What changed in this filing

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Item 1. Financial Statements

2024-05-03 compared with 2023-11-03 · 241 added, 179 removed, 264 unchanged (61% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended September 30, Nine Months Ended September 30,

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

(in thousands, except per share information) 2024 2023

4 unchanged sentences

Selling, general and administrative expenses 54,666 45,511

Loss (gain) on disposal of assets and other ( 145 ) ( 52 ) 137 ( 938 )

Transaction expenses 5,921 —

Gain on disposal of assets and other ( 28 ) ( 260 )

Total operating expenses 60,559 45,251

Operating income 3,200 6,851

Other expense (income)

Other expense

Interest expense 8,760 4,549

Foreign exchange and other losses (gains), net ( 8,279 ) ( 18,288 ) 1,129 ( 37,112 )

Total other expense (income), net ( 3,775 ) ( 10,145 ) 14,871 ( 13,503 )

Income before taxes 9,446 17,847 4,058 21,481

Foreign exchange and other losses, net 1,227 2,972

Total other expense 9,987 7,521

Loss before income taxes ( 6,787 ) ( 670 )

Income tax expense 3,528 2,816

Net income (loss) $ 7,969 $ 16,477 $ ( 2,096 ) $ 16,542

Net loss $ ( 10,315 ) $ ( 3,486 )

Weighted average shares outstanding

1 unchanged sentence

Diluted 12,201 10,179

Earnings (loss) per share

Loss per share

Basic $ ( 0.85 ) $ ( 0.34 )

1 unchanged sentence

Other comprehensive income (loss), net of tax of $ 0 :

Net income (loss) $ 7,969 $ 16,477 $ ( 2,096 ) $ 16,542

Net loss $ ( 10,315 ) $ ( 3,486 )

Change in foreign currency translation ( 804 ) 4,158

Gain (loss) on pension liability ( 15 ) 15

Comprehensive loss $ ( 2,777 ) $ ( 6,147 ) $ ( 914 ) $ ( 29,504 )

Comprehensive income (loss) $ ( 11,134 ) $ 687

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share information) September 30, 2023 December 31, 2022

(in thousands, except share information) March 31, 2024 December 31, 2023

Current assets

4 unchanged sentences

Prepaid expenses and other current assets 20,893 21,887

Accrued revenue 771 665

Costs and estimated profits in excess of billings 10,488 13,365

Accrued revenue 1,935 1,801

Total current assets 546,785 529,604

3 unchanged sentences

Intangible assets, net 261,405 167,970

Goodwill 63,202 —

Deferred income taxes, net 130 368

27 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

Cash flows from operating activities

Net income (loss) $ ( 2,096 ) $ 16,542

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net loss $ ( 10,315 ) $ ( 3,486 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation expense 4,072 2,570

11 unchanged sentences

Billings in excess of costs and estimated profits earned 291 111

Net cash used in operating activities ( 3,077 ) ( 32,132 )

Net cash provided by (used in) operating activities 5,023 ( 23,128 )

Cash flows from investing activities

1 unchanged sentence

Proceeds from sale of property and equipment 177 264

Payments related to business acquisitions and dispositions — ( 485 )

Payments related to business acquisition, net of cash acquired ( 150,086 ) —

Net cash used in investing activities ( 152,819 ) ( 819 )

2 unchanged sentences

Repayments on Credit Facility ( 148,696 ) ( 94,426 )

Proceeds from issuance of Seller Term Loan 59,677 —

Payment of capital lease obligations ( 147 ) ( 273 )

Deferred financing costs ( 3,070 ) —

Repurchases of stock — ( 3,497 )

Net cash provided by (used in) financing activities ( 6,906 ) 9,168

Payment of withheld taxes on stock-based compensation plans ( 1,090 ) ( 1,873 )

Net cash provided by financing activities 151,841 19,357

Effect of exchange rate changes on cash ( 1,722 ) 325

Net decrease in cash, cash equivalents and restricted cash ( 13,878 ) ( 27,080 )

Net increase (decrease) in cash, cash equivalents and restricted cash 2,323 ( 4,265 )

Cash, cash equivalents and restricted cash at beginning of period 46,165 51,029

3 unchanged sentences

Finance lease right of use assets obtained in exchange for lease obligations 750 926

Stock issuance related to business acquisition 44,220 —

Conversion of debt to common stock — 113,650

3 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(in thousands) Common stock Additional paid-in capital Treasury stock Retained

5 unchanged sentences

Restricted stock issuance, net of forfeitures 1 ( 1,091 ) — — — ( 1,090 )

Conversion of debt to common stock 46 113,604 — — — 113,650

Treasury stock — — ( 3,497 ) — — ( 3,497 )

Stock issuance related to business acquisition 20 44,200 — — — 44,220

Currency translation adjustment — — — — ( 804 ) ( 804 )

2 unchanged sentences

Balance at March 31, 2024 $ 130 $ 1,413,970 $ ( 142,057 ) $ ( 709,786 ) $ ( 116,055 ) $ 446,202

Stock-based compensation expense — 1,257 — — — 1,257

Currency translation adjustment — — — — 7,749 7,749

Change in pension liability — — — — 6 6

Net loss — — — ( 6,579 ) — ( 6,579 )

Balance at June 30, 2023 $ 109 $ 1,367,441 $ ( 142,057 ) $ ( 690,660 ) $ ( 115,557 ) $ 419,276

Stock-based compensation expense — 1,247 — — — 1,247

Restricted stock issuance, net of forfeitures — ( 626 ) — — — ( 626 )

Currency translation adjustment — — — — ( 10,710 ) ( 10,710 )

Change in pension liability — — — — ( 36 ) ( 36 )

Net income — — — 7,969 — 7,969

Balance at September 30, 2023 $ 109 $ 1,368,062 $ ( 142,057 ) $ ( 682,691 ) $ ( 126,303 ) $ 417,120

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

(in thousands) Common stock Additional paid-in capital Treasury stock Retained

5 unchanged sentences

Restricted stock issuance, net of forfeitures 1 ( 1,874 ) — — — ( 1,873 )

Conversion of debt to common stock 46 113,604 — — — 113,650

Treasury stock — — ( 3,497 ) — — ( 3,497 )

Currency translation adjustment — — — — 4,158 4,158

2 unchanged sentences

Balance at March 31, 2023 $ 109 $ 1,366,184 $ ( 142,057 ) $ ( 684,081 ) $ ( 123,312 ) $ 416,843

Stock-based compensation expense — 621 — — — 621

Restricted stock issuance, net of forfeitures — ( 1 ) — — — ( 1 )

Liability awards converted to share settled — 275 — — — 275

Currency translation adjustment — — — — ( 16,518 ) ( 16,518 )

Change in pension liability — — — — 57 57

Net income — — — 9,264 — 9,264

Balance at June 30, 2022 $ 62 $ 1,252,647 $ ( 135,562 ) $ ( 684,242 ) $ ( 124,451 ) $ 308,454

Stock-based compensation expense — 765 — — — 765

Restricted stock issuance, net of forfeitures — ( 467 ) — — — ( 467 )

Currency translation adjustment — — — — ( 22,690 ) ( 22,690 )

Change in pension liability — — — — 66 66

Net income — — — 16,477 — 16,477

Balance at September 30, 2022 $ 62 $ 1,252,945 $ ( 135,562 ) $ ( 667,765 ) $ ( 147,075 ) $ 302,605

The accompanying notes are an integral part of these condensed consolidated financial statements.

4 unchanged sentences

Forum Energy Technologies, Inc.

(the “Company,” “FET,” “we,” “our,” or “us”), a Delaware corporation, is a global company serving the oil, natural gas, industrial and renewable energy industries.

(the “Company,” “FET,” “we,” “our,” or “us”), a Delaware corporation, is a global manufacturing company serving the oil, natural gas, industrial and renewable energy industries.

With headquarters located in Houston, Texas, FET provides value added solutions that increase the safety and efficiency of energy exploration and production.

3 unchanged sentences

In management's opinion, all adjustments, consisting of normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations and cash flows have been included.

Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other interim period.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other interim period.

These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2022, which are included in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“U.S.

GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023, which are included in the Company’s 2023 Annual Report on Form 10-K filed with the SEC on March 5, 2024.

Change of Segment

In the first quarter 2024, following the Variperm Holdings Ltd.

("Variperm") acquisition, we aligned our reportable segments with business activity drivers, our customer base, and the manner in which we review and evaluate operating performance.

FET now operates in the following two reportable segments:

(1) Drilling and Completions and (2) Artificial Lift and Downhole.

Refer to Note 10 Business Segments for the product lines making up each segment.

Our historical results of operations were recast retrospectively to reflect these changes in accordance with U.S.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, which the Company adopts as of the specified effective date.

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB"), which the Company adopts as of the specified effective date.

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's consolidated financial statements upon adoption.

Accounting Standard Adopted in 2023

Inflation Reduction Act of 2022.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law.

The IRA, among other provisions, imposes a 15% corporate alternative minimum tax on the adjusted financial statement income of certain large corporations effective for tax years beginning after December 31, 2022 and a 1% excise tax on stock repurchases made by publicly traded U.S.

corporations after December 31, 2022.

The adoption of this standard did not have a material impact on our consolidated financial statements.

Reference Rate Reform (Topic 848) .

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04 , which provides temporary, optional practical expedients and exceptions to enable a smoother transition to the new reference rates which will replace the London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, which expanded the scope to include derivative instruments impacted by the discounting transition.

In December 2022, the FASB issued ASU 2022-06, which extended the temporary accounting rules from December 31, 2022 to December 31, 2024.

Effective April 2023, the Company transitioned its Credit Facility from LIBOR to the Secured Overnight Financing Rate (“SOFR”).

The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Accounting Standards Issued But Not Yet Adopted

Segment Reporting (Topic 280) .

In November 2023, FASB issued ASU 2023-07, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses.

This update is effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods within fiscal years after December 15, 2024.

Early adoption is permitted.

The Company is in the process of evaluating the impact it may have on our consolidated financial statements.

Income Taxes (Topic 740).

In December 2023, FASB issued ASU 2023-09, which improves income tax disclosures.

This update is effective for fiscal years beginning after December 15, 2025.

Early adoption is permitted.

This update should be applied prospectively but retrospective application is permitted.

The Company is in the process of evaluating the impact it may have on our consolidated financial statements.

Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

For a detailed discussion of our revenue recognition policies, refer to the Company’s 2023 Annual Report on Form 10-K.

Disaggregated Revenue

Refer to Note 9 Business Segments for disaggregated revenue by product line and geography.

Forum Energy Technologies, Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (Continued)

Disaggregated Revenue

Refer to Note 10 Business Segments for disaggregated revenue by product line and geography.

Contract Balances

1 unchanged sentence

Contract assets represent revenue recognized for goods and services provided to our customers when payment is conditioned on something other than the passage of time.

Similarly, the Company records contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract.

Similarly, the Company records a contract liability when we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract.

Such contract liabilities typically result from billings in excess of costs incurred on construction contracts and advance payments received on product sales.

The following table reflects the changes in our contract assets and contract liabilities balances for the nine months ended September 30, 2023 (in thousands):

September 30, 2023 December 31, 2022 Increase / (Decrease)

The following table reflects the changes in our contract assets and contract liabilities balances for the three months ended March 31, 2024 (in thousands):

March 31, 2024 December 31, 2023 Decrease

Accrued revenue $ 1,935 $ 1,801

6 unchanged sentences

Contract liabilities $ 14,756 $ 14,772 $ ( 16 ) — %

During the nine months ended September 30, 2023, our contract assets decreased by $ 7.6 million and our contract liabilities increased by $ 4.2 million primarily due to the timing of milestone billings for projects in our Subsea Technologies product line.

During the nine months ended September 30, 2023, we recognized $ 12.6 million of revenue that was included in the contract liability balance at the beginning of the period.

During the three months ended March 31, 2024, our contract assets decreased by $ 3.5 million and our contract liabilities decreased nominally primarily due to the timing of milestone billings for projects in our Subsea product line.

The noncurrent portion of contract assets is recorded on the consolidated balance sheets as other long-term assets.

During the three months ended March 31, 2024, we recognized $ 5.5 million of revenue that was included in the contract liabilities balance at the beginning of the period.

Substantially all of our contracts are less than one year in duration.

As such, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less .

The Company's significant components of inventory at September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023 December 31, 2022

As such, we have elected to apply the practical expedient which allows an entity to exclude disclosures about its remaining performance obligations if such obligation is part of a contract that has an original expected duration of one year or less .

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

On January 4, 2024, the Company and its wholly owned subsidiary acquired all of the issued and outstanding common shares of Variperm (the “Variperm Acquisition”).

Variperm, headquartered in Canada, is a manufacturer of downhole technology solutions, providing sand and flow control products for heavy oil applications.

Total consideration for the Variperm Acquisition includes approximately $ 150.0 million of cash and 2.0 million shares of the Company’s common stock determined using the market price at closing date, which was subject to customary purchase price adjustments.

In connection with the closing, to fund the cash portion of the purchase price, the Company borrowed $ 90.0 million under its senior secured asset-based lending facility (“Credit Facility”) on January 2, 2024 and entered into a $ 60.0 million second lien seller term loan credit agreement (“Seller Term Loan”) on January 4, 2024.

In March 2024, in connection with the finalization of working capital adjustments, the principal amount of the Seller Term Loan was reduced by $ 0.3 million.

During the three months ended March 31, 2024, the Company recognized acquisition-related costs of $ 5.9 million for consulting fees and other costs expensed as transaction expenses.

The acquisition of business on the statement of cash flow is presented net of the cash and cash equivalents acquired.

The following table summarizes the fair value of identified assets acquired and liabilities assumed at the date of acquisition.

The preliminary allocation of consideration transferred is based on management's estimates, judgments and assumptions.

These estimates, judgments and assumptions are subject to change upon final valuation and should be treated as preliminary values.

Management estimated that consideration paid exceeded the fair value of the net assets acquired.

Therefore, goodwill of $ 63.9 million was recorded, most of which is not expected to be deductible for income tax purposes.

The final allocation of purchase consideration could include changes in the estimated fair value of inventories;

property, plant and equipment;

intangible assets comprising of customer relationships, backlog and trade names;

deferred income taxes;

The Company has preliminarily estimated the useful lives of customer relationships, backlog and trade names as approximately eight years , two years and eight years , respectively.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the acquisition (in thousands):

Cash and cash equivalents $ 4,388

Accounts receivable—trade 24,036

Inventories 13,422

Property and equipment 26,213

Intangible assets 104,600

Prepaid expenses and other assets 3,718

Total assets acquired 176,377

Current liabilities 11,760

Long-term liabilities 29,864

Total liabilities assumed 41,624

Total identifiable net assets acquired 134,753

Goodwill 63,941

Total purchase consideration $ 198,694

The excess of the total equity value of Variperm based on the purchase consideration over net assets acquired was recorded as goodwill.

The goodwill is primarily attributable to revenue synergies and assembled workforce expected to be realized from the acquisition.

Intangible assets acquired as a result of the Variperm Acquisition are amortized on a straight-line basis to reflect the pattern in which the economic benefits of the intangible assets are realized.

Acquired goodwill and intangibles relate to our Downhole reporting unit and Downhole asset group.

The fair value for trade names were estimated using the income approach, specifically the relief-from-royalty method which estimates the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or licenses fees on revenues earned through the use of the asset.

The fair value of customer relationships and backlog were estimated using the multi-period excess earnings method.

The excess earning

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

method model estimates revenues and cash flows derived from the asset and then deducts portions of the cash flow that can be attributed to supporting assets.

The resulting cash flow, which is attributable solely to the asset acquired, is then discounted at a rate of return commensurate with the risk of the asset to calculate the present value.

Unaudited Pro Forma Financial Information

The acquired Variperm business contributed revenues and net income of $ 27.4 million and $ 4.4 million, respectively, to the Company for the period from January 4, 2024 to March 31, 2024.

The following unaudited pro forma summary presents the results of operations of the Company as if the acquisition of Variperm occurred on January 1, 2023:

Three Months Ended

Revenue $ 202,392 $ 226,700

Net income (loss) ( 7,148 ) ( 5,587 )

The amounts have been calculated after applying the Company's accounting policies and adjusting the results of Variperm to reflect additional depreciation, amortization, and other purchase accounting adjustments assuming the fair value adjustments to the property, plant and equipment and intangibles assets and other purchase accounting adjustments have been applied on January 1, 2023.

The pro forma amounts do not include any potential cost savings or other expected benefits of the acquisition, and are presented for illustrative purposes only and are not necessarily indicative of results that would have been achieved if the acquisition had occurred as of January 1, 2023 or of future operating performance.

The Company's significant components of inventory at March 31, 2024 and December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

Raw materials and parts $ 99,096 $ 92,563

7 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Continued)

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill from December 31, 2023 to March 31, 2024, were as follows (in thousands):

Artificial Lift and Downhole

Goodwill, December 31, 2023 $ —

Acquisitions 63,941

Impact on non-U.S.

local currency translation ( 739 )

Goodwill, March 31, 2024 $ 63,202

Goodwill is not amortized and is tested for impairment at least annually or when events and circumstances indicate that fair value may be below its carrying value.

Intangible Assets

Intangible assets consisted of the following as of September 30, 2023 and December 31, 2022, respectively (in thousands):

September 30, 2023

Intangible assets consisted of the following as of March 31, 2024 and December 31, 2023, respectively (in thousands):

March 31, 2024

Gross Carrying Amount Accumulated Amortization Net Intangibles Amortization Period (In Years)

1 unchanged sentence

Patents and technology 88,983 ( 42,533 ) 46,450 5 - 19

Non-compete agreements 188 ( 188 ) — 5

Trade names 46,677 ( 29,423 ) 17,254 7 - 19

Trademarks 5,089 ( 2,205 ) 2,884 15

Non-compete agreements 189 ( 189 ) — 5

Total intangible assets $ 507,515 $ ( 246,110 ) $ 261,405

3 unchanged sentences

Patents and technology 89,151 ( 41,189 ) 47,962 5 - 19

Non-compete agreements 188 ( 188 ) — 5

Trade names 42,847 ( 28,974 ) 13,873 7 - 19

Trademarks 5,089 ( 2,120 ) 2,969 15

Non-compete agreements 190 ( 190 ) — 5

Total intangible assets $ 405,115 $ ( 237,145 ) $ 167,970

Notes payable and lines of credit as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, 2023 December 31, 2022

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Debt as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024 December 31, 2023

2025 Notes $ 134,208 $ 134,208

Unamortized debt discount ( 5,785 ) ( 15,314 )

Debt issuance cost ( 1,420 ) ( 3,759 )

Seller Term Loan 59,677 —

Credit Facility 96,471 —

Other debt 3,340 2,864

Total debt 129,613 239,910

Long-term debt, principal amount 293,696 137,072

Unamortized debt discount ( 4,341 ) ( 5,074 )

Debt issuance cost ( 1,903 ) ( 1,245 )

Long-term debt, carrying value 287,452 130,753

current portion ( 5,150 ) ( 1,186 )

Long-term debt, net of current portion $ 282,302 $ 129,567

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

In August 2020, we exchanged $ 315.5 million principal amount of our previous 6.25 % unsecured notes due 2021 for new 9.00 % convertible secured notes due August 2025 (the “2025 Notes”).

The 2025 Notes pay interest at the rate of 9.00 %, of which 6.25 % is payable in cash and 2.75 % is payable in cash or additional notes, at the Company’s option.

Our 9.00 % convertible secured notes due August 2025 (“2025 Notes”), of which $ 134.2 million principal amount was outstanding at March 31, 2024, pay interest at the rate of 9.00 %, of which 6.25 % is payable in cash and 2.75 % is payable in cash or additional notes, at the Company’s option.

The 2025 Notes are secured by a first lien on substantially all of the Company’s assets, except for Credit Facility priority collateral, which secures the 2025 Notes on a second lien basis.

During the nine months ended September 30, 2023, $ 122.8 million or 48 % of the principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock.

In January 2023, $ 122.8 million or 48 % of the then-outstanding principal amount of the 2025 Notes mandatorily converted into approximately 4.5 million shares of common stock.

Seller Term Loan

On January 4, 2024, the Company entered into the Seller Term Loan in connection with the closing of the Variperm Acquisition, which had an initial principal amount of $ 60.0 million and matures in December 2026.

In March 2024, in connection with the finalization of purchase price adjustments, the principal amount of the Seller Term Loan was reduced by $ 0.3 million.

The Seller Term Loan bears interest at the rate of (i) 11.00 % per year for the period commencing on the Closing Date to (but excluding) the first anniversary of the Closing Date, (ii) 17.00 % per annum for the period commencing on the first anniversary of the Closing Date to (but excluding) the second anniversary of the Closing Date and (iii) 17.50 % per annum for the period commencing on the second anniversary of the Closing Date to (but excluding) the maturity date.

The Company has an option to prepay the Seller Term Loan anytime without premium or penalty.

The Seller Term Loan requires the Company to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the last day of each fiscal quarter commencing at the time excess availability is less than the greater of (x) 12.5 % of the Line Cap and (y) $ 31.25 million and continuing until excess availability exceeds the greater of (x) 12.5 % of the Line Cap and (y) $ 31.25 million for 60 consecutive days.

“Line Cap” has the meaning set forth in the Credit Facility.

Subject to customary exceptions, all obligations under the Seller Term Loan are guaranteed, jointly and severally, by our wholly owned U.S.

and Canadian subsidiaries and are secured by substantially all assets of each such entity and the Company, subject to customary exclusions pursuant to certain intercreditor arrangements.

The Seller Term Loan also contains customary representations and warranties and affirmative and negative covenants, as well as customary events of default, with corresponding grace periods, including, without limitation, payment defaults, cross-defaults to other agreements evidencing indebtedness and bankruptcy-related defaults.

Credit Facility

Our senior secured revolving credit facility ( “ Credit Facility”), which has a maturity date of September 2026, provides revolving credit commitments of $ 179.0 million (with a sublimit of up to $ 70.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S.

Our Credit Facility, which has a maturity date , subject to certain exceptions, of September 2028, provides revolving credit commitments of $ 250.0 million (with a sublimit of up to $ 70.0 million available for the issuance of letters of credit for the account of the Company and certain of its domestic subsidiaries) (the “U.S.

Line”), of which up to $ 50.0 million is available to certain of our Canadian subsidiaries for loans in U.S.

or Canadian dollars (with a sublimit of up to $ 3.0 million available for the issuance of letters of credit for the account of our Canadian subsidiaries) (the “Canadian Line”).

or Canadian dollars (with a sublimit of up to $ 10.0 million available for the issuance of letters of credit for the account of our Canadian

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

subsidiaries) (the “Canadian Line”).

Lender commitments under the Credit Facility, subject to certain limitations, may be increased by an additional $ 100.0 million .

Availability under the Credit Facility is subject to a borrowing base calculated by reference to eligible accounts receivable in the U.S., Canada and certain other jurisdictions (subject to a cap) and eligible inventory in the U.S.

Such eligible accounts receivable and eligible inventory serve as priority collateral for the Credit Facility, which is also secured on a second lien basis by substantially all of the Company's other assets.

The amount of eligible inventory included in the borrowing base is restricted to the lesser of $ 124.0 million (subject to a quarterly reduction of $ 0.5 million) and 80.0 % of the total borrowing base.

Our borrowing capacity under the Credit Facility could be reduced or eliminated, depending on future fluctuations in our receivables and inventory.

As of September 30, 2023, our total borrowing base was $ 173.3 million, of which no amount was drawn and $ 18.5 million was used for security of outstanding letters of credit, resulting in remaining availability of $ 154.8 million.

As of March 31, 2024, our total borrowing base was $ 189.1 million, of which $ 96.5 million amount was drawn and $ 21.0 million was used as security for outstanding letters of credit, resulting in remaining availability of $ 71.6 million.

Borrowings under the U.S.

Line are subject to an interest rate equal to, at the Company's option, either (a) the SOFR, subject to a floor of 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly total net leverage ratio, with the U.S.

Line base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50 % per annum, (ii) the one-month adjusted SOFR plus 1.00 % per annum, and (iii) the rate of interest announced, from time to time, by Wells Fargo at its principal office in San Francisco as its prime rate, subject to a floor of 0.00 %.

Borrowings under the Canadian Line were subject to an interest rate during the reporting period equal to, our subsidiary's option, either (a) the Canadian Dollar Offered Rate (“CDOR”), subject to a floor of 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly net leverage ratio.

The Canadian line base rate is determined by reference to the greater of (i) the one-month CDOR plus 1.00 % and (ii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.00 %.

The weighted average interest rate under the Credit Facility was approximately 8.28 % for the nine months ended September 30, 2023.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375 % on the unused portion of commitments if average usage of the Credit Facility is greater than 50 % and (b) 0.500 % on the unused portion of commitments if average usage of the Credit Facility is less than or equal to 50 %.

If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 22.4 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such thresholds for at least 60 consecutive days.

Furthermore, the Credit Facility includes an obligation to prepay outstanding loans with cash on hand in excess of certain thresholds and includes a cross-default to the 2025 Notes.

Deferred Loan Costs

We have incurred loan costs that have been deferred and are amortized to interest expense over the term of the 2025 Notes and the Credit Facility.

In connection with the September 2021 Credit Facility amendment, we deferred approximately $ 1.6 million of loan costs that will be amortized over the facility's remaining life.

Line bear interest at a rate equal to, at our option, either (a) the Secured Overnight Financing Rate (“SOFR”), subject to a floor of 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly total net leverage ratio.

Line base rate is determined by reference to the greatest of (i) the federal funds rate plus 0.50 % per annum, (ii) the one-month adjusted term SOFR plus 1.00 % per annum, and (iii) the “prime rate” of interest announced by Wells Fargo Bank, National Association, subject to a floor of 0.00 %.

Borrowings under the Canadian Line bear interest at a rate equal to, at our Canadian borrowers’ option, either (a) Canadian Overnight Repo Rate Average (“CORRA”), subject to a floor of 0.00 %, plus a margin of 2.25 % to 2.75 %, or (b) a base rate plus a margin of 1.25 % to 1.75 %, in each case based upon the Company's quarterly net leverage ratio.

The Canadian Line base rate is determined by reference to the greater of (i) the Floor, (ii) the one-month CORRA, and (iii) the prime rate for Canadian dollar commercial loans made in Canada as reported by Thomson Reuters, subject to a floor of 0.00 %.

The weighted average interest rate under the Credit Facility was approximately 8.34 % and 7.96 % for the three months ended March 31, 2024 and 2023, respectively.

The Credit Facility also provides for a commitment fee in the amount of (a) 0.375 % on the unused portion of revolving commitments if average usage of the Credit Facility is greater than 50 % and (b) 0.500 % on the unused portion of revolving commitments if average usage of the Credit Facility is less than or equal to 50 %.

If excess availability under the Credit Facility falls below the greater of 12.5 % of the borrowing base and $ 31.25 million, we will be required to maintain a fixed charge coverage ratio of at least 1.00 :1.00 as of the end of each fiscal quarter until excess availability under the Credit Facility exceeds such threshold for 60 consecutive days.

Subject to customary exceptions, all obligations under the Credit Facility are guaranteed, jointly and severally, by our wholly-owned U.S.

subsidiaries and, in the case of the Canadian Line, our wholly-owned Canadian subsidiaries, and are secured by substantially all assets of each such entity and the Company, subject to customary exclusions.

The Credit Facility contains various covenants that, among other things, limit our ability (none of which are absolute) to incur additional indebtedness or issue certain preferred shares, grant certain liens, make certain loans and investments, pay dividends, make distributions or make other restricted payments, enter into mergers or acquisitions unless certain conditions are satisfied, change our lines of business, prepay certain indebtedness, enter into certain affiliate transactions or engage in certain asset dispositions.

If an event of default exists under the Credit Facility, the lenders will have the right to accelerate the maturity of the obligations outstanding under the Credit Facility and exercise other rights and remedies.

Obligations outstanding under the Credit Facility, however, will be automatically accelerated upon an event of default arising from a bankruptcy or insolvency event.

An event of default includes, among other things, nonpayment of principal, interest, fees or other amounts within certain grace periods;

representations and warranties proving to be untrue in any material respect;

failure to perform or otherwise comply with covenants in the Credit Facility or other loan documents, subject, in certain instances, to grace periods;

cross-defaults to certain other indebtedness if such default occurs at the final maturity of such indebtedness or if the effect of such default is to cause, or permit the holders of such indebtedness to cause, the acceleration of such indebtedness;

bankruptcy or insolvency events;

material monetary judgment defaults;

invalidity or unenforceability of the Credit Facility or any other loan document;

and the occurrence of a Change of Control (as defined in the Credit Facility).

Other debt consists of various finance leases of equipment.

Forum Energy Technologies, Inc.

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Notes to Condensed Consolidated Financial Statements (Continued)

Other debt consists primarily of various finance leases of equipment.

Letters of Credit and Guarantees

We execute letters of credit in the normal course of business to secure the delivery of product from specific vendors and also to guarantee our fulfillment of performance obligations relating to certain large contracts.

The Company had $ 18.5 million and $ 21.8 million in total outstanding letters of credit as of September 30, 2023 and December 31, 2022, respectively.

The Company had $ 21.0 million and $ 20.3 million in total outstanding letters of credit as of March 31, 2024 and December 31, 2023, respectively.

For interim periods, our income tax expense or benefit is computed based on our estimated annual effective tax rate and any discrete items that impact the interim periods.

For the three and nine months ended September 30, 2023, the Company recorded a tax expense of $ 1.5 million and $ 6.2 million, respectively.

For the three and nine months ended September 30, 2022, the Company recorded a tax expense of $ 1.4 million and $ 4.9 million, respectively.

For the three months ended March 31, 2024 and 2023, the Company recorded a tax expense of $ 3.5 million and $ 2.8 million, respectively.

The estimated annual effective tax rates for all periods were impacted by losses in jurisdictions where the recording of a tax benefit is not available.

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Finally, the Company believes that it is reasonably possible that a decrease of approximately $ 1.5 million of noncurrent unrecognized tax benefits may occur by the end of 2024 as a result of a lapse of the statute of limitations.

The Organization for Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%.

Numerous countries, including European Union member states, have enacted, or are expected to enact, legislation to be effective January 1, 2024 with general implementation of a global minimum tax by January 1, 2025.

Based on current enacted legislation, we do not expect a material impact on our future effective tax rate.

We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S.

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We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning and recent operating results.

As of September 30, 2023, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions:

In making such a determination, we consider all available positive and negative evidence, including, but not limited to, our recent history of pretax losses over the prior three year period, the goodwill and intangible asset impairments for various reporting units, the future reversals of existing taxable temporary differences, the projected future taxable income or loss and tax-planning.

We believe that there is a reasonable possibility that within the next 12 months, a portion of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve.

As of March 31, 2024, we do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions:

the U.S., the U.K., Germany, Singapore, China and Saudi Arabia.

As a result, we have certain valuation allowances against our deferred tax assets as of September 30, 2023.

As a result, we have certain valuation allowances against our deferred tax assets as of March 31, 2024.

Fair Value Measurements

The Company had no borrowings outstanding under the Credit Facility as of September 30, 2023.

The Company had $ 96.5 million and $ 59.7 million borrowings outstanding under the Credit Facility and Seller Term Loan as of March 31, 2024.

The Credit Facility incurs interest at a variable interest rate, and therefore, the carrying amount approximates fair value.

The Company has an option to prepay the Seller Term Loan anytime without premium or penalty, therefore, the carrying amount approximates fair value.

The fair value of the debt is classified as a Level 2 measurement because interest rates charged are similar to other financial instruments with similar terms and maturities.

The fair value of our 2025 Notes is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those or similar instruments.

At September 30, 2023, the fair value and the carrying value of our 2025 Notes approximated $ 130.1 million and $ 127.0 million, respectively.

At March 31, 2024, the fair value and the carrying value of our 2025 Notes approximated $ 134.1 million and $ 128.8 million, respectively.

At December 31, 2023, the fair value and the carrying value of our 2025 Notes approximated $ 130.9 million and $ 127.9 million, respectively.

There were no other significant outstanding financial instruments as of September 30, 2023 and December 31, 2022 that required measuring the amounts at fair value on a recurring basis.

We did not change our valuation techniques associated with recurring fair value measurements from prior periods, and there were no transfers between levels of the fair value hierarchy during the nine months ended September 30, 2023.

There were no other significant outstanding financial instruments as of March 31, 2024 and December 31, 2023 that required measuring the amounts at fair value on a recurring basis.

Forum Energy Technologies, Inc.

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Business Segments

The Company reports results of operations in the following three reporting segments:

Drilling & Downhole, Completions, and Production.

In the first quarter 2024, following the Variperm Acquisition, we aligned our reportable segments with business activity drivers, our customer base, and the manner in which we review and evaluate operating performance.

FET now operates in the following two reportable segments:

(1) Drilling and Completions and (2) Artificial Lift and Downhole.

Our historical results of operations were recast retrospectively to reflect these changes in accordance with U.S.

The Drilling and Completions segment designs, manufactures and supplies products and solutions to the drilling, subsea, coiled tubing, well stimulation and intervention markets, including applications in oil and natural gas, renewable energy, defense and communications.

The Artificial Lift and Downhole segment designs, manufactures and supplies products and solutions for the artificial lift, production and infrastructure markets.

The Company’s reportable segments are strategic units that offer distinct products and services.

They are managed separately since each business segment requires different marketing strategies.

Operating segments have not been aggregated as part of a reportable segment.

The Company evaluates the performance of its reportable segments based on operating income.

This segmentation is representative of the manner in which our Chief Operating Decision Maker and our board of directors make decisions on how to allocate resources and assess performance.

We consider the Chief Operating Decision Maker to be the Chief Executive Officer.

The amounts indicated below as “Corporate” relate to costs and assets not allocated to the reportable segments.

Summary financial data by segment follows (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Drilling & Downhole $ 81,181 $ 75,723 $ 238,652 $ 223,476

Completions 62,473 72,246 208,239 190,867

Production 36,877 34,238 108,918 95,622

Three Months Ended

Drilling and Completions $ 119,071 $ 126,764

Artificial Lift and Downhole 83,342 62,207

Eliminations ( 21 ) ( 14 )

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Segment operating income

Drilling & Downhole $ 8,437 $ 9,481 $ 25,165 $ 23,995

Completions 2,147 5,915 9,893 8,787

Production 1,803 665 4,546 ( 1,241 )

Drilling and Completions $ 4,559 $ 4,990

Artificial Lift and Downhole 11,786 8,633

Corporate ( 7,252 ) ( 7,032 )

Segment operating income 9,093 6,591

Loss (gain) on disposal of assets and other ( 145 ) ( 52 ) 137 ( 938 )

Transaction expenses 5,921 —

Gain on disposal of assets and other ( 28 ) ( 260 )

Operating income $ 3,200 $ 6,851

A summary of consolidated assets by reportable segment is as follows (in thousands):

September 30, 2023 December 31, 2022

Drilling & Downhole $ 347,503 $ 340,819

Completions 357,174 366,771

Production 100,149 95,089

March 31, 2024 December 31, 2023

Drilling and Completions $ 593,294 $ 615,033

Artificial Lift and Downhole 413,533 178,785

Corporate 14,562 27,243

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Three Months Ended

September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Drilling Technologies $ 42,953 $ 38,159 $ 128,995 $ 100,934

Downhole Technologies 23,480 21,916 68,763 62,902

Subsea Technologies 14,748 15,648 40,894 59,640

Drilling $ 36,472 $ 40,307

Subsea 21,835 12,806

Stimulation and Intervention 38,560 47,310

Coiled Tubing 22,204 26,341

Downhole 52,243 23,211

Production Equipment 18,482 19,896

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The following table presents our revenues disaggregated by geography (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

United States $ 111,317 $ 129,186

Middle East 27,359 12,751 64,058 38,700

Canada 35,639 13,668

Europe & Africa 21,602 11,672

Latin America 9,185 6,191 30,218 25,891

Middle East 17,355 17,982

Asia-Pacific 10,168 7,681

Latin America 6,311 8,768

Total revenue $ 202,392 $ 188,957

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Management has reviewed such pending judicial and legal proceedings, the reasonably anticipated costs and expenses in connection with such proceedings, and the availability and limits of insurance coverage, and has established reserves that are believed to be appropriate in light of those outcomes that are believed to be probable and can be estimated.

The reserves accrued at September 30, 2023 and December 31, 2022, respectively, are immaterial.

The reserves accrued at March 31, 2024 and December 31, 2023, respectively, are immaterial.

In the opinion of management, the Company’s ultimate liability, if any, with respect to these actions is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

In October of 2017, one of our subsidiaries, Global Tubing LLC (“Global Tubing”), filed suit against Tenaris Coiled Tubes, LLC and Tenaris, S.A.

(together “Tenaris”) in the United States District Court for the Southern District of Texas seeking a declaration that its DURACOIL TM products do not infringe certain Tenaris patents related to coiled tubing.

Tenaris filed counterclaims against Global Tubing alleging DURACOIL TM products infringe three patents.

Tenaris sought unspecified damages and a permanent injunction.

In response, Global Tubing alleged that its products do not infringe and the Tenaris patents are invalid and unenforceable.

On March 20, 2023, the court agreed with Global Tubing, finding all patents unenforceable and dismissing all Tenaris infringement claims.

Global Tubing intends to seek an award of its attorneys’ fees and costs incurred as a result of the litigation.

Tenaris has appealed the final judgment and Global Tubing has filed a cross-appeal.

For further disclosure regarding certain litigation matters, refer to Note 12 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.

For further disclosure regarding certain litigation matters, refer to Note 12 of the notes to the consolidated financial statements included in Item 8 of the Company’s 2023 Annual Report on Form 10-K filed with the SEC on March 5, 2024.

Forum Energy Technologies, Inc.

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The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in thousands, except per share amounts):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Net income (loss) - basic $ 7,969 $ 16,477 $ ( 2,096 ) $ 16,542

Interest on dilutive convertible notes due 2025 — 2,762 — 8,286

Net income (loss) - diluted $ 7,969 $ 19,239 $ ( 2,096 ) $ 24,828

Three Months Ended

Net loss $ ( 10,315 ) $ ( 3,486 )

Weighted average shares outstanding - basic 12,201 10,179

Dilutive effect of stock options and restricted stock — —

Dilutive effect of convertible notes due 2025 — 4,547 — 4,547

Weighted average shares outstanding - diluted 12,201 10,179

Earnings (loss) per share

Loss per share

Basic $ ( 0.85 ) $ ( 0.34 )

Diluted $ ( 0.85 ) $ ( 0.34 )

The calculation of diluted earnings per share excluded approximately 46 thousand shares that were anti-dilutive for the three months ended September 30, 2023.

For the nine months ended September 30, 2023, we excluded all potentially dilutive restricted shares and stock options in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for the period.

For the three months and nine months ended September 30, 2022, the diluted earnings per share calculation excluded approximately 54 thousand and 95 thousand shares, respectively.

For the three months ended March 31, 2024 and 2023, we excluded all potentially dilutive restricted shares and stock options in calculating diluted earnings per share as the effect was anti-dilutive due to net losses incurred for these periods.

Diluted earnings per share was calculated using treasury stock method for the restricted shares and stock options.

and if-converted method for the convertible notes.

Stockholders' Equity

Stock-based compensation

During the nine months ended September 30, 2023, the Company granted 86,912 time-based restricted stock units to employees that vest ratably over three years .

In addition, during the nine months ended September 30, 2023, the Company granted 86,912 performance restricted stock units to employees (assuming target performance) that vest based upon the total shareholder return of the Company's common stock as compared to a group of peer companies over three different performance periods.

During the three months ended March 31, 2024, the Company granted 86,391 performance restricted stock units (assuming target performance) to an employee that vest based upon the Company's total shareholder return compared to the total shareholder return of a group of peer companies over three different performance periods.

The performance periods run from January 1, 2024 through December 31, 2024, January 1, 2024 through December 31, 2025 and January 1, 2024 through December 31, 2026, and 1/3 of each award is allocated to each performance period.

The performance restricted stock units may settle for between 0 % and 200 % of the target units granted in shares of the Company’s common stock.

The performance restricted stock units may settle for between 0 % and 200 % of the target units granted.

Also, the Company granted 20,000 time-based restricted stock units to employees that vest after 1 year.

Liability-classified awards

During the three months ended March 31, 2024, the Company granted 82,406 performance restricted stock units (assuming target performance) to employees with same terms as the performance restricted stock units above.

Also, during the three months ended March 31, 2024, the Company granted 168,797 time-based restricted stock units to employees that vest ratably over three years .

Related Party Transactions

The Company has sold and purchased inventory, services and fixed assets to and from various affiliates of certain directors.

The Company has sold and purchased inventory, services and fixed assets to and from affiliates of certain directors.

The dollar amounts of these related party activities are not significant to the Company’s unaudited condensed consolidated financial statements.

Forum Energy Technologies, Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

Subsequent Events

On November 1, 2023, the Company and its wholly owned subsidiary entered into a purchase agreement with Variperm Holdings Ltd.

("Variperm") and its shareholders to acquire all of the issued and outstanding common shares of Variperm.

The Company expects the transaction to close during January 2024.

Variperm, headquartered in Canada, is a manufacturer of downhole technology solutions, providing sand and flow control products for heavy oil applications.

Total consideration for the acquisition includes approximately $ 150.0 million of cash and 2.0 million shares of the Company's common stock, subject to customary purchase price adjustments set forth in the purchase agreement.

The purchase agreement was filed in the Company's Current Report on Form 8-K on November 3, 2023.

On November 1, 2023, the Company entered into an amendment to the Credit Facility that, among other things, permits the acquisition of Variperm, permits the incurrence of either new secured notes in an amount not to exceed $ 200.0 million or other financing, extends the maturity date of the Credit Agreement to September 8, 2028, increases the aggregate revolving commitments to $ 250.0 million from $ 179.0 million, and updates the CDOR provisions with Canadian Overnight Repo Rate Average .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements