DynaVox Inc. on February 16, 2011 (File No. 333-164217)).

3.2		Amended and Restated Bylaws of DynaVox Inc. (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Registration Statement on Form S-1 filed by DynaVox Inc. on February 16, 2011 (File No. 333-164217)).

31.1*		Certification required by Rule 13a-14(a).

31.2*		Certification required by Rule 13a-14(a).

32.1**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**		XBRL Instance Document

101.SCH**		XBRL Taxonomy Extension Schema Document

101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**		XBRL Taxonomy Extension Label Linkbase Document

101. PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith.

3842

SIGNATURES

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.

	DynaVox Inc.
Date: February 11, 2013	By	/s/ Michelle Wilver
Date: May 17, 2013	By	/s/ Michelle Wilver
		Michelle Wilver
		Chief Executive Officer
Date: February 11, 2013	By	/s/ Kenneth D. Misch
Date: May 17, 2013	By	/s/ Kenneth D. Misch
		Kenneth D. Misch
		Chief Financial Officer

3943

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