Array Technologies, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. 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. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective at a reasonable assurance level as a result of the material weaknesses that existed in our internal control over financial reporting as described below. Management’s Report on Internal Control Over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this evaluation, the Company’s management concluded that 59 Table of Contents internal control over financial reporting was not effective as of December 31, 2021, due to the material weaknesses listed below. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that the Company had the following material weaknesses in its internal control over financial reporting at December 31, 2021: Control Environment and Monitoring – We did not maintain appropriately designed entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) the lack of a sufficient number of qualified resources and inadequate oversight and accountability over the performance of controls, and (ii) ineffective evaluation and determination as to whether the components of internal control were present and functioning. Control Activities – These material weaknesses contributed to the following additional material weaknesses within certain business processes: • Inventory – We did not appropriately design and implement controls over the existence, accuracy, and cutoff of inventory. As previously reported, we identified a material weakness relating to inventory cut-off and in-transit inventory, which continued to exist at December 31, 2021. In addition, we identified a material weakness relating to ineffective controls over our year-end inventory reconciliation process, which resulted in adjustments being recorded as of December 31, 2021. • Revenue Recognition – We did not design, implement and maintain effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”). Specifically, we did not maintain effective controls relating to (1) the identification and recognition of performance obligations for customer contracts, and (2) evaluation of customer contracts for potential combination, which resulted in adjustments being recorded as of December 31, 2021, and restatement of the Company’s interim unaudited consolidated financial statements during 2021. • Accounts Receivable – We did not design, implement and maintain effective controls over the existence of accounts receivable. Specifically, we did not design controls at an appropriate precision level to identify material misstatements, which resulted in balance sheet adjustments being recorded as of December 31, 2021. After giving full consideration to these material weaknesses, and the additional analyses and other procedures that we performed to ensure that our consolidated financial statements included in this Annual Report on Form 10-K were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. GAAP. Remediation Plan for Existing Material Weaknesses We have begun the process of, and we are focused on, designing and implementing effective measures to strengthen our internal controls over financial reporting and remediate the material weaknesses. Our planned internal control remediation efforts include the following: Control Environment and Monitoring – Consistent with the COSO 2013 Framework, Principle 4, attracting, developing, and retaining competent personnel, we have recently hired a Chief Accounting Officer who will provide an additional level of technical accounting expertise, oversight, and monitoring of the design and 60 Table of Contents performance of both existing and newly implemented controls as noted below. We will continue to hire in 2022, additional accounting and IT personnel in 2022 to bolster our accounting and IT capabilities and capacity, and we will concentrate on retaining key accounting, IT, and operational personnel. These actions will further serve to remediate the noted material weakness under the COSO 2013 Framework, Principle 16, by enhancing the efforts towards separate evaluations regarding the presence and functionality of the components of internal control, specifically in the areas of inventory, revenue recognition, and accounts receivable, as noted below. Control Activities: • Inventory – We will enhance the design of existing controls and implement new controls over the accounting, processing, and recording of inventory. Specifically, we have strengthened the design of the management review control over inventory-in-transit. Additionally, we have implemented processes to ensure timely identification and evaluation of inventory cut-off and are requiring additional accountability from counterparties on the accuracy of incoming and outgoing shipment documentation. We also plan to deploy information system enhancements and better use of current system capabilities in order to improve the accuracy of inventory cut-off, reporting, and reconciliation. • Revenue Recognition – We will enhance the design of existing controls and implement new controls over the review of the application and recording of revenue for customer contracts under the guidance outlined in ASC 606. We will also design and implement more precise reviews regarding evaluation of contract terms and whether contracts should be combined. These reviews will include increased contract analysis from our legal team as well as ensuring qualified resources are involved and adequate oversight is performed during the internal technical accounting review process. • Accounts Receivable – We will enhance the design of existing controls and implement new controls over the processing and review of accounts receivable billings. We also plan to supplement our accounting staff with more experienced personnel. Additionally, we will evaluate information system capabilities in order to reduce the manual calculations within this business process. While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting. Attestation Report of Independent Registered Public Accounting Firm The effectiveness of the company’s internal control over financial reporting as of December 31, 2021, has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in its report included herein. Changes in Internal Control over Financial Reporting. During the quarter ended December 31, 2021, except for the changes discussed above, there have been no other no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting. Item 9B. Other Information We maintain a website at www.arraytechinc.com. The contents of our website are not incorporated in, or otherwise to be regarded as part of, this Annual Report on Form 10-K. We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of 61 Table of Contents the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission (“SEC”). Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this item and not set forth below will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2022 Annual Meeting of Stockholders, or the Proxy Statement, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2021, and is incorporated herein by reference. We have adopted a written Code of Business Conduct that applies to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Business Conduct is available on our website at www.arraytechinc.com. If we make any substantive amendments to the Code of Business Conduct or grant any waiver from a provision of the Code of Business Conduct to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website or in a Current Report on Form 8-K. Item 11. Executive Compensation. The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this item will be set forth in the Proxy Statement and is incorporated herein by reference. PART IV Item 15. Exhibit and Financial Statement Schedules. (a)(1) Financial Statements. The financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1. (a)(2) Financial Statement Schedules. 62 Table of Contents All schedules have been omitted because they are not required or because the required information is given in the Financial Statements or Notes thereto. (a)(3) Exhibits. The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report. Exhibit Index Number Description of Document Form Date No. 2.1+ Purchase Agreement, dated November 10, 2021, by and among Array Technologies, Inc., Array Tech, Inc., Amixa Capital, S.L., Aurica Trackers, S.L., and Mr. Javier Reclusa 8-K 11/12/2021 2.1 3.1 Amended and Restated Certificate of Incorporation of Array Technologies, Inc., dated October 19, 2020 8-K 10/19/2020 3.1 3.2 Amended and Restated Bylaws of Array Technologies, Inc., dated October 19, 2020 8-K 10/19/2020 3.2 3.3 Certificate of Designations of Series A Perpetual Preferred Stock 8-K 08/11/2021 3.1 4.1 Description of securities registered under Section 12 of the Exchange Act 10-K 03/10/2021 4.1 4.2 Indenture, dated December 3, 2021, among Array Technologies, Inc. and U.S. Bank National Association 8-K 12/07/2021 4.1 4.3 Form of 1.00% Convertible Senior Note due 2028 (included in Exhibit 4.1) 8-K 12/07/2021 4.2 10.1 Registration Rights Agreement, dated October 19 by and among Array Technologies, Inc. and certain holders identified therein 8-K 10/19/2020 10.1 10.2 Registration Rights Agreement, dated August 10, 2021, by and between Array Technologies, Inc. and BCP Helios Aggregator L.P. 8-K 08/11/2021 10.2 10.3 Registration Rights Agreement, dated January 11, 2022, by and among Array Technologies, Inc. and the holders identified therein 8-K 01/11/2022 10.1 10.4 Securities Purchase Agreement, dated August 10, 2021, by and between the Company and BCP Helios Aggregator L.P. 8-K 08/11/2021 10.1 10.5 Credit Agreement, dated October 14, 2020, by and among Array Technologies, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the Lenders (as defined therein) from time to time party thereto 8-K 10/19/2020 10.2 10.6 Amended and Restated ABL Credit and Guarantee Agreement, dated March 23, 2020, by and among ATI Investment Holdings, Inc., Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto S-1/A 10/14/2020 10.1 10.7 Tax Receivable Agreement, dated July 8, 2016, between Array Technologies, Inc. and Ron P. Corio S-1/A 10/14/2020 10.3 63 Table of Contents Number Description of Document Form Date No. 10.8 Form of Array Technologies, Inc. 2020 Long-Term Incentive Plan S-1/A 10/14/2020 10.7 10.9 Earnout Agreement, dated June 23, 2016, by and among ATI Investment Parent, LLC, ATI Investment Sub, Inc., Array Technologies, Inc., and the seller parties thereto S-1/A 10/14/2020 10.8 10.10 Employment Offer Letter, dated August 7, 2018, between Array Technologies, Inc. and Stuart Bolland S-1/A 10/14/2020 10.9 10.11 Amendment to Employment Offer Letter, dated May 25, 2019, between Array Technologies, Inc. and Stuart Bolland S-1/A 10/14/2020 10.7 10.12 Employment Offer Letter, dated April 25, 2018, between Array Technologies, Inc. and Jim Fusaro S-1/A 10/14/2020 10.8 10.13 Employment Offer Letter, dated December 19, 2016, between Array Technologies, Inc. and Jeff Krantz S-1/A 10/14/2020 10.9 10.14 Amendment to Employment Offer Letter, dated May 23, 2019, between Array Technologies, Inc. and Jeff Krantz S-1/A 10/14/2020 10.1 10.15 Offer Letter, dated as of April 3, 2022, by and between Array Technologies, Inc. and Kevin Hostetler 8-K 04/05/2022 10.1 10.16 Array Technologies, Inc. Executive Severance and Change in Control Plan 8-K 04/05/2022 10.2 10.17 Separation Agreement, dated as of March 31, 2022, by and between Array Technologies, Inc. and Jim Fusaro 8-K 04/05/2022 10.3 10.18 Form of Director and Officer Indemnification Agreement S-1/A 10/14/2020 10.11 10.19 Employment Agreement Terms 10-K 03/10/2021 10.13 10.20 Amendment No. 1, dated February 23, 2021, to the credit agreement by and among Array Tech, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto 10-K 03/10/2021 10.14 10.21 Amendment No. 2, dated February 26, 2021, to the credit agreement by and among Array Tech, Inc., as borrower, ATI Investment Sub, Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent and collateral agent, and the lenders from time to time party thereto 8-K 03/02/2021 10.1 10.22 Form of Capped Call Confirmation 8-K 12/07/21 10.1 21.1* List of Subsidiaries of the Registrant 23.1* Consent of Independent Registered Public Accounting Firm 31.1* Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes- Oxley Act of 2002 (18 U.S.C. 1350) 31.2* Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes- Oxley Act of 2002 (18 U.S.C. 1350) 32.1** Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 64 Table of Contents Number Description of Document Form Date No. 32.2** Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) 101* Interactive Data Files 104* Cover Page Interactive Data Files 03/10/2021 * Filed herewith ** Furnished herewith + Exhibits and schedules have been omitted pursuant to Regulation S-K Item 601(a)(5) and will be furnished on a supplemental basis to the Securities and Exchange Commission upon request. Item 16. Form 10–K Summary None 65 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 6, 2022. Array Technologies, Inc. By: /s/ Jim Fusaro Jim Fusaro Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated. Signature Title Date /s/ Jim Fusaro Chief Executive Officer April 6, 2022 Jim Fusaro (Principal Executive Officer) /s/ Nipul Patel Chief Financial Officer April 6, 2022 Nipul Patel (Principal Financial and Accounting Officer) /s/ Brad Forth Chairman of the Board of Directors April 6, 2022 Brad Forth /s/ Paulo Almirante Member of the Board of Directors April 6, 2022 Paulo Almirante /s/ Troy Alstead Member of the Board of Directors April 6, 2022 Troy Alstead /s/ Orlando D. Ashford Member of the Board of Directors April 6, 2022 Orlando D. Ashford /s/ Ron P. Corio Member of the Board of Directors April 6, 2022 Ron P. Corio /s/ Jayanthi Iyengar Member of the Board of Directors April 6, 2022 Jayanthi Iyengar /s/ Bilal Kahn Member of the Board of Directors April 6, 2022 Bilal Kahn 66 Table of Contents Signature Title Date /s/ Gerrard Schmid Member of the Board of Directors April 6, 2022 Gerrard Schmid 67 Table of Contents INDEX TO FINANCIAL STATEMENTS Array Technologies, Inc. and Subsidiaries Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ; Austin, Texas ; PCAOB ID# 243 ) F-1 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting F-5 Consolidated Balance Sheets F- 7 Consolidated Statements of Operations F- 9 Consolidated Statements of Changes in Member’s Equity /Stockholders’ Deficit F- 10 Consolidated Statements of Cash Flows F- 12 Notes to Consolidated Financial Statements F- 14 F-1 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Array Technologies, Inc. Albuquerque, New Mexico Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Array Technologies, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in member’s equity/stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated April 6, 2022 expressed an adverse opinion thereon. Change in Accounting Method Related to Leases As discussed in Notes 2 and 15 to the consolidated financial statements, the Company changed its method of accounting for leases during the year ended December 31, 2021 due to the adoption of Accounting Standards Codification (“ASC”) 842, Leases. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, Table of Contents providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Accounting for Issuance of the Security Purchase Agreement As described in Notes 2 and 11 to the Company’s Consolidated Financial Statements, the Company entered into a Security Purchase Agreement, issuing shares of a newly designated Series A Redeemable Perpetual Preferred Stock of the Company and shares of the Company’s common stock for an aggregate purchase price of $346.0 million. The Company has the option to require the Purchaser to purchase, in one or more additional closings, additional shares of the Series A Redeemable Perpetual Preferred Stock and Common Stock. The Company evaluated the accounting for the instruments issued in the Securities Purchase Agreement and accounted for the Series A preferred stock as temporary equity on the consolidated balance sheets. We identified the accounting evaluation of the Securities Purchase Agreement to be a critical audit matter. Significant judgments and highly complex technical accounting guidance are required in the determination of the scope of the applicable accounting guidance and appropriate balance sheet classification, including the identification and evaluation of embedded features potentially requiring bifurcation as derivatives as well as the determination of initial and subsequent recognition and measurement. Auditing these elements involved especially challenging and complex auditor judgment due to extent of audit effort required to address these matters, including the extent of specialized skills or knowledge needed. The primary procedures we performed to address this critical audit matter included: • Reading and analyzing the contract terms related to the Securities Purchase Agreement. • Evaluating the reasonableness of the conclusions made by the Company related to the accounting treatment for issuance of the Security Purchase Agreement, including the Company’s consideration of relevant accounting standards to analyze the proper balance sheet classification, the embedded features, and the initial and subsequent recognition and measurement. • Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of Management’s application of relevant accounting guidance for the issuance of the Security Purchase Agreement. Accounting for Convertible Debt As described in Note 10 to the Company’s consolidated financial statements, on December 3, 2021 and December 9, 2021, the Company completed a private offering of $375 million and $50 million over allotment, respectively, in aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “Notes”). The Notes contain certain redemption, conversion, and other features that require the Company to assess if such features are embedded derivatives that require bifurcation from the Notes and receive separate accounting treatment. The Company determined the embedded features did not require bifurcation from the Notes, and therefore were not accounted for separately. We identified the accounting evaluation of embedded features in the Convertible Debt to be a critical audit matter because the evaluation of the appropriate accounting treatment for potential derivatives involved a high degree of auditor judgment and an increased extent of effort, including the extent of specialized skill or knowledge needed to evaluate the Company’s conclusions. The primary procedures we performed to address this critical audit matter included: • Reading and analyzing the contract terms included in various agreements related to the issuance of the Convertible Debt, including the indenture agreement and other agreements entered into on or around the issuance date to identify and assess the reasonableness of management's accounting treatment for the different embedded features as they impacted bifurcation conclusions. F-3 Table of Contents • Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of Management’s application of relevant accounting guidance for the issuance of the Convertible Debt. Revenue Recognition of Certain Customer Contracts As described in Note 2 to the Company’s consolidated financial statements, certain of the Company’s contracts are accounted for as multiple performance obligations because the delivery of the components and other services specified in the contract do not represent a single integrated project. We identified the determination of multiple performance obligations in certain customer contracts and the timing of associated revenue recognition to be a critical audit matter because there was a significant amount of judgment exercised by management in identifying and evaluating terms and conditions of these customer contracts that impact the timing of revenue recognition. In addition, a material weakness was identified over the accounting associated with certain contracts. Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill and knowledge needed. The primary procedures we performed to address this critical audit matter included: • Evaluating management’s accounting policies and practices, including the reasonableness of management’s judgments and assumptions related to the identification of each distinct performance obligation and its pattern of delivery related to certain customer contracts. • Utilizing personnel with specialized knowledge and skills in the relevant technical accounting guidance to assist in evaluating the appropriateness of Management’s application of relevant accounting guidance for revenue recognition. /s/ BDO USA, LLP We have served as the Company's auditor since 2016. Austin, Texas April 6, 2022 F-4 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Array Technologies, Inc. Albuquerque, New Mexico Opinion on Internal Control over Financial Reporting We have audited Array Technologies, Inc.’s and Subsidiaries (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in member’s equity/stockholders’ deficit, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as “the financial statements”) and our report dated April 6, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weakness have been identified and described in management’s assessment. These material weaknesses related to managements’ failure to design and maintain effective controls over financial reporting, specifically related to the following: (1) entity-level controls impacting the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements; (2) the design and implementation of controls over the existence, accuracy, and cutoff of inventory; (3) the design, implementation and maintenance of effective controls over revenue recognized for certain contracts relating to the proper application of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”); and (4) the design, implementation and maintenance of effective controls over the existence of accounts receivable. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 financial statements, and this report does not affect our report dated April 6, 2022, on those financial statements. F-5 Table of Contents Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ BDO USA, LLP Austin, Texas April 6, 2022 F-6 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (in thousands) December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 367,670 $ 108,441 Accounts receivable, net 236,009 118,694 Inventories, net 205,653 118,459 Income tax receivables 9,052 17,158 Prepaid expenses and other 33,649 12,423 Total current assets 852,033 375,175 Property, plant and equipment, net 10,692 9,774 Goodwill 69,727 69,727 Other intangible assets, net 174,753 198,260 Deferred tax assets 9,345 — Other assets 26,429 3,088 Total assets $ 1,142,979 $ 656,024 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable $ 91,392 $ 82,755 Accounts payable - related party 610 2,232 Accrued expenses and other 38,494 29,164 Accrued warranty reserve 3,192 3,049 Income tax payable 60 8,814 Deferred revenue 99,575 149,821 Current portion of contingent consideration 1,773 8,955 Current portion of term loan 4,300 4,313 Other current liabilities 5,909 — Total current liabilities 245,305 289,103 Long-term liabilities Deferred tax liability — 13,114 Contingent consideration, net of current portion 12,804 10,736 Other long-term liabilities 5,557 — Long-term debt, net of current portion, debt discount and issuance costs 711,056 423,970 Total long-term liabilities 729,417 447,820 Total liabilities 974,722 736,923 Commitments and contingencies (Note 16) Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value - 500,000 authorized; 350,000 and none issued as of December 31, 2021 and 2020, respectively; liquidation preference of $ 350.0 million and none as of December 31, 2021 and 2020, respectively 237,462 — Stockholders’ deficit Preferred stock of $ 0.001 par value - 4,500,000 authorized; none issued as of December 31, 2021 and 2020, respectively — — F-7 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (continued) (in thousands) December 31, 2021 2020 Common stock of $ 0.001 par value - 1,000,000,000 authorized; 135,026,940 and 126,994,467 issued as of December 31, 2021 and 2020, respectively 135 127 Additional paid-in capital 202,562 140,473 Accumulated deficit ( 271,902 ) ( 221,499 ) Total stockholders’ deficit ( 69,205 ) ( 80,899 ) Total liabilities, redeemable perpetual preferred stock and stockholders’ (deficit) $ 1,142,979 $ 656,024 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2021 2020 2019 Revenue $ 853,318 $ 872,662 647,899 Cost of revenue 770,459 669,861 497,138 Gross profit 82,859 202,801 150,761 Operating expenses General and administrative 80,974 55,634 41,212 Contingent consideration 2,696 26,441 640 Depreciation and amortization 23,930 25,514 25,500 Total operating expenses 107,600 107,589 67,352 Income (loss) from operations ( 24,741 ) 95,212 83,409 Other expense Other expense, net ( 905 ) ( 2,305 ) ( 33 ) Interest expense ( 35,475 ) ( 15,129 ) ( 18,797 ) Total other expense ( 36,380 ) ( 17,434 ) ( 18,830 ) Income before income tax expense (benefit) ( 61,121 ) 77,778 64,579 Income tax expense (benefit) ( 10,718 ) 18,705 24,834 Net income (loss) ( 50,403 ) 59,073 39,745 Preferred dividends and accretion ( 15,715 ) — — Net income (loss) to common shareholders $ ( 66,118 ) $ 59,073 $ 39,745 Earnings (loss) per share Basic $ ( 0.51 ) $ 0.49 $ 0.33 Diluted $ ( 0.51 ) $ 0.49 $ 0.33 Weighted average number of shares Basic 129,984 121,467 119,994 Diluted 129,984 121,514 119,994 The accompanying notes are an integral part of these consolidated financial statements. F-9 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Statements of Changes in Member’s Equity/Stockholders’ Deficit (in thousands) For the years ended December 31, 2019 and 2020 Common Stock Additional paid-in capital Retained Earnings Total Member’s Equity/Stockholders’ Deficit Units Amount Shares Amount Balance, December 31, 2018 1 $ 264,474 — $ — $ — $ — $ 264,474 Capital contribution — 133 — — — — 133 Equity-based compensation — 799 — — — — 799 Net income — 39,745 — — — — 39,745 Balance, December 31, 2019 1 305,151 — — — — 305,151 Special distribution — ( 589,000 ) — — — — ( 589,000 ) Initial public offering of common stock, net of underwriting discounts and commissions — — 7,000 7 145,525 — 145,532 Deferred offering costs — — — ( 6,464 ) — ( 6,464 ) Stock compensation expense — 3,397 — — 1,412 — 4,809 Net income (loss) — 71,394 — — — ( 12,321 ) 59,073 Corporate conversion and stock split ( 1 ) 209,058 119,994 120 — ( 209,178 ) — Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) F-10 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Statements of Changes in Member’s Equity/Redeemable Perpetual Preferred Stock and Stockholders’ Equity/(Deficit) (continued) (in thousands) For the year ended December 31, 2021 Temporary Equity Permanent Equity Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional paid-in capital Accumulated deficit Total Stockholders’ Equity/(Deficit) Shares Amount Shares Amount Shares Amount Balance, December 31, 2020 — $ — — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity-based compensation — — — — 157 — 13,562 — 13,562 Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764 Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — Premium on capped call, net of deferred tax — — — — — — ( 40,514 ) — ( 40,514 ) Preferred cumulative dividends — 8,226 — — — — ( 8,226 ) — ( 8,226 ) Payment of dividends — ( 8,052 ) — — — — — — — — Preferred accretion — 7,489 — — — — ( 7,489 ) — ( 7,489 ) Net (loss) — — ( 8,052 ) — — — — — ( 50,403 ) ( 50,403 ) Balance, December 31, 2021 350 $ 237,462 7,489 — $ — 135,026 $ 135 $ 202,562 $ ( 271,902 ) $ ( 69,205 ) The accompanying notes are an integral part of these consolidated financial statements. F-11 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2021 2020 2019 Cash flows used in (provided by) operating activities Net income (loss) $ ( 50,403 ) $ 59,073 $ 39,745 Adjustments to reconcile net income (loss) to net cash used in (provided by) operating activities: Provision for (recovery of) bad debts ( 467 ) 595 ( 3,986 ) Deferred tax (benefit) expense ( 10,102 ) ( 2,739 ) 22,322 Depreciation and amortization 25,946 27,474 27,316 Amortization of debt discount and issuance costs 15,036 3,366 3,968 Interest paid-in-kind — 3,421 2,832 Equity-based compensation 13,757 4,809 799 Contingent consideration 2,696 26,441 640 Warranty provision 516 953 1,387 Provision for inventory obsolescence 990 1,225 1,742 Changes in operating assets and liabilities Accounts receivable ( 116,848 ) ( 23,038 ) ( 40,708 ) Inventories ( 88,184 ) 28,340 ( 94,594 ) Income tax receivables 8,106 ( 16,530 ) 9,941 Prepaid expenses and other ( 21,226 ) 1,101 2,228 Accounts payable 8,637 ( 50,519 ) 105,481 Accounts payable - related party ( 1,622 ) — — Accrued expenses and other 9,133 10,913 ( 1,978 ) Income tax payable ( 8,754 ) 6,870 1,944 Lease liabilities 221 — — Contingent consideration — ( 25,000 ) — Deferred revenue ( 50,619 ) ( 178,960 ) 306,994 Net cash provided by (used in) operating activities ( 263,187 ) ( 122,205 ) 386,073 Cash flows used in investing activities Purchase of property, plant and equipment ( 3,357 ) ( 1,338 ) ( 1,697 ) Investment in equity security ( 11,975 ) — — Net cash used in investing activities ( 15,332 ) ( 1,338 ) ( 1,697 ) Cash flows from financing activities Proceeds from issuance of convertible notes 413,321 — — Premium paid on capped call ( 52,870 ) — — Fees paid on issuance of convertible notes ( 1,591 ) — — Dividends paid on Series A Preferred ( 8,051 ) — — Proceeds from Series A issuance 224,987 — — Proceeds from common stock issuance 120,645 — — Series A equity issuance costs ( 7,195 ) — — F-12 Table of Contents Array Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (continued) (in thousands) Year Ended December 31, 2021 2020 2019 Common stock issuance costs ( 3,873 ) — — Proceeds from revolving credit facility 126,033 — — Payments on revolving credit facility ( 126,033 ) — — Principal payments on term loan — ( 57,702 ) ( 25,000 ) Proceeds from term loan facility — 575,000 — Principal payments on term loan facility ( 133,225 ) ( 115,000 ) — Proceeds from (Payments on) revolving loan — ( 70 ) ( 39,078 ) Payments on related party loans — ( 45,558 ) — Payment of special distribution — ( 589,000 ) — Proceeds from issuance of common stock, net of underwriting discount and commissions — 145,532 — Contingent consideration ( 7,810 ) — — Deferred offering costs — ( 6,464 ) — Debt issuance costs ( 6,590 ) ( 36,011 ) — Capital contribution — — 133 Net cash provided by (used in) financing activities 537,748 ( 129,273 ) ( 63,945 ) Net change in cash and cash equivalents 259,229 ( 252,816 ) 320,431 Cash and cash equivalents, beginning of period 108,441 361,257 40,826 Cash and cash equivalents, end of period $ 367,670 $ 108,441 $ 361,257 Supplemental Cash Flow Information Cash paid for interest $ 24,306 $ 6,935 $ 11,343 Cash paid for income taxes $ 13,318 $ 31,103 $ 443 The accompanying notes are an integral part of these consolidated financial statements. F-13 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Organization and Business Array Technologies, Inc. (the “Company”) formerly ATI Intermediate Holdings, LLC, is a Delaware corporation formed in December 2018 as a wholly owned subsidiary of ATI Investment Parent, LLC (“Former Parent”). On October 14, 2020, the Company converted from a Delaware limited liability company to a Delaware corporation and changed the Company’s name to Array Technologies, Inc. The Company is headquartered in Albuquerque, New Mexico, and manufactures and supplies solar tracking systems and related products for customers across the United States and internationally. The Company, through its wholly-owned subsidiary, ATI Investment Sub, Inc. (“ATI Investment”) owns one subsidiary through which it conducts substantially all operations; Array Tech, Inc. (collectively “AT”). 2. Summary of Significant Accounting Policies Basis of Accounting and Presentation The accompanying consolidated financial statements were prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Recently Adopted Accounting Pronouncements On January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842) “Leases” which supersedes the lease recognition requirements in ASC Topic 840, “Leases” . Under ASU No. 2016-02, lessees are required to recognize assets and liabilities on the consolidated balance sheets for most leases and provide enhanced disclosures. For companies that are not emerging growth companies (“EGCs”), the ASU was effective for fiscal years beginning after December 15, 2018. For EGCs, the ASU is effective for fiscal years beginning after December 15, 2021. The Company early adopted the new standard using the modified retrospective method by recording a right-of-use asset of $ 13.2 million, short-term portion of lease liabilities of $ 6.3 million and long-term portion of lease liabilities of $ 7.2 million as of the effective date. Prior periods will not be restated and will continue to be reported under Topic 840 guidance in effect during those periods. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The adoption did not have a material impact on its consolidated statements of operations or its consolidated statements of cash flows. See Note 15, Leases, for further information and disclosures related to the adoption of this standard. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company has adopted the pronouncement and it did not have a material impact on its consolidated financial statements and related disclosures. F-14 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) . The amendments in this update simplifies accounting for certain convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. As a result, convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer be available for convertible debt instruments. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company early adopted the new standard effective January 1, 2021 using the modified retrospective method. There was no impact on the Company's financial statements as of the adoption date. As further discussed in Note 10, "Convertible Debt," the Company issued $ 425 million principal amount of convertible senior notes on December 3, 2021, which have been accounted for in accordance with the provisions of ASU 2020-06. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses , which was subsequently amended by ASU No. 2018-19 and ASU No. 2019-10, requires the measurement of expected credit losses for financial instruments carried at amortized cost held at the reporting date based on historical experience, current conditions and reasonable forecasts. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard was adopted on January 1, 2021 as the Company lost it’s status as an Emerging Growth Company effective December 31, 2021 and therefore was required to adopt the standard for the year ending December 31, 2021. The adoption of this standard did not have an impact on consolidated financial statements. Corporate Conversion and Stock Split On October 14, 2020, prior to the issuance of any of our shares of common stock in our initial public offering (the “IPO”), we converted from a Delaware limited liability company to a Delaware corporation. In connection with the corporate conversion we converted all 1,000 of our outstanding member units into 100,000,000 shares of common stock and then completed a stock split of 1.19994 -for-1. The corporate conversion and stock split representing 119,994,467 shares of common stock have been adjusted retroactively for the purposes of calculating basic and diluted earnings per share. Principles of Consolidation The consolidated financial statements include the accounts of Array Technologies, Inc. and its Subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of F-15 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include impairment of goodwill, impairment of long-lived assets, fair value of contingent consideration, Series A Redeemable Preferred Stock and the related future tranche, allowance for credit losses, reserve for excess or obsolete inventories, valuation of deferred tax assets and warranty reserve. Due to the COVID-19 pandemic, there has been and will continue to be uncertainty and disruption in the global economy and financial markets. Management has made estimates and assumptions taking into consideration certain possible impacts due to COVID-19. These estimates may change, as new events occur, and additional information is obtained. Actual results may differ from previously estimated amounts, and such differences may be material to the consolidated financial statements; however, management believes that these estimates and assumptions provide a reasonable basis for the fair presentation of the consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period they occur. Impact of COVID-19 Pandemic In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries, including the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. Due to economic conditions our industry has seen rapid commodity price increases and strained logistics, causing us to experience temporary decreased margins and thus decreased cash from operations which has adversely impacted our business. In addition, due to global tightening of supply chain and strained logistics issues we have experienced an increase in our unbilled revenues and also in some instances incurred liquidated damages. We have taken, and continue to take, mitigating steps to overcome the economic challenges and, therefore, believe the impact to be temporary, but cannot be certain the timing of when we will achieve better margins. The Company believes it has sufficient liquidity and financing options available and expects to have sufficient liquidity to operate for the next 12 months. The Company expects to use cash generated from operations and if needed, can access funds from the Revolving Credit Facility. The Company also has $ 100 million in delayed draw ability under the Series A Redeemable Perpetual Preferred Stock future draw commitment, however this would increase the Company’s dividend obligations and outstanding common stock. The Revolving Credit Facility has $ 186.4 million of availability; however the Company may have limited ability to draw on the funds due to debt covenants. The Company has implemented adjustments to its operations designed to keep employees safe and comply with federal, state and local guidelines, including those regarding social distancing. The extent to which COVID-19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence. In response to COVID-19, the United States government has passed legislation and taken other actions to provide financial relief to companies and other organizations affected by the pandemic. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Accounts Receivable The Company’s accounts receivable are due primarily from solar contractors across the United States and internationally. Credit is extended in the normal course of business based on evaluation of a customer’s F-16 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements financial condition and, generally, collateral is not required. Trade receivables consist of uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days of the invoice date. Management regularly reviews outstanding accounts receivable and provides for estimated credit losses through an estimate of expected credit losses valuation account. The allowance for credit losses is a valuation account that is deducted from a financial asset’s amortized cost to present the net amount we expect to collect from the asset. We estimate allowances for credit losses using relevant available information from both internal and external sources. We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables. In evaluating the level of established reserves, management makes judgments regarding the customers’ ability to make required payments, economic events, and other factors. As the financial conditions of these customers change, circumstances develop, or additional information becomes available, adjustments to the valuation account may be required. When deemed uncollectible, the receivable is charged against the valuation account for credit losses or directly written off. At December 31, 2021 and 2020, the valuation account was $ 0.1 million and $ 0.7 million, respectively. Unbilled receivables, which represent temporary timing differences between shipments made and billing milestones achieved, were $ 111.2 million and $ 18.1 million of the accounts receivable balances as of December 31, 2021 and 2020, respectively. These amounts have not been billed because we are waiting for agreed upon billing stipulations such as billing on a specified date of the month or upon completion of mega-watt deliveries. The unbilled balance has increased as of December 31, 2021 due to global challenges with supply chain logistics and labor shortages in some instances causing delays in delivering specific components to complete a mega-watt delivery. These will be invoiced once the commercial criteria have been met at which point we will invoice and expect payment within 30 to 60 days. Amounts retained by project owners under contracts and included in accounts receivable at December 31, 2021 and 2020 were $ 13.5 million and $ 4.1 million, respectively. Such retention amounts represent funds withheld by our customers until the products are installed by a third-party, arranged by the customer, and the project is declared operational. Retention amounts and length of retention periods may vary. All retention amounts outstanding as of December 31, 2021 are collectible within the next 12 months. The following is the activity of the reserve for credit losses on accounts receivable which includes trade accounts receivable and unbilled accounts receivable (in thousands): December 31, 2021 Beginning balance $ 663 Provision for credit losses ( 303 ) Collected ( 130 ) Written-off ( 90 ) Ending balance $ 140 The following is the activity of the allowance for doubtful accounts (in thousands): F-17 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2020 Beginning balance $ 162 Provision for bad debts 847 Collected ( 242 ) Written-off ( 104 ) Ending balance $ 663 Inventories Inventories consist of raw materials and finished goods. Inventories are stated at the lower of cost or estimated net realizable value using the weighted average method. Provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. See Note 3 for a detail of the components that comprise the inventory balance presented on the accompanying consolidated balance sheets. Property, Plant and Equipment Property, plant and equipment acquired in the acquisition of Array are recorded at fair value at the date of acquisition net of accumulated depreciation and amortization; all other property, plant and equipment are recorded at cost, net of accumulated depreciation and amortization. Improvements, betterments and replacements which significantly extend the life of an asset are capitalized. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets. Repair and maintenance costs are expensed as incurred. A gain or loss on the sale of property, plant and equipment is calculated as the difference between the cost of the asset disposed of, net of depreciation, and the sales proceeds received. A gain or loss on an asset disposal is recognized in the period that the sale occurs. Impairment of Long-Lived Assets When events, circumstances or operating results indicate that the carrying values of long-lived assets might not be recoverable through future operations, the Company prepares projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate that the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value is estimated based upon internal evaluation of each asset that includes quantitative analyses of net revenue and cash flows, review of recent sales of similar assets and market responses based upon discussions in connection with offers received from potential buyers. Management determined there was no impairment for the years ended December 31, 2021, 2020 and 2019. Goodwill Goodwill reflects the excess of the consideration transferred, including the fair value of any contingent consideration over the assigned fair values of the identifiable net assets acquired. Goodwill is not amortized, and is assigned to the reporting unit and tested for impairment at least on an annual basis. Goodwill is assessed using either a qualitative assessment or quantitative approach to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount. The qualitative assessment evaluates factors including macroeconomic conditions, industry-specific and company-specific considerations, F-18 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements legal and regulatory environments, and historical performance. If the Company determines that is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is performed. Otherwise, no further assessment is required. The quantitative approach compares the estimated fair value of the reporting unit to its carrying amount, including goodwill. Impairment is indicated if the estimated fair value or the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the differential. The Company completes its annual goodwill impairment test as of year-end. At December 31, 2021, the Company performed both a qualitative and quantitative test for impairment of goodwill and no impairment was recorded. At December 31, 2020, the Company performed a qualitative assessment of its goodwill and no impairment was recorded. At December 31, 2019, the Company performed a quantitative assessment of its goodwill and no impairment was recorded. Amortizable and Other Intangible Assets The Company amortizes identifiable intangible assets consisting of developed technology, customer relationships, contractual backlog and internal-use software modifications because these assets have finite lives. The Company’s intangible assets with finite lives are amortized on a straight-line basis over the estimated useful lives. The basis of amortization approximates the pattern in which the assets are utilized, over their estimated useful lives. The Array Technologies trade name has been determined to have an indefinite life and, therefore, is not amortized but is subject to an annual impairment test or at any other time when impairment indicators exist. The Company completed its annual impairment test for its non-amortizable asset (Trade Name) by comparing the estimated fair value to the carrying value of such asset. Based on the results of the tests, the Company did no t recognize any impairment charges for the years ended December 31, 2021, 2020 and 2019. Deferred Offering Costs Deferred offering costs consist primarily of registration fees, filing fees, listing fees, specific legal and accounting costs, and transfer agent fees, which are direct and incremental fees related to the offerings. Deferred offering costs were offset against the proceeds. Debt Discount and Financing Costs Debt discount and financing costs incurred to issue debt are deferred and amortized using the effective interest method as a component of interest expense over the life of the related debt agreement. Amortization expense and write-off of debt discount and deferred financing costs was $ 15.0 million, (including $ 9.6 million in write-offs in connection with unscheduled principal payoffs that occurred in February and August of 2021 – see Notes 9 and 10), $ 3.4 million and $ 4.0 million, respectively, for the years ended December 31, 2021, 2020 and 2019. Revenue Recognition Under ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenues from the sale of solar tracking systems and parts and determines its revenue recognition through the following steps (i) identification of the contract or contracts with a customer, (ii) identification of the performance obligations within the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price F-19 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements to the performance obligations within the contract, and (v) recognition of revenue when, or as the performance obligation has been satisfied. Performance Obligations The majority of the Company’s contracts with customers are accounted for as one performance obligation, because the Company is integrating the solar tracking system components and related services as part of a single project. Certain contracts associated with customers using the federal investment tax credit (“ITC”) for solar energy projects and other standalone tracker component sales are accounted for as multiple performance obligations because the delivery of the components and other services specified in the contract do not represent a single integrated project. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company uses the expected cost-plus margin approach to estimate the standalone selling price of each performance obligation. In contracts with one performance obligation, the Company’s performance obligation is satisfied over-time as control is transferred to the customer by measuring the progress toward complete satisfaction of the performance obligation using an input (i.e., “cost to cost”) method. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue recognized for the Company’s ITC related contracts and standalone system component sales are recorded at a point in time and recognized when obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is typically upon delivery to the customer in line with shipping terms. In certain situations, when product is still in our custody, and title and risk of loss has passed to the customer (known as bill-and-hold arrangement), revenue will be recognized when all the specific requirements for transfer of control under a bill-and-hold arrangement have been met. The Company had $ 168.9 million in contracts with customers for the sale of goods and services that contained bill-and-hold obligations such as storage, handling and other custodial duties. Any losses incurred on point-in-time projects are recognized as the goods are delivered. In assessing the recognition of revenue, the Company also evaluates whether two or more contracts should be combined and accounted for as one contract and if the combined or single contract should be accounted for as multiple performance obligations which could change the amount of revenue and profit (loss) recorded in a period. Contracts are often modified through change orders to account for changes in specifications or design, manner of performance, equipment, materials, scope of work, and/or the period of completion of the project. Although the Company evaluates each change order to determine whether such modification creates a separate performance obligation, the majority of change orders are for goods or services that are not distinct within the context of the original contract and, therefore, not treated as separate performance obligations but rather as a modification of the existing contract and performance obligation. We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of revenue, and classify such costs as a component of cost of revenue. F-20 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Contract Estimates Accounting for contracts utilizing the cost-to-cost measure of progress is based on various assumptions to project the outcome of future events that can exceed a year. These assumptions include the cost and availability of materials. The Company reviews and updates its contract-related estimates on an ongoing basis and recognizes adjustments for any project specific facts and circumstances that could impact the measurement of the extent of progress, such as the total costs to complete the contracts, under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the period it is identified . At contract inception, any variable consideration such as liquidated damages are estimated based on probability of occurrence and then re-evaluated for probability at the end of the quarterly period. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled accounts receivable for goods delivered but not invoiced, and deferred revenue (contract liabilities) on the consolidated balance sheets. The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in unbilled accounts receivable. The changes in unbilled accounts receivable and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time. As of December 31, 2021 and December 31, 2020, unbilled accounts receivable totaled $ 111.2 million and $ 18.1 million, respectively, are included within accounts receivable on the consolidated balance sheets on a contract-by-contract basis at the end of the reporting period. The Company also receives advances or deposits from its customers, before revenue is recognized, resulting in contract liabilities. The changes in contract liabilities (i.e. deferred revenue) relate to advanced orders and payments received by the Company and are the result of customers looking to take advantage of certain U.S. federal tax incentives set to decrease at the end of 2019 and 2020. Based on the terms of the tax incentives the customer must pay for the goods prior to December 31, 2019 and 2020, which accounts for the increase in the advanced orders and payments and the resulting deferred revenue at December 31, 2019 and 2020 and subsequent reduction for deliveries which occurred during the year ended December 31, 2020 and 2021. As of December 31, 2021 and December 31, 2020, contract liabilities consisting of deferred revenue were $ 99.6 million and $ 149.8 million, respectively and were recorded on a contract-by-contract basis at the end of each reporting period. During the years ended December 31, 2021 and 2020, the Company converted $ 149.8 million and $ 328.8 million deferred revenue to revenue, respectively, which represented 100 % of the prior years deferred revenue balance. Remaining Performance Obligations As of December 31, 2021, the Company had $ 301.5 million of remaining performance obligations. The Company expects to recognize revenue on 100 % of these performance obligations in the next twelve months . Warranty Obligations The Company offers an assurance type warranty for its products against manufacturer defects and does not contain service elements. For these assurance type warranties, a provision for estimated future costs related to warranty expense is recorded when they are probable and reasonably estimable, which is typically when F-21 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements products are delivered. This provision is based on historical information on the nature, frequency and average cost of claims for each product line. When little or no experience exists for an immature product line, the estimate is based on comparable product lines. These estimates are re-evaluated on an ongoing basis using best-available information and revisions to estimates are made as necessary. Income Taxes The Company provides for income taxes based on the provisions of FASB ASC Topic 740, Income Taxes, which, among other things, requires that recognition of deferred income taxes be measured by the provisions of enacted tax rates in effect at the date of the consolidated financial statements. A valuation allowance is provided to reduce deferred income tax assets if it is more likely than not that all, or some portion, of such deferred tax assets will not be recognized. Provision for estimated income taxes is based upon elements of income and expense reported in the consolidated statements of operations. The Company also files certain corporate state income tax returns. Generally, the Company is subject to examination by U.S. federal (or state or local) income tax authorities for three years from the filing of a tax return. The current provision for income taxes represents actual or estimated amounts payable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. Adjustments for penalties and interest, if any, are also reflected in the current year tax provision or benefit. The Company determines whether uncertain tax positions are more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company recognizes interest and penalties related to unrecognized tax benefits within the interest expense line and other expense line, respectively, in the consolidated statements of operations. Accrued interest and penalties are included within the related liability lines in the consolidated balance sheets. Equity-Based Compensation The Company recognizes equity-based compensation expense based on the equity award’s grant date fair value. The determination of the fair value of equity awards issued to employees of the Company is based upon the underlying share price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends. The Company accounts for forfeitures as they occur. The grant date fair value of each unit is amortized on a straight-line basis over the requisite service period. Temporary Equity Equity instruments that are redeemable for cash or other assets are classified as temporary equity if the instrument is redeemable, at the option of the holder, at a fixed or determinable price on a fixed or determinable date or upon the occurrence of an event that is not solely within the control of the issuer. Redeemable equity instruments are initially carried at the fair value of the equity instrument at the issuance date, which is subsequently adjusted at each balance sheet date if the instrument is currently redeemable, or probable of becoming redeemable. The Series A Redeemable Perpetual Preferred Stock issued in connection with the Securities Purchase Agreement as described in Note 11 is classified as temporary equity in the F-22 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements accompanying consolidated financial statements. The Company elected the accreted redemption value method under which it accretes changes in redemption value over the period from the date of issuance of the Series A Redeemable Perpetual Preferred Stock to the earliest costless redemption date (the fifth anniversary) using the effective interest method. Such adjustments are included in preferred undeclared dividends and accretion on Series A Redeemable Perpetual Preferred Stock on the Company’s consolidated statements of changes in equity and treated similarly to a dividend on preferred stock for GAAP purposes. Earnings per Share (“EPS”) Basic earnings per share, or EPS, is computed by dividing net income available to shareholders by the weighted average shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue shares, such as stock options, unvested restricted stock, or convertible debt, were exercised and converted into shares. The convertible debt is not currently convertible. Diluted EPS is computed by dividing net income available to shareholders by the weighted average shares outstanding during the period, increased by the number of additional shares that would have been outstanding if the potential shares had been issued and were dilutive. Credit Concentration Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, and accounts receivable. The Company has no significant off balance sheet concentrations of credit risk. The Company maintains its cash with financial institutions that are believed to be of high credit quality and has not experienced any material losses relating to any cash. As of December 31, 2021 and December 31, 2020, $ 367.2 million and $ 108.2 million, respectively, of the Company’s bank balances were uninsured and uncollateralized and exposed to custodial credit risk. The Company’s customer base consists primarily of solar contractors and utilities. The Company does not require collateral on its trade receivables. For the year ended December 31, 2021, the Company’s largest customer and five largest customers constituted 12.6 % and 46.0 % of total revenues, respectively. Two customers made up 22.7 % of revenue and are the only customers greater than 10% of total revenue for the year ended December 31, 2021. For the year ended December 31, 2020, the Company’s largest customer and five largest customers constituted 11.2 % and 40.9 % of total revenues, respectively. Two customers made up 21.5 % of revenue and are the only customers constituting greater than 10% of total revenue for the year ended December 31, 2020. For the year ended December 31, 2019, the Company’s largest customer and five largest customers constituted 17.2 % and 50.1 % of total revenues, respectively. Two customers make up 28.7 % of revenue and are the only customers constituting greater than 10% of total revenue. The loss of any one of the Company’s top five customers could have a materially adverse effect on the revenues and profits of the Company. Further, the Company’s trade accounts receivable are from companies within the solar industry and, as such, the Company is exposed to normal industry credit risks. As of December 31, 2021, the Company’s largest customer and five largest customers constituted 17.6 % and 44.6 % of trade accounts receivable, respectively. As of December 31, 2020, the Company’s largest customer and five largest customers constituted 0.1 % and 20.9 % of trade accounts receivable, respectively. The Company continually evaluates its reserves for potential credit losses and establishes reserves for such losses. Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows a fair value F-23 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value, as follows: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Unobservable inputs that are supported by little or no market activity that are significant to the fair value of the assets or liabilities. Assets valued using Level 1 inputs are determined by quoted market prices derived from an active market and Level 2 inputs are based primarily on quoted prices for similar assets in active or inactive markets. Level 3 inputs are valued by management’s assumptions about the assumptions the market participants would utilize in pricing the asset. The fair values of the Company’s cash, accounts receivable, and accounts payable approximate their carrying values due to their short maturities. The carrying value of the Company’s notes payable, capped call, and related party loans approximates their fair values, as they are based on current market rates at which the Company could borrow funds with similar terms. The Company follows the provisions of FASB ASC Topic 820-10 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. As it relates to the Company, this applies to certain nonfinancial assets and liabilities acquired in business combinations and measurement of goodwill impairment and non-amortizable intangibles and is thereby measured at fair value. The Company has determined such fair value primarily by third-party valuations. New Accounting Standards To be adopted In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, and continue to evaluate the impact that ASU 2021-08 will have, if any, on its consolidated financial statements. F-24 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Inventories Inventories consisted of the following (in thousands): December 31, 2021 2020 Raw materials $ 85,470 $ 39,051 Finished goods 127,598 85,833 Reserve for excess or obsolete inventory ( 7,415 ) ( 6,425 ) Total $ 205,653 $ 118,459 The following is the activity of the inventory reserve (in thousands): December 31, 2021 2020 Beginning balance $ ( 6,425 ) $ ( 5,200 ) Increases ( 1,766 ) ( 2,518 ) Decreases 776 1,293 Ending balance $ ( 7,415 ) $ ( 6,425 ) 4. Property, Plant and Equipment Property, plant and equipment consisted of the following (in thousands): Estimated Useful Life (Years) December 31, 2021 2020 Land N/A $ 1,340 $ 1,340 Buildings and land improvements 15 - 39 2,451 2,486 Manufacturing equipment 7 13,924 13,261 Furniture, fixtures and equipment 5 - 7 476 443 Vehicles 5 161 140 Hardware and software 3 - 5 1,683 887 Assets in progress NA 1,880 — Total 21,915 18,557 Less: accumulated depreciation ( 11,223 ) ( 8,783 ) Property, plant and equipment, net $ 10,692 $ 9,774 Depreciation expense was $ 2.4 million, $ 2.2 million and $ 2.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which $ 2.0 million, $ 2.0 million and $ 1.8 million, respectively, was allocated to cost of revenues and $ 0.4 million, $ 0.2 million and $ 0.3 million, respectively, is included in depreciation and amortization in the accompanying consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019. F-25 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements 5. Goodwill and Other Intangible Assets Goodwill Goodwill relates to Former Parent’s acquisition of Array. At the acquisition date, July 8, 2016, goodwill was $ 121.6 million. At December 31, 2020 and December 31, 2021 goodwill totaled $ 69.7 million, net of accumulated impairment of $ 51.9 million and is not deductible for tax purposes. Other Intangible Assets Other intangible assets consisted of the following (in thousands): Estimated Useful Life (Years) December 31, 2021 2020 Amortizable: Costs: Developed technology 14 $ 203,800 $ 203,800 Customer relationship 10 89,500 89,500 Internal-use software modification 2.5 4,356 4,356 Total Amortizable Intangibles 297,656 297,656 Accumulated amortization: Developed technology 79,790 65,233 Customer relationship 49,057 40,107 Internal-use software modification costs 4,356 4,356 Total Accumulated Amortization 133,203 109,696 Total Amortizable Intangibles, Net 164,453 187,960 Non-amortizable costs: Trade name 10,300 10,300 Total Other Intangible Assets, Net $ 174,753 $ 198,260 Amortization expense related to intangible assets was $ 23.5 million, $ 25.3 million and $ 25.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Estimated future annual amortization expense for the above amortizable intangible assets for the remaining periods through December 31, as follows (in thousands): Amount 2022 $ 23,507 2023 23,507 2024 23,507 2025 23,507 2026 23,507 Thereafter 46,918 $ 164,453 F-26 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements 6 Investment in Equity Securities The Company made a $ 10.0 million and $ 2.0 million investment in preferred stock of a private company in February 2021 and April 2021, respectively. The investment is accounted for in accordance with ASC 321 at its cost less any impairment. The investment balance as of December 31, 2021 is $ 12.0 million and is recorded in other assets on the condensed consolidated balance sheet. There is no impairment recorded for the year ended December 31, 2021. 7. Income Taxes The provision for income taxes charged to operations consists of the following (in thousands): Year Ended December 31, 2021 2020 2019 Current Expense: Federal $ ( 8 ) $ 17,248 $ 1,709 State ( 668 ) 4,196 803 Foreign 60 — — ( 616 ) 21,444 2,512 Deferred Expense (Benefit): Federal ( 9,085 ) ( 2,799 ) 20,576 State ( 1,017 ) 60 1,746 ( 10,102 ) ( 2,739 ) 22,322 Total Income Tax Expense (Benefit) $ ( 10,718 ) $ 18,705 $ 24,834 F-27 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands): December 31, 2021 2020 Deferred Tax Assets: Bad debts $ 32 $ 156 Inventories 2,411 2,050 Accrued warranties 1,242 841 Accrued compensation 315 271 Accrued settlement — 524 Net operating loss 1,944 506 Equity-based compensation 948 154 Lease liabilities 2,661 — Premium on capped call 12,356 — Interest expense carryforward 5,301 — Other 275 239 Deferred Tax Assets 27,485 4,741 Valuation allowance ( 222 ) ( 208 ) Deferred Tax Assets, net 27,263 4,533 Deferred Tax Liabilities: Property, plant, and equipment ( 1,083 ) ( 1,043 ) Intangible assets ( 14,165 ) ( 16,604 ) ROU assets ( 2,670 ) — Deferred Tax Liabilities ( 17,918 ) ( 17,647 ) Deferred Tax Asset (Liability), net $ 9,345 $ ( 13,114 ) F-28 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements A reconciliation of income tax expense computed at the federal statutory rate of 21% to actual income tax expense at the Company’s effective rate is as follows (in thousands): Year Ended December 31, 2021 2020 2019 Income tax rate reconciliation Income tax expense (benefit) at U.S. statutory rate $ ( 12,835 ) $ 16,333 $ 13,562 State income taxes ( 1,545 ) 3,375 2,049 Permanent differences: Derecognition of tax assets from IRS examination — — 9,284 Equity-based compensation 1,542 852 168 Contingent consideration 567 5,553 134 Credits ( 620 ) ( 79 ) ( 284 ) Other nondeductible expenses 69 437 40 Effect of CARES Act — ( 6,608 ) — Foreign income benefit — ( 1,201 ) ( 155 ) Officer’s compensation 435 — — Transaction costs 950 — — Change in valuation allowance 14 — ( 45 ) Other 705 43 81 Total Income Tax Expense (Benefit) $ ( 10,718 ) $ 18,705 $ 24,834 The Company files income tax returns in the U.S. federal jurisdiction and in multiple states. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2015. As of December 31, 2021, the Company had federal income tax net operating loss (“NOL”) carryforwards of approximately $ 5.1 million. The Company has state income tax NOL carryforwards of approximately $ 9.7 million that will expire in future years beginning in 2029. Realization of deferred tax assets associated with federal and state net operating loss and federal tax credit carryforwards is dependent upon generating sufficient taxable income of the appropriate type, and in the appropriate jurisdictions, to utilize them prior to their expiration, if any. It is not more likely than not that deferred tax assets from certain state net operating loss and federal tax credit carryforwards would be realized due to type and location of future earnings and as such the Company increased the valuation allowance $ 14 thousand for the years ended December 31, 2021 and none for the year ended December 31, 2020. ASC 740, Income Taxes, addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. In accordance with ASC 740, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The Company’s assessments of its tax positions in accordance with ASC 740 did not result in changes that had a material impact on results of operations, financial condition or liquidity. The Company had no unrecognized income tax benefits at either December 31, 2021 or 2020. F-29 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. Among other things, the CARES Act provided the ability for taxpayers to carryback a net operating loss (“NOL”) arising in a taxable year beginning after December 31, 2017 and before January 1, 2021 to each of the five years preceding the year of the loss. The Company generated a significant NOL during its tax year ended March 31, 2019 and filed a carryback claim in June 2020 for this NOL. As a result of the carryback claim, the Company recorded an income tax benefit of $ 10.7 million on its consolidated statement of operations for the year ended December 31, 2020, resulting from the difference in the current U.S. federal tax rate of 21% and the tax rate of 35% applicable in the carryback year. The Company’s 2017 federal income tax return was selected for examination by the IRS in 2018. As a result of the examination, an adjustment related to the value allocated to the developed technology for tax purposes was potentially required. During 2019, the Company settled the 2017 examination and agreed to a reduction in the developed technology value from $ 210 million to $ 188 million for federal income tax purposes. As a result of this change in the value of the acquired developed technology, the Company reduced its NOL carryforwards by approximately $ 2.8 million for previously taken amortization and increased the deferred tax liability related to the revised developed technology tax basis by approximately $ 4.6 million. In addition, the Company will no longer receive tax basis upon payment of the Tax Receivable Agreement (“TRA”) liability, as such the related deferred tax asset of $ 4.7 million for the TRA was also written off during 2019. The adjustments resulting from the change in developed technology value have been recorded as an income tax expense for the year ended December 31, 2020. Refer to Note 16 - Commitments and Contingencies, for detail on the TRA, which was contingent consideration at the time of the Array acquisition. 8. Accrued Warranty Reserve The following table summarizes the activity related to the estimated accrued warranty reserve (in thousands): December 31, 2021 2020 Beginning balance $ 3,049 $ 2,592 Provision for warranties issued 1,064 1,054 Payments ( 373 ) ( 496 ) Warranty expirations ( 548 ) ( 101 ) Ending balance $ 3,192 $ 3,049 9. Senior Secured Credit Facility Long term debt consisted of the following (in thousands): F-30 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 2021 2020 Term loan facility $ 326,775 $ 460,000 Revolving credit facility — — 326,775 460,000 Less discount and issuance costs ( 23,291 ) ( 31,717 ) Long term debt, net of debt discount and financing costs 303,484 428,283 Less current portion of long-term debt ( 4,300 ) ( 4,313 ) Long-term Senior Secured Credit Facility debt, net of current portion, debt discount and financing costs $ 299,184 $ 423,970 Senior Secured Credit Facility On October 14, 2020, the Company entered into a senior secured credit facility which was amended on February 23, 2021 by the first amendment and on February 26, 2021 by the second amendment. The senior secured facility consisted originally of (i) a $ 575 million senior secured seven-year term loan facility (the “Term Loan Facility”) and (ii) a $ 150 million senior secured 5-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Senior Secured Credit Facility”). On February 23, 2021, the Company entered into the first amendment (“First Amendment”) to our Senior Secured Credit Facility. The First Amendment, in the case of Eurocurrency borrowings, lowers the London interbank offered rate floor to 50 basis points from 100 basis points and lowers the applicable margin to 325 basis points from 400 basis points per annum. This results in our current rate on the Term Loan Facility decreasing to 3.75 % down from 5 % prior to the First Amendment. On February 26, 2021, the Company entered into the incremental facility amendment No. 2 (the “Second Amendment”) to the Senior Secured Credit Facility. The Second Amendment increases the $ 150.0 million Revolving Credit Facility from $ 150.0 million to $ 200.0 million. Revolving Credit Facility Under the Revolving Credit Facility, the Company had a zero outstanding balance as of December 31, 2021 and 2020, $ 13.6 million and $ 46.6 million in standby letters of credit as of December 31, 2021 and 2020, and availability of $ 186.4 and $ 103.4 million at December 31, 2021 and 2020. Term Loan Facility The Term Loan Facility had a balance of $ 326.8 million and $ 460.0 million as of December 31, 2021 and 2020, respectively. The Company made unscheduled payoffs of the Term Loan Facility during the year in the aggregate of $ 130.0 million which resulted in the write-off of capitalized fees in the aggregate of $ 9.6 million. The Term Loan Facility accrued interest equal to applicable margin of 1 % plus base rate ( 2.75 % and 4.00 % at December 31, 2021 and 2020, respectively). The balance of the Term Loan Facility is presented in the accompanying consolidated balance sheets net of debt discount and issuance costs of $ 23.3 million and $ 31.7 million at December 31, 2021 and 2020, respectively. The debt discount and issuance costs are being amortized using the effective interest method. The rate was 4.9 % and 6.08 % at December 31, 2021 and 2020, respectively. The Term Loan Facility has an annual excess cash flow calculation, for which the prescribed formula did not result in requiring the Company to make any advance principal payments for the year ended December 31, 2021. F-31 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Interest Rate The interest rates applicable to the loans under the Term Loan Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 300 basis points per annum; or (ii) in the case of Eurocurrency borrowings, the greater of (a) the London interbank offered rate for the relevant currency, adjusted for statutory reserve requirements, and (b) 100 basis points, plus, in each case, the applicable margin of 400 basis points per annum. The interest rates applicable to the loans under the Revolving Facility equal, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the adjusted LIBOR rate as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 150 basis points, plus, in each case, the applicable margin of 225 basis points per annum; or (ii) in the case of Eurocurrency borrowings, the greater of (a) the London interbank offered rate for the relevant currency, adjusted for statutory reserve requirements, and (b) 50 basis points, plus, in each case, the applicable margin of 325 basis points per annum. The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00 % per annum of the original principal amount of the loans funded thereunder. There is no scheduled amortization under the Revolving Credit Facility. Guarantees and Security The obligations under the Senior Secured Credit Facility are guaranteed by ATI Investment Sub, Inc. and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Senior Secured Credit Facility are secured by a first priority security interest in substantially all of Array Tech, Inc.’s and the guarantors’ existing and future property and assets, including accounts receivable, inventory, equipment, general intangibles, intellectual property, investment property, other personal property, material owned real property, cash and proceeds of the foregoing. Prepayments and Amortization Loans under the Revolving Credit Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. Loans under the Term Loan Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than a 1 % premium with respect to prepayments on account of certain “repricing events,” subject to exceptions, occurring within 12 months of the closing date of the Senior Secured Credit Facility). The Senior Secured Credit Facility requires mandatory prepayments, but not permanent reductions of commitments thereunder, for excess cash flow, asset sales, subject to a right of reinvestment, and refinancing facilities. The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00 % per annum of the original principal amount of the loans funded thereunder. There is no scheduled amortization under the Revolving Credit Facility. Restrictive Covenants and Other Matters F-32 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Senior Secured Credit Facility contains affirmative and negative covenants including covenants that restrict our incurrence of indebtedness, incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type. The Revolving Credit Facility also includes a springing financial maintenance covenant that is tested on the last day of each fiscal quarter if the outstanding loans and certain other credit extensions under the Revolving Credit Facility exceed 35 % of the aggregate amount of commitments thereunder, subject to customary exclusions and conditions. If the financial maintenance covenant is triggered, the first lien net leverage ratio will be tested for compliance not to exceed 7.10 to 1.00. The Senior Secured Credit Facility also includes customary events of default, including the occurrence of a change of control. As of December 31, 2021, the Company was in compliance with all the required covenants. Future maturities of the Senior Secured Credit Facility (in thousands): Amount 2022 $ 4,300 2023 4,300 2024 4,300 2025 4,300 2026 4,300 Thereafter 305,275 $ 326,775 For the years ended December 31, 2021, 2020 and 2019, interest expense related to all long-term debt totaled $ 35.7 million, $ 11.3 million and $ 11.5 million, respectively, which consisted of cash interest, and amortization of the debt discount and financing costs. 10. Convertible Debt December 31, 2021 2020 1% Senior unsecured convertible notes $ 425,000 $ — Less: unamortized discount and issuance costs ( 13,137 ) — 1% Senior unsecured convertible notes, net (1) $ 411,863 $ — (1) Effective interest rate for the Notes for the year ended December 31, 2021 was 1.5 %. On December 3, 2021 and December 9, 2021, the Company completed a private offering of $ 375 million and $ 50 million over allotment, respectively, in aggregate principal amount of 1.00 % Convertible Senior Notes due 2028 (the “Notes”) resulting in proceeds of $ 364.7 million and $ 48.6 million, respectively, after deducting the original issue discount of 2.75 %. The Notes were issued pursuant to an indenture, dated December 3, 2021 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. F-33 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements The Notes are senior unsecured obligations of the Company and will mature on December 1, 2028, unless earlier converted redeemed or repurchased. The Notes bear interest at a rate of 1.00 % per year, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022. The Notes were not convertible during the quarter ended December 31, 2021 and none have been converted to date. Also given the average market price of the common stock has not exceeded the exercise price since inception, there was no dilutive impact for the year ended December 31, 2021. Redemption At any time prior to the close of business on the business day immediately preceding June 1, 2028, the Notes are convertible at the option of the holders only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price then in effect on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price per $ 1,000 principal amount of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate for the Notes on each such trading day; (3) if the Company calls such Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events as described in the Indenture. On or after June 1, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or any portion of their Notes at any time regardless of the foregoing circumstances. Upon conversion of the Notes, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the Notes being converted. The Company may redeem (an “Optional Redemption”) for cash all or any portion of the Notes, at its option, on or after December 6, 2025, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company redeems less than all the outstanding Notes, at least $ 100 million aggregate principal amount of Notes must be outstanding and not subject to redemption as of the date of the relevant notice of redemption. No sinking fund is provided for the Notes. The conversion rate for the Notes was initially 41.9054 shares of the Company’s common stock per $ 1,000 principal amount of Notes, which was equivalent to an initial conversion price of approximately $ 23.86 per share of common stock or 10.1 million shares of common stock. The initial conversion price of the Notes represented a premium of approximately 32.5 % to the last reported sale price of the Company’s common stock on the Nasdaq Global Market on November 30, 2021. The conversion rate for the Notes is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following F-34 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements certain corporate events that occur prior to the maturity date of the Notes or if the Company delivers a notice of redemption in respect of the Notes, the Company will, under certain circumstances, increase the conversion rate of the Notes for a holder who elects to convert its Notes (or any portion thereof) in connection with such a corporate event or convert its Notes called (or deemed called) for redemption during the related Redemption Period (as defined in the Indenture), as the case may be. If the Company undergoes a Fundamental Change (as defined in the Indenture), holders may require, subject to certain conditions and exceptions, the Company to repurchase for cash all or any portion of their Notes at a Fundamental Change Repurchase Price (as defined in the Indenture) equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, to, but excluding, the Fundamental Change Repurchase Date (as defined in the Indenture). The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company or its Significant Subsidiaries after which the Notes become automatically due and payable. The Convertible Notes were evaluated for embedded derivatives noting there were none that needed to be bifurcated and accounted for separately. Interest expense on the convertible debt of $ 0.4 million was recognized for the Notes included contractual interest expense of $ 0.3 million and the amortization of debt discount and issuance cost of $ 0.1 million for the year ended December 31, 2021. The discount and issuance costs will be amortized over the life of the debt using the effective interest rate of 1.5 %. Capped Call On November 30, 2021, concurrently with the pricing of the Notes, the Company also entered into privately negotiated capped call transactions (the “Capped Calls”) with Morgan Stanley & Co. LLC, Credit Suisse Capital LLC, through its agent, Credit Suisse Securities (USA) LLC and JPMorgan Chase Bank, N.A., New York Branch (collectively, the “Counterparties”). The Capped Calls each have an initial strike price of $ 23.8633 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $ 36.0200 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 17.8 million shares of the Company’s common stock. The Capped Calls are expected generally to reduce potential dilution to the common stock upon conversion of any Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The Company paid $ 52.9 million from the net proceeds from the issuance and sale of the Notes to purchase the Capped Calls. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event; a tender offer; and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to terminations of the Capped Calls, including changes in law; failures to deliver; and hedging disruptions. Certain Initial Purchasers under the Array Technologies, Inc. 1.00% Convertible Senior Notes due 2028 Purchase Agreement and Counterparties under the confirmations entered into in connection with the Capped Calls, or their affiliates, have engaged in, and may in the future engage in, other commercial dealings with the F-35 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Company or its affiliates in the ordinary course of business. They have received, or may in the future receive, customary fees and commissions for those transactions. The Capped Calls meet the criteria in ASC 815-40 to be classified within Stockholders' Equity, and therefore was recorded to additional paid in capital at the fair value on issuance which was equal to the premium paid. Due to the instrument being classified in equity, it is not remeasured after issuance. The Company made a tax election to integrate the Notes and the Capped Calls. The accounting impact of this tax election makes the Capped Calls deductible as original issue discount interest for tax purposes over the term of the note, and results in a $ 12.4 million deferred tax asset recorded as an adjustment to Additional paid-in capital on our Balance Sheet as of December 31, 2021. 11. Redeemable Perpetual Preferred Series A Redeemable Perpetual Preferred On August 10, 2021, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which on August 11, 2021, the Company issued and sold to certain investors (the “Purchasers”) 350,000 shares of a newly designated Series A Redeemable Perpetual Preferred Stock of the Company, par value $ 0.001 per share (the “Series A Redeemable Perpetual Preferred Stock”), and 7,098,765 shares of the Company’s common stock, par value $ 0.001 per share (“Common Stock”), for an aggregate purchase price of $ 346.0 million (the “Initial Closing”). Further, pursuant to the Securities Purchase Agreement, on September 27, 2021, the Company issued and sold to the Purchaser 776,235 shares of Common Stock for an aggregate purchase price of $ 776 (the “Prepaid Forward Contract”). The Company used net proceeds from the Initial Closing to repay $ 102.0 million, which was the amount outstanding under the Company’s existing revolving credit facility and prepaid $ 100 million under the Company’s term loan. The Purchaser is entitled to designate one representative to be appointed to the Company’s board of directors, and to appoint three non-voting observers to the Board, in each case until such time as the Purchaser no longer beneficially own shares of the Series A Redeemable Perpetual Preferred Stock with at least $ 100 million aggregate Liquidation Preference (as defined below). The Series A Redeemable Perpetual Preferred Stock has no maturity date. Additional Closings The Securities Purchase Agreement gives the Company the option to require the Purchaser to purchase, in one or more additional closings, up to 150,000 shares, until June 30, 2023, of the Series A Redeemable Perpetual Preferred Stock and up to 3,375,000 shares of Common Stock (or up to 6,100,000 shares of Common Stock in the event of certain price-related adjustments) (subject to certain equitable adjustments pursuant to any stock dividend, stock split, stock combination, reclassification or similar transaction) for an aggregate purchase price up to $ 148 million (the “Delayed Draw Commitment”). The Company evaluated the accounting for the instruments issued in the Securities Purchase Agreement and determined the Series A Redeemable Perpetual Preferred Stock and Common Stock issued in the Initial Closing, as well as the Prepaid Forward Contract, and Delayed Draw Commitment are freestanding instruments accounted for in equity. The Series A Redeemable Perpetual Preferred Stock is recorded in temporary equity on the consolidated balance sheets as it has redemption features upon certain triggering events that are outside the Company’s F-36 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements control, such as a fundamental change. The proceeds of the Series A Redeemable Perpetual Preferred Stock, and transactions costs and discount of $ 15.4 million have been allocated to each instrument based on its relative fair value. At the Initial Closing date, $ 229.8 million was allocated to the Series A Redeemable Perpetual Preferred Stock, $ 105.4 million to Common Stock, $ 12.4 million to the Delayed Draw Commitment which was recorded as a debit to additional paid-in-capital, and $ 11.7 million for a Prepaid Forward Contract. Dividends On or prior to the fifth anniversary of the Initial Closing, the Company may pay dividends on the Series A Redeemable Perpetual Preferred Stock either in cash at the then-applicable Cash Regular Dividend Rate (as defined below), through accrual to the Liquidation Preference at the Accrued Regular Dividend Rate of 6.25 % (the “Permitted Accrued Dividends”), or a combination thereof. Following the fifth anniversary of the Initial Closing, dividends shall be payable only in cash. To the extent the Company does not declare such dividends and pay in cash following the fifth anniversary of the Initial Closing, the dividends accrue to the Liquidation Preference (“Default Accrued Dividends”) at the then-applicable Cash Regular Dividend Rate plus 200 basis points. In the event there are Default Accrued Dividends outstanding for six consecutive quarters, the Company, at the option of the holder of the Series A Redeemable Perpetual Preferred Stock (each a “Holder”), will pay 100 % of the amount of Default Accrued Dividends by delivering to the Holder a number of shares of Common Stock equal to the quotient of (i) the amount of Default Accrued Dividends) divided by (ii) 95 % of the 30-day VWAP of the Common Stock (“Non-Cash Dividend”). The “Cash Regular Dividend Rate” of the Series A Redeemable Perpetual Preferred Stock means (i) initially, 5.75 % per annum on the Liquidation Preference and (ii) increased by (a) 50 basis points on each of the fifth, sixth and seventh anniversaries of the Initial Closing and (b) 100 basis points on each of the eighth, ninth and tenth anniversaries of the Initial Closing. The “Accrued Regular Dividend Rate” on the Series A Redeemable Perpetual Preferred Stock means 6.25 % per annum on the Liquidation Preference. Dividends declared as of December 31, 2021 were $ 8.2 million and $ 8.1 million were paid. The Series A preferred stock have similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock. As a result, the discount on Series A preferred stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the perpetual dividend using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the Series A preferred stock by a corresponding amount. The discount of $ 120.2 million is therefore being amortized over five years using the effective yield method. The amortization in each period is the amount which, together with the stated dividend in the period, results in a constant rate of effective cost with regard to the carrying amount of the Series A preferred stock. The Company has presented the Series A Redeemable Perpetual Preferred Stock in temporary equity and is accreting the discount on the increasing rate dividends using the effective interest method. Such accretion totaled $ 7.4 million for the year ended December 31, 2021. The Company had no dividends accreted to the carrying value of the Series A Redeemable Perpetual Preferred Stock the regular cash rate of dividends of 5.75 %, as they were paid as of the year ended December 31, 2021. Fees F-37 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Until June 30, 2023, the Company will pay the Purchaser a cash commitment premium on the unpurchased portion of Delayed Draw Commitment as follows: a. — % through the six-month anniversary of the Initial Closing; b. 1.5 % from the six-month anniversary of the Initial Closing through the 12-month anniversary of the Initial Closing; and c. 3.0 % from the 12-month anniversary of the Initial Closing through June 30, 2023. The Company may terminate some or all of the Delayed Draw Commitment, from time to time, at its sole discretion. Ranking and Liquidation Preference The Series A Redeemable Perpetual Preferred Stock ranks senior to the Common Stock with respect to dividend rights and rights upon the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (a “Liquidation”). Upon a Liquidation, each share of Series A Redeemable Perpetual Preferred Stock would be entitled to receive an amount per share (the “Liquidation, Redemption or Repurchase Amount”) equal to the greater of (i) the Liquidation Preference of such share, plus all accrued and unpaid dividends (including any Accrued Dividends) thereon and (ii) an amount in cash equal to the sum of (a) 130.0 % of the Initial Liquidation Preference (as defined below) of such share, minus (b) the cumulative amount of cash dividends paid in respect of such share prior to such payment. As used herein, “Liquidation Preference” means, with respect to any share of the Series A Redeemable Perpetual Preferred Stock, the initial liquidation preference of $ 1,000 per share (the “Initial Liquidation Preference”) plus any Accrued Dividends of such share as of the time of determination. Redemption Rights The Company may redeem all or any portion of the Series A Redeemable Perpetual Preferred Stock (in increments of not less than $ 200 million based on the Liquidation Preference of such shares of Series A Redeemable Perpetual Preferred Stock to be redeemed at such time (or such lesser amount to the extent the Company chooses to redeem all of the outstanding shares of Series A Redeemable Perpetual Preferred Stock)) for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount. Upon a “Fundamental Change” (involving a change of control, bankruptcy, insolvency or liquidation of the Company as further described in the Certificate of Designations), each Holder shall have the right to require the Company to redeem all or any part of the Holder’s Series A Redeemable Perpetual Preferred Stock for an amount in cash equal to the Liquidation, Redemption or Repurchase Amount. Voting and Consent Rights Each Holder of Series A Redeemable Perpetual Preferred Stock will have one vote per share on any matter on which Holders of Series A Redeemable Perpetual Preferred Stock are entitled to vote separately as a class (as described below), whether at a meeting or by written consent. The Holders of shares of Series A Redeemable Perpetual Preferred Stock do not otherwise have any voting rights. The consent of the Holders of a majority of the outstanding shares of Series A Redeemable Perpetual Preferred Stock will be required for so long as the Threshold Amount remains outstanding for (i) amendments to the Company’s organizational documents that have an adverse effect on the Holders, (ii) issuances by the Company of securities that are senior to, or equal in priority with, the Series A Redeemable Perpetual Preferred Stock, (iii) entrance into, or amendments to, transactions with affiliates of the Company, (iv) incurrence by the Company of indebtedness, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5 -to-1 after giving effect to such incurrence (other than drawdowns by the Company under the Company’s current F-38 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Revolving Credit Facility) or (v) any payment of dividends or making of distributions on equity securities of the Company ranking junior to the Series A Redeemable Perpetual Preferred Stock or redemptions, purchases or direct or indirect acquisitions of such equity securities ranking junior to or parity with the Series A Redeemable Perpetual Preferred Stock by the Company, unless the Consolidated Total Leverage Ratio (as defined in the Certificate of Designations) would not exceed 8.5 -to-1 after giving effect to such dividends, distributions, redemptions, purchases or acquisitions. 12. Related Party Loan The Company had a senior secured promissory note, as amended, with a unit holder of Former Parent that had a balance, net of debt discount and issuance costs, as of December 31, 2019 of $ 41.8 million for which the Company paid off the balance on July 31, 2020 to settle the obligation with respect to the Senior Secured Loan. The Company paid interest expense for the years ended December 31, 2020 and 2019 of $ 3.8 million and $ 7.3 million, respectively, which consisted of cash interest, PIK interest and amortization of the debt discount. 13. Common and Preferred Stock Authorized Shares On October 14, 2020, in connection with the IPO, a new Certificate of Incorporation became effective for the Company, which authorized capital stock of 1,000,000,000 shares of common stock, $ 0.001 par value, and 5,000,000 shares of preferred stock, $ 0.001 par value. Common Stock Voting Rights Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held as of the applicable record date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. Dividends The holders of Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the Board of Directors of the Company (the “Board”), subject to the preferences applicable to holders of Preferred Stock. Liquidation In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock shall be divided among and paid ratably to the holders of Common Stock, subject to the preferences applicable to holders of Preferred Stock. Preferred Stock Preferred Stock may be issued from time to time by the Company for such consideration as may be fixed by the Board. The Board is authorized to provide for one or more series of Preferred Stock and to fix the designation of such series, the voting rights, preferences and relative, participating, optional and other special F-39 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, as may be permitted under the General Corporation Law of the State of Delaware. The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding. 14. Revenues Based on Topic 606 provisions, the Company disaggregates its revenue from contracts with customers by those sales recorded over-time and sales recorded at a point in time. The following table presents the Company’s revenue disaggregated by sales recorded over-time and sales recorded at a point in time (in thousands): Year Ended December 31, 2021 2020 2019 Over-time Revenues $ 626,057 $ 503,238 $ 493,633 Point in time Revenues 227,261 369,424 154,266 Total Revenue $ 853,318 $ 872,662 $ 647,899 As discussed in FN 22 to the consolidated financial statements, ITC-related contracts were determined to have multiple performance obligations satisfied at a point in time instead of one performance obligation satisfied over time. Total revenue was not impacted, but the disaggregated revenue information above for 2020 and 2019 has been revised to correct this error, which resulted in $360.1 and $106.2 of revenue being reclassified from over-time revenue to point in time revenue for 2020 and 2019, respectively . Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities) on the condensed consolidated balance sheets. The majority of the Company’s contract amounts are billed as work progresses in accordance with agreed-upon contractual terms, which generally coincide with the shipment of one or more phases of the project. Billing sometimes occurs subsequent to revenue recognition, resulting in contract assets. The changes in contract assets (i.e., unbilled receivables) and the corresponding amounts recorded in revenue relate to fluctuations in the timing and volume of billings for the Company’s revenue recognized over-time. 15. Earnings (Loss) per Share The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts): F-40 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Year Ended December 31, 2021 2020 2019 Net income (loss) $ ( 50,403 ) $ 59,073 39,745 Preferred dividends and accretion ( 15,715 ) — — Net income (loss) to common shareholders ( 66,118 ) 59,073 39,745 Basic: Weighted-average shares 129,984 121,467 119,994 Earnings (loss) per share $ ( 0.51 ) $ 0.49 $ 0.33 Diluted: Weighted-average shares 129,984 121,467 119,994 Equity compensation dilutive securities — 47 — Weighted average dilutive shares 129,984 121,514 119,994 Earnings (loss) per share $ ( 0.51 ) $ 0.49 $ 0.33 Potentially dilutive common shares issuable pursuant to equity-based awards of 227,253 were not included for the year ended December 31, 2021 as their potential effect was anti-dilutive as the Company generated a net loss. There were no potentially dilutive common shares issuable pursuant to our 1% Senior Notes as the stock price is below the strike price and the Company generated a net loss. The Company’s capped call option agreement entered into in December 2021 is not included in the calculation of the earnings per share as the impact would be anti-dilutive. The potential shares issuable under the Company’s convertible 1% notes issued in December 2021 are not included in the earnings per share calculation as the par value of the notes is required to be paid in cash upon conversion and the stock price has not exceeded the conversion price on the notes at December 31, 2021. There were 26,671,594 Class B units and 1,000 Class C units of Former Parent issued to certain employees or directors of the Company which were not included in the calculation of basic or diluted EPS for the years ended December 31, 2020 and 2019, as the Class B and Class C units do not represent potential units of the Company. 16. Commitments and Contingencies Litigation The Company, in the normal course of business, is subject to claims and litigation. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company would accrue a liability for the estimated loss. On May 14, 2021, a putative class action was filed in the U.S. District Court for the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2) and 15 of the Securities Exchange Act of 1933 (“Plymouth Action”). The Plymouth Action alleges misstatements and/or omissions in the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s December 2020 offering (the “2020 Follow-On Offering”), and the Company’s March 2021 F-41 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements offering (the “2021 Follow-On Offering”) during the putative class period of October 14, 2020 through May 11, 2021. On June 30, 2021, a second putative class action was filed in the Southern District of New York against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11 and 15 of the Securities Exchange Act of 1933 (“Keippel Action”). The Keippel Action similarly alleged misstatements and/or omissions in certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering during the putative class period of October 14, 2020 through May 11, 2021. On July 6, 2021, the Court entered an order that the Keippel Action was in all material respects substantially similar to the Plymouth Action that both actions arise out of the same or similar operative facts, and that the parties are substantially the same parties. The Court accordingly consolidated the Keippel Action with the Plymouth Action for all pretrial purposes and, ordered all filings to be made in the Plymouth Action. On July 16, 2021, a verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“First Derivative Action”). The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for misleading proxy statements, (2) breach of fiduciary duty, (3) unjust enrichment, (4) abuse of control, (5) gross mismanagement, (6) corporate waste, (7) aiding and abetting breach of fiduciary duty, and (8) contribution under sections 10(b) and 21D of the Securities Exchange Act of 1934. On July 30, 2021, a second and related verified derivative complaint was filed in the Southern District of New York against certain officers and directors of the Company (“Second Derivative Action”). The complaint alleges: (1) violations of Section 14(a) of the Securities Exchange Act of 1934 for causing the issuance of a false/misleading proxy statement, (2) breach of fiduciary duty, and (3) aiding and abetting breaches of fiduciary duty. On August 24, 2021, the Second Derivative Action was consolidated with the First Derivative Action, the Court appointed co-lead counsel, and the case was temporarily stayed pending the entry of an order on all motions to dismiss directed at the pleadings filed in the Plymouth Action. The stay shall remain in effect until the later of (a) the entry of an order on any motions to dismiss the Plymouth Action or, (b) to the extent the complaint in the Plymouth Action is amended, the entry of an order on any motions to dismiss any such amended complaints in the Plymouth Action. On September 21, 2021, the Court appointed a group comprised of institutional investors Plymouth County Retirement Association and Carpenters Pension Trust Fund for Northern California as lead plaintiff in the Plymouth Action. The deadline for the lead plaintiff to file an amended complaint in the Plymouth action was originally November 19, 2021 but was subsequently extended by agreement of the parties and further order of the Court. On December 7, 2021, an amended class action complaint was filed by lead plaintiff in the Plymouth Action against the Company and certain officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, promulgated thereunder, and Sections 11, 12(a)(2), and 15 of the Securities Exchange Act of 1933, on behalf of a putative class of persons and entities that purchased or otherwise acquired the Company’s securities during the period from October 14, 2020 through May 11, 2021 (the “Consolidated Amended Complaint”). The Consolidated Amended Complaint alleges misstatements and/or omissions in: (1) certain of the Company’s registration statements and prospectuses related to the Company’s IPO, the Company’s 2020 Follow-On Offering, and the Company’s 2021 Follow-On Offering; (2) in the F-42 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Company’s annual report and associated press release announcing results for the fourth quarter and full fiscal year 2020; and (3) in the Company’s November 5, 2020 and March 9, 2021 earnings calls. Consistent with the individual rules of practice for the Court in the Plymouth Action, on January 24, 2022, the defendants in the Plymouth Action, including the Company and certain of its officers and directors named as defendants therein, served on lead plaintiff and the Court a letter outlining why the Consolidated Amended Complaint should be dismissed in its entirety. Lead plaintiff must respond to that letter on or before February 23, 2022, stating the extent, if any, to which lead plaintiff concurs with the defendants’ objections and the amendments, if any, to be made to the Consolidated Amended Complaint to address them, or else stating the reasons and controlling authority that lead plaintiff asserts supports the Consolidated Amended Complaint. If, as a result of this exchange of letters, the parties have failed to resolve their dispute about the sufficiency of the Consolidated Amended Complaint, then, on or before March 21, 2022, defendants must submit a letter to the Court setting forth the reason why a motion dismiss is warranted. At this time the Company believes that the likelihood of any material loss related to these matters is remote given the preliminary stage of the claims and strength of the Company’s defenses. The Company has not recorded any material loss contingency in the consolidated balance sheets as of December 31, 2021. Contingent Consideration Tax Receivable Agreement Concurrent with the Acquisition, Array Tech, Inc. (f/k/a Array Technologies, Inc.) entered into a Taxes Receivable Agreement (“TRA”) with the former majority shareholder of Array. The TRA is valued based on the future expected payments under the agreement. The TRA provides for the payment by Array Tech, Inc. to the former owners for certain federal, state, local and non-U.S. tax benefits deemed realized in post-closing taxable periods by Array, from the use of certain deductions generated by the increase in the tax value of the developed technology. The TRA is accounted for as contingent consideration and subsequent changes in fair value of the contingent liability are recognized in contingent consideration in the accompanying consolidated statements of operations. At December 31, 2021 and December 31, 2020, the fair value of the TRA was $ 14.6 million and $ 19.7 million, respectively. Estimating the amount of payments that may be made under the TRA is by nature imprecise. The significant fair value inputs used to estimate the future expected TRA payments to the former owners include the timing of tax payments, a discount rate, book income projections, timing of expected adjustments to calculate taxable income and the projected rate of use for attributes defined in the TRA. Payments made under the TRA consider tax positions taken by the Company and are due within 125 days following the filing of the Company’s U.S. federal and state income tax returns under procedures described in the agreement. The current portion of the TRA liability is based on tax returns. The TRA will continue until all tax benefit payments have been made or the Company elects early termination under the terms described in the TRA. As of December 31, 2021, the undiscounted future expected payments through December 31, under the TRA are as follows (in thousands): F-43 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Amount 2022 $ 1,773 2023 — 2024 3,533 2025 1,772 2026 1,774 Thereafter 11,532 $ 20,384 Earn-Out Liability The Company had a liability to the selling stockholders of Array for contingent consideration consisting of earn-out payments in the form of cash upon the occurrence of certain events, including the sale, transfer, assignment, pledge, encumbrance, distribution or disposition of shares held by the acquirer to a third-party; initial public offering of the equity securities of Former Parent, acquirer or the Company; the sale of equity securities or assets of Former Parent, acquirer or the Company to a third-party; or a merger, consolidation, recapitalization or reorganization of Former Parent, acquirer or the Company. The maximum aggregate earn-out consideration was $ 25.0 million. The earn-out liability was paid off in the fourth quarter of the fiscal year ended December 31, 2020. The fair value of the earn-out liability was initially determined as of the Acquisition Date using unobservable inputs. These inputs include the estimated amount and timing of future cash flows, the probability of a qualifying event occurring, and a risk-free rate used to adjust the probability-weighted cash flows to their present value. Subsequent to the Acquisition Date, at each reporting period, the earn-out liability was re-measured to fair value with changes in fair value recorded in contingent consideration in the accompanying consolidated statements of operations. The following table summarizes the liability related to the estimated contingent consideration (in thousands): TRA Earn-Out Liability Contingent Consideration Balance, December 31, 2018 $ 17,168 $ 442 $ 17,610 IRS Settlement ( 2,727 ) — ( 2,727 ) Fair value adjustment 3,367 — 3,367 Balance, December 31, 2019 17,808 442 18,250 IRS Settlement 1,883 24,558 26,441 Fair value adjustment — ( 25,000 ) ( 25,000 ) Balance, December 31, 2020 19,691 — 19,691 Fair value adjustment 2,696 — 2,696 Payments ( 7,810 ) — ( 7,810 ) Balance, December 31, 2021 $ 14,577 $ — $ 14,577 The TRA and earn-out liabilities require significant judgment and are classified as Level 3 in the fair value hierarchy. F-44 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Surety Bond The Company provides surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company’s performance in accordance with contractual or legal obligations. As of December 31, 2021, the maximum potential payment obligation with regard to surety bonds was $ 160.4 million. 17. Fair Value of Financial Instruments The carrying values and the estimated fair values of debt financial instruments as of December 31 are as follows: 2021 2020 Carrying Value Fair Value Carrying Value Fair Value Convertible senior notes $ 411,863 $ 410,771 $ — $ — The carrying values of the Company's revolving credit facility recorded in long-term debt on the Balance Sheet approximate fair value due to the variable interest rate. The fair value of the Convertible senior notes is estimated using Level 2 inputs as they are not registered securities nor listed on any securities exchange but may be traded by qualified institutional buyers. 18. Equity-Based Compensation 2020 Plan On October 14, 2020, the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) became effective. The 2020 Plan authorized 6,683,919 new shares, subject to adjustments pursuant to the 2020 Plan. During the year ended December 31, 2021, the Company granted an aggregate of 661,924 restricted stock units (“RSUs”) to employees and board of director members and 177,472 Performance Stock Units (PSUs) to certain executives. The fair value of the RSUs is determined using the market value of common stock on the grant date. The PSUs cliff vest after three years and upon meeting certain revenue and adjusted EPS targets. The PSUs also contain a modifier based on the total stock return (TSR) compared to a certain Index which modifies the number of PSUs that vest. The PSUs were valued using a Monte-Carlo simulation method with a volatility assumption of 66 %, risk free interest rate of 0.28 % based on the United States Treasury Constant Maturity rates and no dividends paid assumption. Based on results achieved in 2021 and the forecasted amounts over the remainder of the performance period, the Company does not expect the units to vest and therefore has recognized no expense in 2021. F-45 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Activity under the 2020 Plan was as follows: Number of Shares Weighted Average Grant Date Fair Value RSUs Unvested, December 31, 2019 — — Granted 500,006 $ 22.00 Vested — — Forfeited — — Unvested, December 31, 2020 500,006 $ 22.00 Granted 661,924 $ 23.17 Vested ( 157,473 ) $ 22.00 Forfeited ( 74,048 ) $ 27.51 Unvested, December 31, 2021 930,409 $ 22.39 Number of Shares Weighted Average Grant Date Fair Value PSUs Unvested, December 31, 2020 — — Granted 177,472 $ 28.25 Vested — — Forfeited ( 29,785 ) 30.74 Unvested, December 31, 2021 147,687 $ 27.75 Class B Units and Class C Units of Former Parent The Company accounted for equity grants to employees (Class B units and Class C units, “the Units”, of Former Parent) as equity-based compensation under ASC 718, Compensation-Stock Compensation . The Units contain vesting provisions as defined in the agreement. Vested units do not forfeit upon termination and represent a residual interest in Former Parent. Equity-based compensation cost is measured at the grant date fair value and is recognized on a straight-line basis over the requisite service period, including those units with graded vesting with a corresponding credit to additional paid-in capital as a capital contribution from Former Parent. However, the amount of equity-based compensation at any date is equal to the portion of the grant date value of the award that is vested. The Units issued to employees are measured at fair value on the grant date using an option pricing model. The Company utilizes the estimated weighted average of the Company’s expected fund life dependent on various exit scenarios to estimate the expected term of the awards. Expected volatility is based on the average of historical and implied volatility of a set of comparable companies, adjusted for size and leverage. The risk-free rates are based on the yields of U.S. Treasury instruments with comparable terms. Actual results may vary depending on the assumptions applied within the model. F-46 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements On November 19, 2019 and May 19, 2020, Former Parent issued 22,326,653 and 4,344,941 , respectively, Class B units to certain employees of the Company. On March 28, 2020, Former Parent issued 1,000 Class C units to a member of the board of directors of Array Technologies, Inc. On March 23, 2021, in connection with the closing of the 2021 Follow-on Offering, all of the outstanding Class B Units of Former Parent were immediately vested per the terms of the equity awards, resulting in the Company accelerating the recognition of expense of $ 8.9 million. For the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 16.3 million, $ 4.8 million and $ 0.8 million, respectively, in equity-based compensation. At December 31, 2021, the Company had $ 16.8 million of unrecognized compensation costs related to RSU’s which is expected to be recognized over approximately 2.1 years. There were 103,833 forfeitures during the year ended December 31, 2021, and no forfeitures during 2020 and 2019. 19. Leases Effective January 1, 2021, the Company adopted ASC 842 Leases using the modified retrospective approach. The Company elected the use of the package of practical expedients permitted under the transition guidance which allows the Company not to reassess whether a contract contains a lease, carry forward the historical lease classification and not reassess initial direct lease costs. The Company also elected to apply the short-term measurement and recognition exemption in which the right-of-use (“ROU”) assets and lease liabilities are not recognized for short-term leases. Adoption of this standard resulted in recording of net operating lease ROU assets and corresponding operating lease liabilities of $ 13.2 million and $ 13.5 million, respectively. The standard did not materially affect the consolidated statements of income and had no impact on the consolidated statements of cash flows. The following table summarizes the balances as it relates to leases at the end of the period (in thousands): Location on the consolidated balance sheet December 31, 2021 ROU Asset Other assets $ 11,245 Lease liability, current portion Other current liabilities $ 5,909 Lease liability, long-term portion Other long-term liabilities 5,359 Total lease liability $ 11,268 The Company determines if an arrangement is a lease at its inception. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets also include any initial direct costs and prepayments less lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. As the Company’s leases generally do not provide an implicit rate, the Company uses its collateralized incremental borrowing rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease payments. Lease expense for these leases is recognized on a straight-line basis over the lease term. F-47 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Operating lease arrangements are comprised primarily of real estate and equipment agreements for which the right-of-use assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued liabilities or other long-term liabilities in the consolidated balance sheets. The details of the Company’s operating leases are as follows (in thousands): Year Ended December 31, 2021 Operating lease expense $ 6,635 Variable lease expense 106 Short-term lease expense — Total lease expense $ 6,741 The following table presents the maturities of lease liabilities as of December 31, 2021 (in thousands): Operating Leases 2022 $ 4,213 2023 1,782 2024 1,782 2025 1,027 2026 1,023 Thereafter 3,197 Total lease payments 13,024 Less: Imputed lease interest ( 1,756 ) Total lease liabilities $ 11,268 The following table represents future minimum lease obligations under non-cancelable operating leases as of December 31, 2020 (in thousands): Operating Leases 2021 $ 6,663 2022 6,073 2023 893 2024 791 2025 15 Thereafter — Total $ 14,435 The Company’s weighted-average remaining lease-term and weighted-average discount rate are as follows: Year Ended December 31, 2021 Weighted average remaining lease-term 3.8 years Weighted average discount rate 5 % Supplemental cash flow and other information related to operating leases are as follows (in thousands): F-48 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Year Ended December 31, 2021 Operating cash flows from operating leases $ 6,644 Non cash investing activities: Lease liabilities arising from obtaining right-of-use assets $ 17,363 20. Related Party Transactions Accounts Payable-Related Party The Company had $ 0.6 million and $ 2.2 million at December 31, 2021 and 2020, respectively, of accounts payable-related party with the former shareholders of Array. The payables relate to a federal tax refund related to the pre-Acquisition periods, restricted cash at Acquisition Date which were due to the sellers of Array upon release of the restriction offset by a receivable related to a sales/use tax audit from the pre-Acquisition period for which the seller provided the Company with indemnification. Consent Fees-Related Party The Company incurred $ 2.2 million in consent fees with the former majority shareholder of Array to allow a carryback of post-acquisition net operating losses to pre-acquisition periods under the CARES Act. The consent fee is included in accounts payable – related party and other expense, net in the accompanying consolidated financial statements at December 31, 2020. Special Distribution to Former Parent On October 14, 2020, the Company issued a special distribution of $ 589 million to Former Parent (the “Special Distribution”). Related Party Loans - see Note 12 Contingent Consideration - see Note 16 21 . Geographic Information Summary information about geographic areas: ASC 280 (“Segment Reporting”) establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one operating and reportable segment and derives revenues from selling its product. The Company’s long-lived assets are located in the United States. Revenues within geographic areas based upon Customers’ project location (in thousands): F-49 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Year Ended December 31, 2021 2020 2019 United States $ 826,639 $ 805,070 $ 563,157 Australia 5,509 45,216 51,531 Rest of the world 21,170 22,376 33,211 Total Revenue $ 853,318 $ 872,662 $ 647,899 F-50 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements 22. Restatement (Unaudited) Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements During the preparation of the consolidated financial statements as of and for the year ended December 31, 2021, the Company identified errors in the accounting for certain contracts under ASC 606. Specifically, certain contracts were inappropriately combined with other contracts and ITC related contracts were determined to have multiple performance obligations satisfied at a point in time instead of one performance obligation satisfied over time. The Company’s management and the audit committee of the Company’s Board of Directors concluded that it is appropriate to restate the quarterly unaudited condensed consolidated financial statements for the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021. The following presents the restated quarterly unaudited financial statements as of March 31, 2021, June 30, 2021 and September 30, 2021, as well as the statements for the three month period ended March 31, 2021, the three and six month periods ended June 30, 2021 and the three and nine month periods ended September 30, 2021. F-51 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements March 31, 2021 (in thousands, except per share and share amounts) (unaudited) As Previously Reported Restatement Adjustments As Restated ASSETS Current assets Cash and cash equivalents $ 19,133 $ 19,133 Accounts receivable, net 121,921 2,308 124,229 Inventories, net 124,705 124,705 Income tax receivables 4,155 4,155 Prepaid expenses and other 15,639 15,639 Total current assets 285,553 2,308 287,861 Property, plant and equipment, net 9,740 9,740 Goodwill 69,727 69,727 Other intangible assets, net 192,383 192,383 Other assets 25,873 25,873 Total assets $ 583,276 $ 2,308 $ 585,584 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable $ 71,823 $ 71,823 Accounts payable - related party 2,608 2,608 Accrued expenses and other 34,551 34,551 Accrued warranty reserve 3,098 3,098 Income tax payable 10,224 657 10,881 Deferred revenue 89,880 89,880 Current portion of contingent consideration 9,567 9,567 Current portion of term loan 4,300 4,300 Other current liabilities 6,288 6,288 Total current liabilities 232,339 657 232,996 Long-term liabilities Deferred tax liability 13,043 ( 38 ) 13,005 Contingent consideration, net of current portion 10,272 10,272 Other long-term liabilities 6,055 6,055 Long-term debt, net of current portion, debt discount and issuance costs 391,682 391,682 Total long-term liabilities 421,052 ( 38 ) 421,014 Total liabilities 653,391 619 654,010 Commitments and contingencies (Note 12) Preferred stock of 0.001 par value - 5,000,000 shares authorized; none issued as of March 31, 2021 — — F-52 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Common stock of $ 0.001 par value - 1,000,000,000 shares authorized; 126,994,467 shares issued as of March 31, 2021 127 127 Additional paid-in capital 148,370 148,370 Accumulated deficit ( 218,612 ) 1,689 ( 216,923 ) Total stockholders’ deficit ( 70,115 ) 1,689 ( 68,426 ) Total liabilities and stockholders’ deficit $ 583,276 $ 2,308 $ 585,584 June 30, 2021 As Previously Reported Restatement Adjustments As Reported ASSETS Current assets Cash and cash equivalents $ 17,682 $ 17,682 Accounts receivable, net 153,610 ( 3,972 ) 149,638 Inventories, net 137,666 137,666 Income tax receivables 9,657 ( 1,735 ) 7,922 Prepaid expenses and other 11,597 11,597 Total current assets 330,212 ( 5,707 ) 324,505 Property, plant and equipment, net 9,763 9,763 Goodwill 69,727 69,727 Other intangible assets, net 186,507 186,507 Other assets 26,109 26,109 Total assets $ 622,318 $ ( 5,707 ) $ 616,611 LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts payable $ 81,377 81,377 Accounts payable - related party 610 610 Accrued expenses and other 19,129 19,129 Accrued warranty reserve 2,968 2,968 Income tax payable — — Deferred revenue 51,458 51,458 Current portion of contingent consideration 1,908 1,908 Current portion of term loan 4,300 4,300 Other current liabilities 6,379 6,379 Total current liabilities 168,129 — 168,129 Long-term liabilities Deferred tax liability 14,472 ( 1,896 ) 12,576 F-53 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Contingent consideration, net of current portion 10,108 10,108 Other long-term liabilities 4,273 4,273 Long-term debt, net of current portion, debt discount and issuance costs 493,945 493,945 Total long-term liabilities 522,798 ( 1,896 ) 520,902 Total liabilities 690,927 ( 1,896 ) 689,031 Commitments and contingencies (Note 12) Preferred stock of 0.001 par value - 5,000,000 shares authorized; none issued as of June 30, 2021 — — Common stock of $ 0.001 par value - 1,000,000,000 shares authorized; 126,994,467 shares issued as of June 30, 2021 127 127 Additional paid-in capital 149,893 149,893 Accumulated deficit ( 218,629 ) ( 3,811 ) ( 222,440 ) Total stockholders’ deficit ( 68,609 ) ( 3,811 ) ( 72,420 ) Total liabilities and stockholders’ deficit $ 622,318 $ ( 5,707 ) $ 616,611 September 30, 2021 As Previously Reported Restatement Adjustments As Restated ASSETS Current assets Cash and cash equivalents $ 116,391 $ 116,391 Restricted cash — — Accounts receivable, net 177,462 ( 7,354 ) 170,108 Inventories, net 173,126 173,126 Income tax receivables 6,453 1,029 7,482 Prepaid expenses and other 18,193 18,193 Total current assets 491,625 ( 6,325 ) 485,300 Property, plant and equipment, net 10,202 10,202 Goodwill 69,727 69,727 Other intangible assets, net 180,630 180,630 Other assets 24,405 24,405 Total assets $ 776,589 $ ( 6,325 ) $ 770,264 LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT) Current Liabilities Accounts payable $ 84,703 84,703 Accounts payable - related party 610 610 F-54 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Accrued expenses and other 31,256 31,256 Accrued warranty reserve 3,025 3,025 Income tax payable 629 629 Deferred revenue 81,347 81,347 Current portion of contingent consideration 2,168 2,168 — — Current portion of term loan 4,300 4,300 Other current liabilities 6,457 6,457 Total current liabilities 214,495 — 214,495 Long-term liabilities Deferred tax liability 6,583 ( 505 ) 6,078 Contingent consideration, net of current portion 10,784 10,784 Other long-term liabilities 2,953 2,953 Long-term debt, net of current portion, debt discount and issuance costs 299,212 299,212 Total long-term liabilities 319,532 ( 505 ) 319,027 Total liabilities 534,027 ( 505 ) 533,522 Commitments and contingencies (Note 13) Series A Redeemable Perpetual Preferred Stock of $ 0.001 par value - 500,000 authorized; 350,000 issued as of September 30, 2021; liquidation preference of $ 352.8 million at September 30, 2021 235,278 235,278 Stockholders’ equity/(deficit) — Preferred stock of $ 0.001 par value - 4,500,000 shares authorized; zero issued as of September 30, 2021 — — Common stock of $ 0.001 par value - 1,000,000,000 shares authorized; 134,869,467 shares issued as of September 30, 2021 135 135 Additional paid-in capital 251,330 251,330 Accumulated deficit ( 244,181 ) ( 5,820 ) ( 250,001 ) Total stockholders’ equity/(deficit) 7,284 ( 5,820 ) 1,464 Total liabilities, redeemable perpetual preferred stock and stockholders’ equity/(deficit) $ 776,589 $ ( 6,325 ) $ 770,264 F-55 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended March 31, 2021 (in thousands, expect per share and share amounts) (unaudited) As Previously Reported Restatement Adjustment As Restated Revenue 245,932 $ 2,308 $ 248,240 Cost of revenue 202,074 202,074 Gross profit 43,858 2,308 46,166 Operating expenses General and administrative 24,673 24,673 Contingent consideration 148 148 Depreciation and amortization 5,984 5,984 Total operating expenses 30,805 — 30,805 Income from operations 13,053 2,308 15,361 Other expense Other expense, net ( 78 ) ( 78 ) Interest expense ( 9,009 ) ( 9,009 ) Total other expense ( 9,087 ) — ( 9,087 ) Income before income tax expense 3,966 2,308 6,274 Income tax expense 1,079 619 1,698 Net income $ 2,887 $ 1,689 $ 4,576 Earnings per share Basic $ 0.02 $ 0.01 $ 0.04 Diluted $ 0.02 $ 0.01 $ 0.04 Weighted average number of shares Basic 126,994 126,994 126,994 Diluted 127,298 127,298 127,298 F-56 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended June 30, 2021 (in thousands, expect per share and share amounts) (unaudited) As Previously Reported Restatement Adjustment As Restated Revenue 202,796 $ ( 6,280 ) $ 196,516 Cost of revenue 176,009 176,009 Gross profit 26,787 ( 6,280 ) 20,507 Operating expenses General and administrative 15,113 15,113 Contingent consideration ( 13 ) ( 13 ) Depreciation and amortization 5,981 5,981 Total operating expenses 21,081 — 21,081 Income (loss) from operations 5,706 ( 6,280 ) ( 574 ) Other expense Other expense, net ( 122 ) ( 122 ) Interest expense ( 6,651 ) ( 6,651 ) Total other expense ( 6,773 ) — ( 6,773 ) Loss before income tax expense ( 1,067 ) ( 6,280 ) ( 7,347 ) Income tax benefit ( 1,050 ) ( 780 ) ( 1,830 ) Net loss $ ( 17 ) $ ( 5,500 ) $ ( 5,517 ) Loss per share Basic $ — $ ( 0.04 ) $ ( 0.04 ) Diluted $ — $ ( 0.04 ) $ ( 0.04 ) Weighted average number of shares Basic 126,994 126,994 126,994 Diluted 126,994 126,994 126,994 F-57 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Three Months Ended September 30, 2021 (in thousands, expect per share and share amounts) (unaudited) As Previously Reported Restatement Adjustments As Restated Revenue $ 192,068 $ ( 3,382 ) $ 188,686 Cost of revenue 182,789 182,789 Gross profit 9,279 ( 3,382 ) 5,897 Operating expenses General and administrative 18,493 18,493 Contingent consideration 936 936 Depreciation and amortization 5,984 5,984 Total operating expenses 25,413 — 25,413 Loss from operations ( 16,134 ) ( 3,382 ) ( 19,516 ) Other expense Other expense, net ( 297 ) ( 297 ) Interest expense ( 13,109 ) ( 13,109 ) Total other expense ( 13,406 ) — ( 13,406 ) Loss before income tax benefit ( 29,540 ) ( 3,382 ) ( 32,922 ) Income tax benefit ( 3,988 ) ( 1,373 ) ( 5,361 ) Net loss $ ( 25,552 ) $ ( 2,009 ) $ ( 27,561 ) Preferred dividends and accretion ( 5,479 ) ( 5,479 ) Net loss to common shareholders $ ( 31,031 ) $ ( 2,009 ) $ ( 33,040 ) Loss per share Basic $ ( 0.24 ) $ ( 0.02 ) $ ( 0.25 ) Diluted $ ( 0.24 ) $ ( 0.02 ) $ ( 0.25 ) Weighted average number of shares Basic 130,955 130,955 130,955 Diluted 130,955 130,955 130,955 F-58 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Six Months Ended June 30, 2021 (in thousands, expect per share and share amounts) (unaudited) As Previously Reported Restatement Adjustments As Restated Revenue $ 448,728 $ ( 3,972 ) $ 444,756 Cost of revenue 378,083 378,083 Gross profit 70,645 ( 3,972 ) 66,673 Operating expenses General and administrative 39,786 39,786 Contingent consideration 135 135 Depreciation and amortization 11,965 11,965 Total operating expenses 51,886 — 51,886 Income (loss) from operations 18,759 ( 3,972 ) 14,787 Other expense Other expense, net ( 200 ) ( 200 ) Interest expense ( 15,660 ) ( 15,660 ) Total other expense ( 15,860 ) — ( 15,860 ) Income (loss) before income tax expense 2,899 ( 3,972 ) ( 1,073 ) Income tax expense (benefit) 29 ( 161 ) ( 132 ) Net income (loss) $ 2,870 $ ( 3,811 ) $ ( 941 ) Earnings (loss) per share Basic $ 0.02 $ ( 0.03 ) $ ( 0.01 ) Diluted $ 0.02 $ ( 0.03 ) $ ( 0.01 ) Weighted average number of shares Basic 126,994 126,994 126,994 Diluted 127,203 127,203 127,203 F-59 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Nine Months Ended September 30, (in thousands, expect per share and share amounts) (unaudited) As Previously Reported Restatement Adjustments As Restated Revenue $ 640,796 $ ( 7,354 ) $ 633,442 Cost of revenue 560,872 560,872 Gross profit 79,924 ( 7,354 ) 72,570 Operating expenses General and administrative 58,279 58,279 Contingent consideration 1,071 1,071 Depreciation and amortization 17,949 17,949 Total operating expenses 77,299 — 77,299 Income (loss) from operations 2,625 ( 7,354 ) ( 4,729 ) Other expense Other expense, net ( 497 ) ( 497 ) Interest expense ( 28,769 ) ( 28,769 ) Total other expense ( 29,266 ) — ( 29,266 ) Loss before income tax benefit ( 26,641 ) ( 7,354 ) ( 33,995 ) Income tax benefit ( 3,959 ) ( 1,534 ) ( 5,493 ) Net loss $ ( 22,682 ) $ ( 5,820 ) $ ( 28,502 ) Preferred dividends and accretion ( 5,479 ) ( 5,479 ) Net loss to common shareholders $ ( 28,161 ) $ ( 5,820 ) $ ( 33,981 ) Loss per share Basic $ ( 0.22 ) $ ( 0.05 ) $ ( 0.26 ) Diluted $ ( 0.22 ) $ ( 0.05 ) $ ( 0.26 ) Weighted average number of shares Basic 128,315 128,315 128,315 Diluted 128,315 128,315 128,315 F-60 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Changes in Shareholders' Deficit- Three Months Ended March 31, 2021 (in thousands, share amounts) (unaudited) Preferred Stock Common Stock Additional As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity based compensation — — — — 7,897 — 7,897 Net Income — — — — — 2,887 2,887 Balance, March 31, 2021 — $ — 126,994 $ 127 $ 148,370 $ ( 218,612 ) $ ( 70,115 ) Adjustments Balance, December 31, 2020 — $ — — $ — $ — $ — — Net Income — — — — — 1,689 1,689 Total Adjustments — $ — — $ — $ — $ 1,689 1,689 As Restated Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity based compensation — — — — 7,897 — 7,897 Net Income — — — — — 4,576 4,576 Balance, March 31, 2021 - As Restated — — 126,994 $ 127 $ 148,370 $ ( 216,923 ) $ ( 68,426 ) F-61 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Changes in Shareholders' Deficit- Three Months Ended June 30, 2021 (in thousands, share amounts) (unaudited) Preferred Stock Common Stock Additional As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit Balance, March 31, 2021 — $ — 126,994 127 148,370 ( 218,612 ) $ ( 70,115 ) Equity-based compensation — — — — 1,523 — 1,523 Net loss — — — — — ( 17 ) ( 17 ) Balance, June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 218,629 ) $ ( 68,609 ) Adjustments Balance, March 31, 2021 — $ — — $ — $ — $ 1,689 1,689 Net loss — — — — — ( 5,500 ) ( 5,500 ) Total Adjustments — $ — — $ — $ — $ ( 3,811 ) ( 3,811 ) As Restated Balance, March 31, 2021 — $ — 126,994 $ 127 $ 148,370 $ ( 216,923 ) $ ( 68,426 ) Equity based compensation — — — — 1,523 — 1,523 Net loss — — — — — ( 5,517 ) ( 5,517 ) Balance, June 30, 2021 - As Restated — — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 ) F-62 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Changes in Shareholders' Equity/(Deficit) - Three Months Ended September 30, 2021 Temporary Equity Permanent Equity (in thousands, share amounts) (unaudited) Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional As Previously Reported Shares Amount Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit Balance, June 30, 2021 — $ — — $ — 126,994 127 149,893 ( 218,629 ) $ ( 68,609 ) Equity-based compensation — — — — — — 2,160 — 2,160 Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764 Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 ) Net loss — — — — — — — ( 25,552 ) ( 25,552 ) Balance, September 30, 2021 350 235,278 — $ — 134,869 $ 135 $ 251,330 $ ( 244,181 ) $ 7,284 Adjustments Balance, June 30, 2021 — — — $ — — $ — $ — $ ( 3,811 ) ( 3,811 ) Net loss — — — — — — — ( 2,009 ) ( 2,009 ) Total Adjustments — — — $ — — $ — $ — $ ( 5,820 ) ( 5,820 ) As Restated Balance, June 30, 2021 — — — $ — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 ) Equity based compensation — — — — — — 2,160 — 2,160 F-63 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764 Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 ) Net loss — — — — — — — ( 27,561 ) ( 27,561 ) Balance, September 30, 2021 - As Restated 350 235,278 — — 134,869 $ — $ 251,330 $ ( 250,001 ) $ 1,464 Statement of Changes in Shareholders' Deficit- Six Months Ended June 30, 2021 (in thousands, share amounts) (unaudited) Preferred Stock Common Stock Additional As Previously Reported Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity-based compensation — — — — 9,420 — 9,420 Net loss — — — — — 2,870 2,870 Balance, June 30, 2021 — $ — 126,994 $ 127 $ 149,893 $ ( 218,629 ) $ ( 68,609 ) Adjustments Balance, December 31, 2020 — $ — — $ — $ — $ — $ — Net loss — — — — — ( 3,811 ) ( 3,811 ) Total Adjustments — $ — — $ — $ — $ ( 3,811 ) $ ( 3,811 ) As Restated Balance, December 31, 2020 — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity based compensation — — — — 9,420 — 9,420 Net loss — — — — — ( 941 ) ( 941 ) Balance, June 30, 2021 - As Restated — — 126,994 $ 127 $ 149,893 $ ( 222,440 ) $ ( 72,420 ) F-64 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Changes in Shareholders' Equity/(Deficit) - Nine Months Ended September 30, 2021 Temporary Equity Permanent Equity (in thousands, share amounts) (unaudited) Series A Redeemable Perpetual Preferred Stock Preferred Stock Common Stock Additional As Previously Reported Shares Amount Shares Amount Shares Amount paid-in capital Retained earnings Total Stockholders’ Deficit Balance, December 31, 2020 — $ — — $ — 126,994 127 140,473 $ ( 221,499 ) $ ( 80,899 ) Equity-based compensation — — — — — — 11,580 — 11,580 Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764 Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 ) Net loss — — — — — — — ( 22,682 ) ( 22,682 ) Balance, September 30, 2021 350 235,278 — $ — 134,869 $ 135 $ 251,330 $ ( 244,181 ) $ 7,284 Adjustments Balance, December 31, 2020 — — — $ — — $ — $ — $ — $ — Net loss — — — — — — — ( 5,820 ) ( 5,820 ) Total Adjustments — — — $ — — $ — $ — $ ( 5,820 ) $ ( 5,820 ) As Restated Balance, December 31, 2020 — — — $ — 126,994 $ 127 $ 140,473 $ ( 221,499 ) $ ( 80,899 ) F-65 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Equity based compensation — — — — — — 11,580 — 11,580 Issuance of Series A Preferred, net of fees 350 229,799 — — — — — — — Issuance of common stock, net — — — — 7,875 8 104,756 — 104,764 Preferred cumulative dividends plus accretion — 5,479 — — — — ( 5,479 ) — ( 5,479 ) Net loss — — — — — — — ( 28,502 ) ( 28,502 ) Balance, September 30, 2021 - As Restated 350 235,278 — — 134,869 $ — $ 251,330 $ ( 250,001 ) $ — $ 1,464 F-66 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Cash Flows Three Months Ended March 31, 2021 (in thousands) (unaudited) As Previously Reported Restatement Adjustments As Restated Cash flows used in operating activities Net income $ 2,887 $ 1,689 $ 4,576 Adjustments to reconcile net income to net cash used in operating activities: Recovery of bad debts ( 535 ) ( 535 ) Deferred tax benefit ( 71 ) ( 38 ) ( 109 ) Depreciation and amortization 6,481 6,481 Amortization of debt discount and issuance costs 3,586 3,586 Interest paid-in-kind — — Equity-based compensation 7,911 7,911 Contingent consideration 148 148 Warranty provision 302 302 Changes in operating assets and liabilities — Accounts receivable ( 2,692 ) ( 2,308 ) ( 5,000 ) Inventories ( 6,246 ) ( 6,246 ) Income tax receivables 13,003 13,003 Prepaid expenses and other ( 3,216 ) ( 3,216 ) Accounts payable ( 10,556 ) ( 10,556 ) Accounts payable - related party — — Accrued expenses and other 5,134 5,134 Income tax payable 1,410 657 2,067 Lease liabilities 247 247 Deferred revenue ( 59,941 ) — ( 59,941 ) Net cash used in operating activities ( 42,148 ) — ( 42,148 ) Cash flows used in investing activities Purchase of property, plant and equipment ( 570 ) ( 570 ) Investment in equity security ( 10,000 ) ( 10,000 ) Net cash used in investing activities ( 10,570 ) — ( 10,570 ) Cash flows used in financing activities Proceeds from revolving credit facility — Principal payments on term loan facility ( 30,000 ) ( 30,000 ) Debt issuance costs ( 6,590 ) ( 6,590 ) Net cash used in financing activities ( 36,590 ) — ( 36,590 ) Net decrease in cash, cash equivalents and restricted cash ( 89,308 ) — ( 89,308 ) Cash, cash equivalents and restricted cash, beginning of period 108,441 108,441 Cash, cash equivalents, and restricted cash, end of period $ 19,133 $ — $ 19,133 F-67 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements \ F-68 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Statement of Cash Flows Six Months Ended June 30, (in thousands) (unaudited) As Previously Reported Restatement Adjustments As Restated Cash flows used in operating activities Net income $ 2,870 $ ( 3,811 ) $ ( 941 ) Adjustments to reconcile net income to net cash used in operating activities: Recovery of bad debts ( 551 ) ( 551 ) Deferred tax benefit 1,358 ( 1,896 ) ( 538 ) Depreciation and amortization 12,964 12,964 Amortization of debt discount and issuance costs 5,118 5,118 Interest paid-in-kind — — Equity-based compensation 9,467 9,467 Contingent consideration 135 135 Warranty provision 425 425 Provision for inventory obsolescence 1,236 1,236 Changes in operating assets and liabilities — Accounts receivable ( 34,365 ) 3,972 ( 30,393 ) Inventories ( 20,443 ) ( 20,443 ) Income tax receivables 7,501 1,735 9,236 Prepaid expenses and other 826 826 Accounts payable ( 1,378 ) ( 1,378 ) Accounts payable - related party ( 1,622 ) ( 1,622 ) Accrued expenses and other ( 10,541 ) ( 10,541 ) Income tax payable ( 8,814 ) ( 8,814 ) Lease liabilities 68 68 Deferred revenue ( 98,363 ) — ( 98,363 ) Net cash used in operating activities ( 134,109 ) — ( 134,109 ) Cash flows used in investing activities Purchase of property, plant and equipment ( 1,200 ) ( 1,200 ) Investment in equity security ( 11,975 ) — ( 11,975 ) Net cash used in investing activities ( 13,175 ) — ( 13,175 ) Cash flows from financing activities Proceeds from revolving credit facility 102,000 102,000 Principal payments on term loan facility ( 31,075 ) ( 31,075 ) Payments on related party loans — — Contingent consideration ( 7,810 ) — ( 7,810 ) Debt issuance costs ( 6,590 ) — ( 6,590 ) Net cash provided by financing activities 56,525 — 56,525 Net decrease in cash, cash equivalents and restricted cash ( 90,759 ) — ( 90,759 ) F-69 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Cash, cash equivalents and restricted cash, beginning of period 108,441 108,441 Cash, cash equivalents, and restricted cash, end of period $ 17,682 $ — $ 17,682 Statement of Cash Flows Nine Months Ended September 30, (in thousands) (unaudited) As Previously Reported Restatement Adjustments As Restated Cash flows used in operating activities Net loss $ ( 22,682 ) $ ( 5,820 ) $ ( 28,502 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Recovery of bad debts ( 574 ) ( 574 ) Deferred tax benefit ( 6,531 ) ( 505 ) ( 7,036 ) Depreciation and amortization 19,454 19,454 Amortization of debt discount and issuance costs 13,653 13,653 Interest paid-in-kind — — Equity-based compensation 11,706 11,706 Contingent consideration 1,071 1,071 Warranty provision 305 305 Provision for inventory obsolescence 654 654 Changes in operating assets and liabilities — Accounts receivable ( 58,194 ) 7,354 ( 50,840 ) Inventories ( 55,321 ) ( 55,321 ) Income tax receivables 10,705 ( 1,029 ) 9,676 Prepaid expenses and other ( 5,770 ) ( 5,770 ) Accounts payable 1,948 1,948 Accounts payable - related party ( 1,622 ) ( 1,622 ) Accrued expenses and other 1,683 1,683 Income tax payable ( 8,185 ) ( 8,185 ) Lease liabilities 337 337 Deferred revenue ( 68,474 ) — ( 68,474 ) Net cash used in operating activities ( 165,837 ) — ( 165,837 ) Cash flows used in investing activities Purchase of property, plant and equipment ( 2,252 ) ( 2,252 ) Investment in equity security ( 11,975 ) ( 11,975 ) Net cash used in investing activities ( 14,227 ) — ( 14,227 ) Cash flows from financing activities Proceeds from revolving credit facility 102,000 102,000 Principal payments on term loan facility ( 132,150 ) ( 132,150 ) Proceeds from Series A issuance 224,987 224,987 Proceeds from common stock issuance 120,645 120,645 Series A equity issuance costs ( 7,195 ) ( 7,195 ) F-70 Table of Contents Array Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements Common stock issuance costs ( 3,873 ) ( 3,873 ) Payments on revolving credit facility ( 102,000 ) ( 102,000 ) Payments on related party loans — — Contingent consideration ( 7,810 ) ( 7,810 ) Deferred offering costs — — Debt issuance costs ( 6,590 ) — ( 6,590 ) Net cash provided by financing activities 188,014 — 188,014 Net change in cash and cash equivalents 7,950 — 7,950 Cash and cash equivalents, beginning of period 108,441 108,441 Cash and cash equivalents, end of period $ 116,391 $ — $ 116,391 F-71 23 . Subsequent Events STI Acquisition On January 11, 2022 (the “Closing Date”), the Company completed the previously announced STI Acquisition, pursuant to that certain definitive agreement (the “Purchase Agreement”), dated as of November 10, 2021, by and among Array Tech, Inc, a wholly-owned subsidiary of the Company, Amixa Capital, S.L. and Aurica Trackers, S.L., each a company duly organized under the laws of the Kingdom of Spain, and Mr. Javier Reclusa Etayo. In accordance with the Purchase Agreement, the Company paid closing consideration to STI consisting of $ 410.5 million in cash (the “Cash Consideration”) and 13,894,800 shares of the Company’s common stock (the “Stock Consideration”). The fair value of the purchase consideration was $ 610.7 million and resulted in the Company owning 100 % of the interests in STI. The Company is in the process of determining the acquisition assets and liabilities and the related accounting impact. The purchase price will be increased by the amount that is four times the audited Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of the target less € 47.0 million ($ 53.5 million at current exchange rates), such that the amount of contingent consideration is subject to a cap of € 45.0 million ($ 52.0 million at current exchange rates). Subsequent to December 31, 2021, it was determined that the targets were not met. The acquisition of STI will provide the Company with an immediate presence in Brazil as well as Western Europe. Transaction expenses incurred in connection with the acquisition are estimated to be $ 5.3 million. Series A Redeemable Preferred Issuance In connection with the Stock Purchase Agreement and the Certificate of Designations governing the Series A Redeemable Perpetual Preferred Stock (see Note 11 - Redeemable Perpetual Preferred), on January 7, 2022, the Company issued and sold to the Purchasers 50,000 shares of Series A Redeemable Perpetual Preferred Stock and 1,125,000 shares of Common Stock in an Additional Closing for an aggregate purchase price of $ 49,376,125 . Employee Stock Purchase Plan The Company’s Compensation Committee approved the Employee Stock Purchase Plan in December 2021. The Plan allows employees to purchase shares at 15 % off the lower of the stock price at the beginning or ending of the six months window through payroll deductions. The plan is considered compensatory in nature and the Company will record stock compensation expense on the plan beginning in 2022.