What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-07-29 · 278 added, 177 removed, 454 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at June 30, 2021 is unaudited)

(Information at September 30, 2021 is unaudited)

September 30,

(In Thousands)

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CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at June 30, 2021 is unaudited )

(Information at September 30, 2021 is unaudited )

September 30,

(In Thousands)

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Series E 14 % cumulative, redeemable Class C preferred stock, no par value,

210,000 shares issued;

no shares issued or outstanding at September 30, 2021;

( 210,000 shares

139,768 outstanding;

aggregate liquidation preference

of $ 297,706,000 ($ 277,982,000 at December 31, 2020)

Series F redeemable Class C preferred stock, no par value, 1 share issued and

$ 278 million at December 31, 2020)

Series F redeemable Class C preferred stock, no par value, no shares

issued or outstanding at September 30, 2021;

( 1 share issued and

aggregate liquidation preference of $ 100

at December 31, 2020)

Stockholders' equity:

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aggregate liquidation preference

of $ 3,385,000 ($ 3,265,000 at December 31, 2020)

of $ 3.4 million ($ 3.3 million at December 31, 2020)

Series D 6 % cumulative, convertible Class C preferred stock, no par value;

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aggregate liquidation preference

of $ 1,342,000 ($ 1,312,000 at December 31, 2020)

of $ 1.4 million ($ 1.3 million at December 31, 2020)

Common stock, $ .10 par value;

75,000,000 shares authorized,

31,283,210 shares issued

150 million shares authorized, 90 million

shares issued ( 75 million shares authorized, 40 million shares issued

at December 31, 2020)

Capital in excess of par value

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Less treasury stock, at cost:

Common stock, 982,639 shares ( 2,074,565 shares at December 31, 2020)

Common stock, 1 million shares ( 2.1 million shares at December 31, 2020)

Total stockholders' equity

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands, Except Per Share Amounts)

Cost of sales

Gross profit (loss)

Selling, general and administrative expense

Other expense (income), net

Operating income

Other expense, net

Operating income (loss)

Interest expense, net

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Non-operating other expense (income), net

Income (loss) before benefit for income taxes

Benefit for income taxes

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net income (loss)

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Accretion of Series E redeemable preferred stock

Net income attributable to participating securities

Net income (loss) attributable to common stockholders

Income (loss) per common share:

Net income (loss)

Deemed dividend on Series E and Series F

redeemable preferred stocks

Net loss attributable to common stockholders

Basic and dilutive net loss per common share

See accompanying notes.

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Balance at June 30, 2021

Issuance of common stock in exchange

for redeemable preferred stocks

Deemed dividend on redeemable

preferred stocks

Dividend accrued on redeemable

preferred stock prior to exchange

Accretion of redeemable preferred

stock prior to exchange

Stock-based compensation

Issuance of restricted and unrestricted stock

Balance at September 30, 2021

Balance at December 31, 2019

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Balance at June 30, 2020

Dividend accrued on redeemable

preferred stock

Accretion of redeemable preferred stock

Stock-based compensation

Balance at September 30, 2020

See accompanying notes.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

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Amortization of intangible and other assets

Stock-based compensation

Cash provided (used) by changes in assets and liabilities:

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Prepaid insurance

Precious metals

Accounts payable

Accrued interest

Accrued payroll and benefits

Other assets and other liabilities

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Expenditures for property, plant and equipment

Proceeds from vendor settlements associated with

property, plant and equipment

Other investing activities

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Payments on other long-term debt

Payments of debt-related costs

Payments on short-term financing

Payments of costs to exchange redeemable preferred

stocks for common stock

Other financing activities

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All material intercompany accounts and transactions have been eliminated.

Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to current period presentation, including all share and per share information relating to the stock split in the form of a stock dividend discussed below.

Nature of Business – We are engaged in the manufacture and sale of chemical products.

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and parts of Mexico and Canada .

In our opinion, the unaudited condensed consolidated financial statements of the Company as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 include all adjustments and accruals, consisting of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods.

In our opinion, the unaudited condensed consolidated financial statements of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 include all adjustments and accruals, consisting of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods.

These interim results are not necessarily indicative of results for a full year due, in part, to the seasonality of our sales of agricultural products and the timing of performing our major plant maintenance activities.

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Actual results could differ from those estimates.

Increase in Authorized Shares of Common Stock and a Stock Dividend - During the third quarter of 2021, LSB held a Special Meeting of Stockholders (the “Special Meeting”).

At the Special Meeting, our stockholders approved:

the issuance and sale of up to approximately 60.4 million shares of common stock of the Company upon the exchange of all of the outstanding shares of Series E and Series F Redeemable Preferred (see discussion of the exchange transaction (“Exchange Transaction” in Note 2);

amending our restated certificate of incorporation to increase the number of authorized shares of our common stock to 150 million shares of common stock;

amending the certificate of designations of the Series E Redeemable Preferred to revise the preferential rights of holders of shares of Series E Redeemable Preferred to eliminate the right to participate in connection with the declaration of the proposed common stock dividend with respect to our common stock.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies (continued)

In August 2021, our Board of Directors (“Board”) declared a common stock dividend (“Special Dividend”) contingent on the closing of the Exchange Transaction (as defined below).

As a result of the stockholders’ approval and the closing of the Exchange Transaction, such Special Dividend was effected in the form of a stock dividend of 0.3 shares of our common stock, for each outstanding share of common stock (exclusive of common stock held in the treasury and the common shares issued as part of the Exchange Transaction ), but the Special Dividend was contingent upon the stockholders’ approval of the proposals noted above.

As the result of the stockholders’ approval, the Special Dividend was paid through the issuance of approximately 9.1 million shares of common stock on October 8, 2021 to holders of record of common stock, including certain stock-based awards, on September 24, 2021 (the “Record Date”).

Our common stock began trading on a stock dividend-adjusted basis on October 13, 2021.

See additional discussion in Note 13 – Sub sequent Events .

For financial reporting purposes, the Special Dividend is accounted for as a stock split in the form of a stock dividend.

As a result, all share and per share information herein has been retroactively adjusted to reflect the Special Dividend.

In addition, pursuant to anti-dilution terms included in outstanding cash-based awards, the number of units of cash-based awards increased due to the Special Dividend.

As a result, additional expense was recognized due to the Special Dividend.

In summary, we recognized approximately $ 1.3 million expense, of which $ 0.5 million is classified as cost of sales and $ 0.8 million is classified as SG&A.

See additional discussion relating to these cash-based awards in Note 2.

Redeemable Preferred Stocks – Our redeemable preferred stocks that were redeemable outside of our control were classified as temporary/mezzanine equity.

The redeemable preferred stocks were recorded at fair value upon issuance, net of issuance costs or discounts.

In addition, certain embedded features (“embedded derivative”) included in the Series E Redeemable Preferred required bifurcation and were classified as derivative liabilities.

The carrying values of the redeemable preferred stocks were being increased since issuance by periodic accretions (including the amount for dividends earned but not yet declared or paid) using the interest method so that the carrying amount would equal the redemption value as of the earliest possible redemption date by the holder.

The accretion was recorded to retained earnings/accumulated deficit.

However, during the third quarter of 2021, our redeemable preferred stocks were exchanged into our common stock as discussed in Note 2.

As a result, the change in classification of the redeemable preferred stocks from temporary/mezzanine equity to permanent equity was considered an extinguishment.

In conjunction with the extinguishment of the redeemable preferred stocks, the then current fair value of the bifurcated embedded derivative was applied to the carrying value of the redeemable preferred stocks at the time of the extinguishment.

Equity Awards – Equity award transactions with employees are measured based on the estimated fair value of the equity awards issued.

For equity awards with service conditions that have a graded vesting period, we recognize compensation cost on a straight-line basis over the requisite service period for the entire award.

Forfeitures are accounted for as they occur.

We may issue new shares of common stock or may use treasury shares associated with the equity awards.

In January 2021, the compensation committee of our Board of Directors approved the grant of 799,499 shares of time-based restricted stock and 284,810 shares of performance-based restricted stock to certain executives under our 2016 Long Term Incentive Plan.

The number of shares has been retroactively adjusted to reflect the Special Dividend as discussed above.

The time-based restricted stock shares will vest at the end of each one-year period at the rate of one-third per year for three years, vesting 100% at the end of three years .

See Note 2 concerning performance-based restricted stock awards .

The unvested restricted shares carry dividend and voting rights contingent upon the vesting and lapsing of restriction.

Sales of these shares are restricted prior to the date of vesting.

Pursuant to the terms of the underlying restricted stock agreements, unvested restricted shares may immediately vest upon the occurrence of a change in control (as defined by agreement), termination without cause or death.

See additional discussion relating to equity awards in Note 2.

Income Taxes – Income taxes are accounted for under the asset and liability method.

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In addition, we recognize contingent gains when such gains are realized or when the contingencies have been resolved (generally at the time a settlement has been reached).

Redeemable Preferred Stocks – Our redeemable preferred stocks that are redeemable outside of our control are classified as temporary/mezzanine equity.

The redeemable preferred stocks were recorded at fair value upon issuance, net of issuance costs or discounts.

In addition, certain embedded features included in the Series E Redeemable Preferred required bifurcation and are classified as derivative liabilities.

The carrying values of the redeemable preferred stocks are being increased by periodic accretions (including the amount for dividends earned but not yet declared or paid) using the interest method so that the carrying amount will equal the redemption value as of October 25, 2023, the earliest possible redemption date by the holder.

The accretion was recorded to retained earnings.

However, this accretion will change if the expected redemption date changes.

Also, see discussion in Note 12 – Subsequent Events.

Derivatives, Hedges and Financial Instruments – Derivatives are recognized in the balance sheet and are measured at fair value.

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Level 3 - Valuations of assets and liabilities classified as Level 3 are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

At June 30, 2021, and December 31, 2020, we did not have any financial instruments with fair values materially different from their carrying amounts (which excludes issuance costs, if applicable).

At September 30, 2021, and December 31, 2020 , we did not have any financial instruments with fair values materially different from their carrying amounts (which excludes issuance costs, if applicable).

The fair value of financial instruments is not indicative of the overall fair value of our assets and liabilities since financial instruments do not include all assets, including intangibles, and all liabilities.

Equity Awards – Equity award transactions with employees are measured based on the estimated fair value of the equity awards issued.

For equity awards with service conditions that have a graded vesting period, we recognize compensation cost on a straight-line basis over the requisite service period for the entire award.

Forfeitures are accounted for as they occur.

We may issue new shares of common stock or may use treasury shares associated with the equity awards.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies (continued)

In January 2021, the compensation committee of our Board of Directors approved the grant of 614,999 shares of time-based restricted stock and 219,084 shares of performance-based restricted stock to certain executives under our 2016 Long Term Incentive Plan.

The time-based restricted stock shares will vest at the end of each one-year period at the rate of one-third per year for three years, vesting 100% at the end of three years .

The performance-based restricted stock will vest at the end of three years , subject to achievement of certain performance metrics.

The unvested restricted shares carry dividend and voting rights contingent upon the vesting and lapsing of restriction.

Sales of these shares are restricted prior to the date of vesting.

Pursuant to the terms of the underlying restricted stock agreements, unvested restricted shares will immediately vest upon the occurrence of a change in control (as defined by agreement), termination without cause or death.

Revenue Recognition

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Most of our contracts contain a single performance obligation with the promise to transfer a specific product.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies (continued)

Most of our revenue is recognized from performance obligations satisfied at a point in time, however, we have a performance obligation to perform certain services that are satisfied over a period of time.

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Future revenues to be earned from the satisfaction of performance obligations will be recognized when control transfers as goods are loaded and weighed or services are performed over the remaining duration of our contracts.

Income (Loss) per Common Share – Net income (loss) attributable to common stockholders is computed by adjusting net income (loss) by the amount of dividends and dividend requirements on preferred stocks and the accretion of redeemable preferred stocks, if applicable.

Income (Loss) per Common Share – Net income (loss) attributable to common stockholders is computed by adjusting net income (loss) by the amount of dividends and dividend requirements (including the deemed dividend discussed in Note 2) on preferred stocks and the accretion of redeemable preferred stocks, if applicable.

Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding, excluding contingently issuable common shares (unvested restricted stock), if applicable.

For periods we earn net income, a proportional share of net income is allocated to participating securities, if applicable and dilutive, determined by dividing total weighted average participating securities by the sum of the total weighted average common shares and participating securities (the “two-class method”).

Certain securities (Series E Redeemable Preferred and restricted stock units) participate in dividends declared on our common stock and are therefore considered to be participating securities.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies (continued)

Certain securities (Series E Redeemable Preferred prior to the Exchange Transaction and restricted stock units) participate in dividends declared on our common stock and are therefore considered to be participating securities.

Participating securities have the effect of diluting both basic and diluted income per common share during periods of net income.

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Diluted loss per common share is computed after giving consideration to the dilutive effect of our potential common stock instruments that are outstanding during the period, except where such non-participating securities would be anti-dilutive.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies (continued)

Recently Adopted Accounting Pronouncement

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Income (loss) Per Common Share

Redeemable Preferred Stocks Exchanged for Common Stock

Series E and Series F Redeemable Preferred Exchanged for Common Stock

In July 2021, we entered into a Securities Exchange Agreement (the “Exchange Agreement”) with LSB Funding (the “Holder”), an affiliate of Eldridge Industries, LLC and other affiliates (together “Eldridge”), which Exchange Agreement was voted on and approved by our stockholders at the Special Meeting as discussed in Note 1.

Pursuant to the terms of the Exchange Agreement, the Holder would exchange all of the shares of the Series E and Series F Redeemable Preferred into our common stock based on the liquidation preference (“Liquidation Preference”), at the time of the exchange, and an exchange price of $ 6.16 , which is equal to the 30 -day volume weighted average price as of the date of the Exchange Agreement.

The Liquidation Preference primarily consists of $ 1,000 per share of Series E Redeemable Preferred plus accrued and unpaid dividends and the participation rights value.

On September 27, 2021, the closing of the Exchange Agreement occurred, and the Exchange Transaction was consummated.

Pursuant to the terms of the Exchange Agreement, the Holder exchanged all of the shares of the Series E and Series F Redeemable Preferred for approximately 49.1 million shares of our common stock.

The total fair value of the approximately 49.1 million shares of common stock issued was approximately $ 531.1 million (based on the average per share price on the date of closing).

The fair value of the common stock issued was in excess of the Ser ies E and Series F Redeemable Preferred carrying amount, net of the bifurcated embedded derivative and unamortized issuance costs, by approximately $ 231.8 million and is treated as a deemed dividend.

Because we were in an accumulated deficit position on the closing date, the deemed dividend was charged to capital in excess of par value .

Changes in our Series E and Series F Redeemable Preferred (including the bifurcated embedded derivative discussed in Note 7) are as follows:

Series E Redeemable Preferred

Series F Redeemable Preferred

Redeemable preferred stocks

Accrued Liability-Embedded Derivative

Redeemable preferred stocks

(Dollars In Thousands)

Balance at December 31, 2020

Accretion relating to liquidation

preference on preferred stock

Accretion for discount and

issuance costs on preferred

Accumulated dividends

Change in fair value of

embedded derivative

Costs relating to exchange

Exchange of preferred stock

for common stock

Balance at September 30, 2021

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Redeemable Preferred Stocks Exchanged for Common Stock (continued)

Change of Control

As the result of the Exchange Transaction discussed above, Eldridge held over 60 % of our outstanding shares of common stock on the closing date.

As a result, a change of control (“CoC”) event occurred as defined in certain agreements, including the following:

Performance-Based Restricted Stock

Pursuant to the terms of the performance-based awards outstanding as of the CoC event, approximately 300,000 shares of restricted stock were issued including the satisfaction of certain performance conditions above the target performance level.

Such restricted stock is subject to the time-based vesting conditions set forth in the applicable award agreement and the 2016 Long Term Incentive Plan.

Due to the issuance of the restricted stock, we recognized an additional $ 1.7 million of stock-based compensation (classified as SG&A).

Cash-Based Awards

Pursuant to the terms of the cash-based awards outstanding as of the CoC event, all such awards immediately vested.

As a result of the vesting, we recognized an additional $ 2.0 million expense, of which $ 0.7 million is classified as cost of sales and $ 1.3 million is classified as SG&A.

At September 30, 2021 and December 31, 2020, our liability for these cash-based awards was approximately $ 5.4 million and $ 0.4 million, respectively.

Loss Per Common Share

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(Dollars In Thousands, Except Per Share Amounts)

Net income (loss)

Adjustments for basic net income (loss) per common share:

Adjustments for basic income (loss) per common share:

Dividend requirements on Series E Redeemable

Deemed dividend on Series E and Series F

Redeemable Preferred

Dividend requirements on Series B Preferred

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Accretion of Series E Redeemable Preferred

Net income attributable to participating securities

Numerator for basic net income (loss) per common

share - net income (loss) attributable to common

Dividends on Series B and Series D Preferred

assumed to be converted, if dilutive

Numerator for diluted net income (loss) per common

Denominator for basic net income (loss) per common

share - weighted- average shares (1)

Effect of dilutive securities:

Convertible preferred stocks

Unvested restricted stock and stock units

Dilutive potential common shares

Denominator for diluted net income (loss) per

Numerator for basic and diluted net loss per common

Denominator for basic and diluted net income (loss) per

common share - adjusted weighted-average

Basic net income (loss) per common share

Diluted net income (loss) per common share

Basic and diluted net loss per common share

Excludes the weighted-average shares of unvested restricted stock that are contingently issuable.

The following weighted-average shares of securities were not included in the computation of diluted net income (loss) per common share as their effect would have been antidilutive:

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Loss Per Common Share (continued)

The following weighted-average shares of securities were not included in the computation of diluted net loss per common share as their effect would have been antidilutive:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Restricted stock and stock units

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Stock options

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Current and Noncurrent Accrued and Other Liabilities

September 30,

(In Thousands)

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Accrued death and other executive benefits

Series E Redeemable Preferred - embedded derivative

Deferred revenue

Series E Redeemable Preferred - embedded derivative

Less noncurrent portion

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Our long-term debt consists of the following:

September 30,

(In Thousands)

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rate of 3.75% (A)

Senior Secured Notes due 2023 (B)

Senior Secured Notes due 2023, with an interest

rate of 9.625% (B)

Secured Financing due 2023, with an interest

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Long-term debt due after one year, net

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt (continued)

(A) O ur revolving credit facility, as amended (the “Working Capital Revolver Loan”), provides for advances up to $ 65 million (the “Maximum Revolver Amount”), based on specific percentages of eligible accounts receivable and inventories and up to $ 10 million of letters of credit, the outstanding amount of which reduces the available for borrowing under the Working Capital Revolver Loan.

At June 30, 2021 , our available borrowings under our Working Capital Revolver Loan were approximately $ 50.3 million , based on our eligible collateral, less outstanding letters of credit and loan balance.

At September 30, 2021 , our available borrowings under our Working Capital Revolver Loan were approximately $ 48.2 million , based on our eligible collateral, less outstanding letters of credit and loan balance.

The maturity date of the Working Capital Revolver Loan is on the earlier of (i) the date that is 90 days prior to the earliest stated maturity date of the Senior Secured Notes (unless refinanced or repaid) and (ii) February 26, 2024 .

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The Financial Covenant, if triggered, is tested monthl y.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt (continued)

(B) On April 25, 2018, LSB completed the issuance and sale of $ 400 million aggregate principal amount of its 9.625 % Senior Secured Notes due 2023 (the “Notes”), pursuant to an indenture (the “Indenture”), dated as of April 25, 2018.

The Notes were issued at a price equal to 99.509 % of their face value.

On June 21, 2019, LSB completed the issuance and sale of $ 35 million aggregate principal amount of its 9.625 % Senior Secured Notes due 2023 (the “New Notes”).

The New Notes were issued pursuant to the Indenture (the Notes together with the New Notes, the “Senior Secured Notes”).

The New Notes were issued at a price equal to 102.125 % of their face value, plus accrued interest from May 1, 2019 to June 21, 2019.

The Senior Secured Notes mature on May 1, 2023 .

Interest is to be paid semiannually in arrears on May 1 st and November 1 st .

(C) El Dorado Chemical Company (“EDC”), one of our subsidiaries, is party to a secured financing arrangement with an affiliate of LSB Funding L.L.C.

(“LSB Funding”).

Also, the lender provided LSB a consent to close the Exchange Transaction discussed in Note 2 and to allow for a payment of dividends not to exceed $ 2 million to the holders of the Series B and Series D Preferred, if and when declared by the Board.

(B) The Senior Secured Notes were scheduled to mature on May 1, 2023 ;

however, on September 29, 2021, we distributed a notice of redemption, which notice was contingent to the closing of the new senior secured notes, with a redemption date of October 29, 2021 , and such redemption occurred with the closing of new senior secured notes as discussed in Note 13 – Subsequent Events.

Because the Senior Secured Notes were redeemed with the proceeds from the new senior secured notes and such redemption occurred prior to the issuance of these condensed consolidation financial statements, the carrying amount of the Senior Secured Notes remains classified as noncurrent.

(C) El Dorado Chemical Company (“EDC”), one of our subsidiaries, is party to a secured financing arrangement with an affiliate of LSB Funding.

Principal and interest are payable in 48 equal monthly installments with a final balloon payment of approximately $ 3 million due in June 2023 .

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In June 2021, the PPP loan was fully forgiven by the SBA and lender.

As a result, we recognized a gain on extinguishment of debt of $ 10 million for the three months ended June 30, 2021.

As a result, we recognized a gain on extinguishment of debt of $ 10 million during the second quarter of 2021 .

Commitments and Contingencies

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Prior to this weather event, we had both types of arrangements.

During the first quarter of 2021, as a result of the extreme conditions previously described, we settled all of our natural gas forward contracts and certain volume purchase commitments and recognized a realized gain of approximately $6.8 million, which includes the realized gain discussed under “Natural Gas Contracts” in Note 6 and is classified as a reduction to cost of sales.

At June 30, 2021, certain of our natural gas contracts qualify as normal purchases under GAAP and thus are not mark-to-market, which contracts included volume purchase commitments with fixed costs of approximately 4.7 million MMBtus of natural gas.

These contracts extend through December 2021 at a weighted-average cost of $ 2.75 per MMBtu ($ 13.1 million) and a weighted-average market value of $ 3.40 per MMBtu ($ 16.1 million).

During the first quarter of 2021, as a result of the extreme conditions previously described, we settled all of our natural gas forward contracts and certain volume purchase commitments and recognized a realized gain of approximately $6.8 million, which includes the realized gain discussed under “Natural Gas Contracts” i n Note 7 and is classified as a reduction to cost of sales.

At September 30, 2021, certain of our natural gas contracts qualify as normal purchases under GAAP and thus are not mark-to-market, which contracts included volume purchase commitments with fixed costs of approximately 4.8 million MMBtus of natural gas.

These contracts extend through February 2022 at a weighted-average cost of $ 3.84 per MMBtu ($ 18.4 million) and a weighted-average market value of $ 5.55 per MMBtu ($ 26.6 million).

LSB INDUSTRIES, INC.

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Commitments and Contingencies (continued)

Settlements of Gain Contingencies - In June 2020, EDC and certain vendors mediated settlements for EDC to recover certain costs associated with a nitric acid plant at our El Dorado Facility.

Settlements of Gain Contingencies - During 2020, EDC and certain vendors mediated settlements for EDC to recover certain costs associated with a nitric acid plant at our El Dorado Facility.

The construction of this plant was completed, and the plant began production in 2016.

As a result, the recovery from these settlements recognized during the three months ended June 30, 2020, includes approximately $ 5.7 million classified as a reduction to cost of sales and approximately $ 1.9 million classified as a reduction to PP&E.

As a result, the recovery from these settlements recognized during 2020, includes approximately $ 5.7 million classified as a reduction to cost of sales and approximately $ 1.9 million classified as a reduction to PP&E.

Legal Matters - Following is a summary of certain legal matters involving the Company:

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We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at our facilities should we discontinue the operations of a facility.

As of June 30, 2021, our accrued liabilities for environmental matters totaled $ 467,000 relating primarily to the matters discussed below.

As of September 30, 2021, our accrued liabilities for environmental matters totaled approximately $ 0.5 million relating primarily to the matters discussed below.

Estimates of the most likely costs for our environmental matters are generally based on preliminary or completed assessment studies, preliminary results of studies or our experience with other similar matters.

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During 2019, the Evaluation Report was submitted to the ADEQ and the ADEQ approved the report.

No liability has been established at June 30, 2021 , in connection with this ADEQ matter.

No liability has been established at September 30, 2021 , in connection with this ADEQ matter.

Other Environmental Matters

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LSB and EDC placed its liability insurance carrier on notice, and the carrier is handling the defense for LSB and EDC concerning this matter.

Our product liability insurance policies have aggregate limits of general liability totaling $ 100 million, with a self-insured retention of $ 250,000 , which retention limit has been met relating to the West Fertilizer matter.

In 2015, the trial court dismissed plaintiff’s negligenc e claims against us, and EDC based on a duty to inspect but allowed the plaintiffs to proceed on claims for design defect and failure to warn.

LSB INDUSTRIES, INC.

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Commitments and Contingencies (continued)

Subsequently, we and EDC have entered into confidential settlement agreements (with approval of our insurance carriers) with several plaintiffs that had claimed wrongful death and bodily injury and insurance companies asserting subrogation claims for damages from the explosion.

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We continue to defend these lawsuits vigorously and we are unable to estimate a possible range of loss at this time if there is an adverse outcome in this matter as to EDC.

As of June 30, 2021, no liability reserve has been established in connection with this matter, except for the unpaid portion of the settlement agreements discussed above.

As of September 30, 2021, no liability reserve has been established in connection with this matter, except for the unpaid portion of the settlement agreements discussed above.

In 2015, we and EDA received formal written notice from Global Industrial, Inc.

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In addition, post-judgment interest will accrue at the annual rate of 4.25 % until paid.

During the first six months of 2020, this judgment impacted our condensed consolidated statement of operations as follows:

During the first nine months of 2020, this judgment impacted our condensed consolidated statement of operations as follows:

additional depreciation expense of $ 0.5 million classified as cost of sales;

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Due to the impact from the COVID-19 pandemic, the trial date for Part (2) of the matter has been delayed and we are awaiting a new trial date.

No liability was established at June 30, 2021, or December 31, 2020, in connection with the cross-claims in Part (2) of the matte r, except for certain invoices held in accounts payable.

No liability was established at September 30, 2021, or December 31, 2020, in connection with the cross-claims in Part (2) of the matte r, except for certain invoices held in accounts payable.

We are also involved in various other claims and legal actions (including matters involving gain contingencies).

It is possible that the actual future development of claims could be different from our estimates but, after consultation with legal counsel, we believe that changes in our estimates will not have a material effect on our business, financial condition, results of operations or cash flows.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Derivatives, Hedges and Financial Instruments

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At December 31, 2020, our natural gas contracts included 7.3 million MMBtu of natural gas, that extended through December 2021, but these contracts were settled during the first quarter of 2021, primarily due to the weather event discussed in Note 6.

At June 30, 2021, we had no outstanding natural gas contracts.

At September 30, 2021, we had no outstanding natural gas contracts.

The valuations of the natural gas contracts are classified as Level 2.

At December 31, 2020, the valuation inputs included the contractual weighted-average cost of $ 2.65 per MMBtu and the weighted-average market value of $ 2.49 per MMBtu.

For the six months ended June 30, 2021, we recognized a gain of $ 2.7 million (including a realized gain of $ 1.5 million), all of which was recognized in the first quarter.

For the three and six months ended June 30, 2020 , we recognized a minimal gain and a loss of $ 0.7 , respectively .

The gain is classified as a reduction of cost of sales and the loss is classified as cost of sales.

Embedded Derivative

As discussed in Note 8, certain embedded features (“embedded derivative”) relating to the redemption of the Series E Redeemable Preferred, which includes certain contingent redemption features and the participation rights value have been bifurcated from the Series E Redeemable Preferred and recorded as a liability.

At June 30, 2021, and December 31, 2020, we estimate that the contingent redemption features have fair value since we estimate that a portion of the shares of this preferred stock would be redeemed prior to October 25, 2023.

For certain other embedded features, we estimated no fair value based on our assessment that there is a remote probability that these features will be exercised.

The fair value of the embedded derivative was valued using discounted cash flow models and primarily based on the difference in the present value of estimated future cash flows with no redemptions prior to October 25, 2023, compared to certain estimated redemptions during the same period and applying the effective dividend rate of the Series E Redeemable Preferred.

In addition, at June 30, 2021, and December 31, 2020, the fair value of the embedded derivative included the valuation of the participation rights, which was based on the equivalent of 303,646 shares of our common stock at $ 6.05 and $ 3.39 per share, respectively.

The valuations of the embedded derivative are classified as Level 3.

This derivative is valued using market information, management’s redemption assumptions, the underlying number of shares as defined in the terms of the Series E Redeemable Preferred, and the market price of our common stock.

For the three months ended June 30, 2021, and 2020, we recognized an unrealized loss of approximately $ 0.7 million and an unrealized gain of approximately $ 0.1 million, respectively, due to the change in fair value of the embedded derivative.

For the six months ended June 30, 2021, and 2020, we recognized an unrealized loss of approximately $ 1.2 million and an unrealized gain of approximately $ 0.8 million, respectively, due to the change in fair value of the embedded derivative.

The unrealized gain and loss are included in non-operating other income and expense.

At December 31, 2020, the fair value of the natural gas contracts included approximately $ 0.1 million (classified as a current asset) and approximately $ 1.3 million (classified as a current liability).

The valuation inputs included the contractual weighted-average cost of $ 2.65 per MMBtu and the weighted-average market value of $ 2.49 per MMBtu.

LSB INDUSTRIES, INC.

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Derivatives, Hedges and Financial Instruments (continued)

The following details our assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021, and December 31, 2020 :

Fair Value Measurements at

June 30, 2021 Using

Quoted Prices

(Level 3) (1)

(In Thousands)

Assets - Supplies, prepaid items and other:

Natural gas contracts

Liabilities - Current and noncurrent accrued and

other liabilities:

Natural gas contracts

For the nine months ended September 30, 2021, we recognized a gain of $ 2.7 million (including a realized gain of $ 1.5 million), all of which was recognized in the first quarter.

For the three and nine months ended September 30, 2020, we recognized a $ 0.5 million gain and a loss of $ 0.2 , respectively .

The gain is classified as a reduction of cost of sales and the loss is classified as cost of sales.

Embedded Derivative

There was no Level 3 transfer activity for the six months ended June 30, 2021.

Benefit for income taxes is as follows:

As discussed in Note 2, the Series E Redeemable Preferred was exchanged for our common stock during September 2021.

As a result, certain bifurcated embedded redemption features and participation rights value (“embedded derivative”) included as a part of the terms of the Series E Redeemable Preferred were extinguished.

P rior to the completion of the E xchange Transaction, the embedded derivative was classified as a liability.

At December 31, 2020, the fair value of the embedded derivative was approximately $ 1.0 million (classified as a noncurrent liability).

We estimated that the contingent redemption features had fair value since we estimate that a portion of the shares of this preferred stock would be redeemed prior to October 25, 2023, the earliest redemption date by the holder.

For certain other embedded features, we estimated no fair value based on our assessment that there was a remote probability that these features would be exercised.

A t December 31, 2020, the fair value of the embedded derivative included the valuation of the participation rights, which was based on the equivalent of 303,646 shares of our common stock at $ 3.39 per share.

The valuations of the embedded derivative were classified as Level 3.

This derivative was valued using market information, management’s redemption assumptions, the underlying number of shares as defined in the terms of the Series E Redeemable Preferred, and the market price of our common stock.

For the three and nine months ended September 30, 2021, we recognized a loss of approximately $ 1.1 million and $ 2.3 million (including a realized loss of $ 3.3 million), respectively, due to the change in fair value of the embedded derivative through the date of the Exchange Transaction.

For the three and nine months ended September 30, 202 0, we recognized an unrealized loss of approximately $ 0.1 million and an unrealized gain of approximately $ 0.6 million, respectively, due to the change in fair value of the embedded derivative.

The gain and loss are included in non-operating other income and expense.

There was no Level 3 transfer activity for the nine months ended September 30, 2021.

Provision (benefit) for income taxes is as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

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Total Deferred

Benefit for income taxes

Provision (benefit) for income taxes

For the three and nine months ended September 30, 2021 and 2020, the current provision (benefit) for state income taxes shown above includes regular state income tax, provisions for uncertain state income tax positions, the impact of state tax law changes and other similar adjustments.

LSB INDUSTRIES, INC.

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Income Taxes (continued)

For the three and six months ended June 30, 2021, and 2020, the current provision (benefit) for state income taxes shown above includes regular state income tax, provisions for uncertain state income tax positions, the impact of state tax law changes and other similar adjustments.

Our estimated annual effective tax rate for 2021 includes the impact of permanent tax differences including but not limited to PPP loan forgiveness, limits on deductible compensation, state tax law changes, and valuation allowances.

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Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results.

Based on our analysis, we currently believe that it is more-likely-than-not that a portion of our federal deferred tax assets will not be able to be utilized and we estimate the valuation allowance to be recorded during 2021 to be approximately $ 3.0 million.

Based on our analysis, we currently believe that it is more-likely-than-not that a portion of our federal deferred tax assets will not be able to be utilized.

However, we estimate a $ 7.9 million reduction in the related valuation allowance associated with these federal deferred tax assets will be recorded during 2021.

We have also determined it is more-likely-than-not that a portion of our state deferred tax assets will not be able to be utilized.

However, we estimate a reduction in the related valuation allowance associated with these state deferred tax assets to be recorded during 2021 will be approximately $ 4.4 million.

However, we estimate a $ 5.9 million reduction in the related valuation allowance associated with these state deferred tax assets will be recorded during 2021.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets.

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Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

The tax benefit for the six months ended June 30, 2021 was $ 0.2 million ( 2 % benefit on pre-tax income) and the tax benefit for the six months ended June 30, 2020, was $ 1.6 million ( 8 % benefit on pre-tax loss).

For both periods, the effective tax rate is less than the statutory tax rate primarily due to the impact of the valuation allowances.

The tax benefit for the nine months ended September 30, 2021 was $ 0.2 million ( 15 % benefit on pre-tax income).

The negative effective tax rate is primarily due to near break-even pre-tax book income and permanent tax differences including but not limited to PPP loan forgiveness and limits on deductible compensation, state tax law changes, and valuation allowances.

The tax benefit for the nine months ended September 30, 2020 was $ 3.0 million ( 7 % benefit on pre-tax loss).

The effective tax rate is less than the statutory tax rate primarily due to the impact of the valuation allowances.

LSB and certain of its subsidiaries file income tax returns in the U.S.

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Additionally, the 2013-2016 years remain subject to examination for determining the amount of net operating loss and other carryforwards.

Redeemable Preferred Stocks

Series E and Series F Redeemable Preferred

As of June 30, 2021, the Series E Redeemable Preferred had a 14.5 % annual dividend rate and a participating right in dividends and liquidating distributions equal to 303,646 shares of common stock (participation rights value).

Dividends accrue semi-annually in arrears and are compounded.

Pursuant to the terms of the Series E Redeemable Preferred, the annual dividend rate will increase (a) by an additional 0.50 % in April 2022 and (b) by an additional 1.0 % in April 2023.

The Series E Redeemable Preferred contains redemption features and a participation rights value that are being accounted for as derivative instruments and have been bifurcated from the Series E Redeemable Preferred as discussed in Note 6.

Also, see discussion in Note 12 – Subsequent Events.

As of June 30, 2021 , the Series F Redeemable Preferred has voting rights to vote as a single class on all matters which the common stock have the right to vote and is entitled to a number of votes equal to 456,225 shares of our common stock.

Changes in our Series E and Series F Redeemable Preferred are as follows:

Series E Redeemable Preferred

(Dollars In Thousands)

Balance at December 31, 2020

Accretion relating to liquidation preference on

preferred stock

Accretion for discount and issuance costs on

preferred stock

Accumulated dividends

Balance at June 30, 2021

Non-Redeemable Preferred Stock

Series Non-Redeemable B Preferred – The 20,000 shares of Series B 12 % cumulative, convertible preferred stock (“Series B Preferred”), $ 100 par value, are convertible, in whole or in part, into 866,666 shares of our common stock ( 43.3333 shares of common stock for each share of preferred stock ) at any time at the option of the holder and entitle the holder to one vote per share.

The Series B Preferred provides for annual cumulative dividends of 12% ($ 12.00 per share) from date of issue, payable when and as declared.

All of the outstanding shares of the Series B Preferred are owned by the Golsen Holders and an immediate family member .

Series Non-Redeemable D Preferred – The 1,000,000 shares of Series D 6 % cumulative, convertible Class C preferred stock (“Series D Preferred”) have no par value and are convertible, in whole or in part, into 325,000 shares of our common stock ( 0.325 share of common stock for 1 share of preferred stock ) at any time at the option of the holder.

Dividends on the Series D Preferred are cumulative and payable annually in arrears at the rate of 6% per annum ($ 0.06 per share) of the liquidation preference of $ 1.00 per share.

Each holder of the Series D Preferred shall be entitled to .875 votes per share .

All of the outstanding shares of Series D Preferred are owned by the Golsen Holders and an immediate family member .

See discussions concerning dividends on the Series B and Series D Preferred in Note 11 – Related Party Transactions.

LSB INDUSTRIES, INC.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

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Other Information

Although most of our contracts have an original expected duration of one year or less, for our contracts with a duration greater than one year at contract inception, the average remaining expected duration was approximately 15 months at June 30, 2021 .

Liabilities associated with contracts with customers (contract liabilities) primarily relate to deferred revenue and customer deposits associated with cash payments received in advance from customers for volume shortfall charges and product shipments.

We had approximately $ 1.2 million and $ 2.5 million of contract liabilities as of June 30, 2021 and December 31, 2020, respectively.

For the three and six months ended June 30, 2021, revenues of $ 1.0 million and $ 1.6 million, respectively, were recognized and included in the balance at the beginning of the respective period.

For the three and six months ended June 30, 2020, revenues of $ 1.5 million and $ 1.0 million, respectively, were recognized and included in the balance at the beginning of the respective period.

We had approximately $ 1.7 million and $ 2.5 million of contract liabilities as of September 30, 2021 and December 31, 2020, respectively.

For the three and nine months ended September 30, 2021, revenues of $ 0.6 million and $ 2.2 million, respectively, were recognized and included in the balance at the beginning of the respective period.

For the three and nine months ended September 30, 2020, revenues of $ 0.6 million and $ 1.5 million, respectively, were recognized and included in the balance at the beginning of the respective period.

Related Party Transactions

As of June 30, 2021, we have three separate outstanding financing arrangements with an affiliate of LSB Funding as discussed in footnotes (D), (E) and (F) of Note 4.

Also, an affiliate of LSB Funding holds $ 50 million of our Senior Secured Notes discussed in footnote (B) of Note 4.

In addition, LSB Funding holds all outstanding shares of the Series E and Series F Redeemable Preferred discussed in Note 8.

Also, see discussion in Note 12 – Subsequent Events.

The Golsen Holders and an immediate family member hold all outstanding shares of the Series B Preferred and Series D Preferred, which accumulated dividends on such shares totaled approxim ately $ 1.7 million at June 30, 2021 .

As discussed in Note 2, as the result of the stockholders’ approval, the closing of the Exchange Agreement occurred, and the Exchange Transaction was consummated on September 27, 2021.

Pursuant to the terms of the Exchange Agreement, LSB Funding exchanged all of the shares of the Series E and Series F Redeemable Preferred for approximately 49.1 million shares of our common stock .

As discussed in Note 1, our Board declared the Special Dividend that was paid through the issuance of approximately 9.1 million shares of common stock in October 2021, which amount included approximately 1.2 million shares to LSB Funding and approximately 0.7 million shares to the Golsen Holders.

In addition, pursuant to the anti-dilution terms of the Series B and Series D Preferred, the conversion ratio of the Series B Preferred increased to 43.3333 to 1 from 33.3333 to 1 and the Series D Preferred increased to 0.325 to 1 from 0.25 to 1 as discussed in Note 9.

The Golsen Holders and an immediate family member hold all outstanding shares of the Series B and Series D Preferred, which accumulated dividends on such shares totaled approxim ately $ 1.8 million at September 30, 2021 .

After considering the Special Dividend, LSB Funding holds approximately 54.4 million shares of our outstanding common stock, or 60 % of our outstanding common stock.

As of September 30, 2021, we have three separate outstanding financing arrangements by an affiliate of LSB Funding as discussed in footnotes (D), (E) and (F) of Note 5.

Also, an affiliate of LSB Funding held $ 50 million of our Senior Secured Notes discussed in footnote (B) of Note 5, which Senior Secured Notes were redeemed with the proceeds from the new senior secured notes as discussed in Note 13.

A n affiliate of LSB Funding holds $ 30 million of the new senior secured notes .

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Cash Flow Information

The following provides additional information relating to cash flow activities:

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

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Income taxes, net

Noncash continuing investing and financing activities:

Noncash investing and financing activities:

Accounts receivable, supplies, other assets, accounts

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of property, plant and equipment

Dividends accrued on Series E Redeemable Preferred

Accounts payable associated with financing professional fees

Accretion of Series E Redeemable Preferred

Series E and Series F Redeemable Preferred and related

dividends, accretion, and embedded derivative exchanged

for common stock, net of related costs in accounts payable

Extinguishment of PPP loan

Accounts payable associated with debt-related costs

Subsequent Events

Special Dividend

During October 2021, LSB paid the Special Dividend through the issuance of approximately 9.1 million shares of common stock as discussed in Note 1.

Senior Secured Notes due 2028

On October 14, 2021, LSB completed a private offering of $ 500 million in aggregate principal amount of its 6.250 % Senior Secured Notes due 2028 (the “Notes”).

The Notes were issued at a price equal to 100 % of their face value and pursuant to an indenture, dated as of October 14, 2021 (the “Indenture”), by and among the LSB, the subsidiary guarantors named therein, and a trustee and collateral agent.

In addition, the Notes were issued in a transaction exempt from the registration requirements under the Securities Act of 1933 (the “Securities Act”) and are being resold to eligible purchasers in reliance on Rule 144A under the Securities Act and to non-U.S.

persons in accordance with Regulation S under the Securities Act.

The Notes will mature on October 15, 2028 and rank senior in right of payment to all of our debt that is expressly subordinated in right of payment to the notes, and will rank pari passu in right of payment with all of our liabilities that are not so subordinated, including the Working Capital Revolver Loan .

LSB’s obligations under the Notes are jointly and severally guaranteed by the subsidiary guarantors named in the Indenture on a senior secured basis.

Interest on the Notes accrues at a rate of 6.250% per annum and is payable semi-annually in arrears on May 15 and October 15 of each year, beginning on May 15, 2022, to the holders of record on the immediately preceding May 1 and October 1.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 19, 2021, we entered into a Securities Exchange Agreement (the “Exchange Agreement”) with LSB Funding LLC (the “Holder”), an affiliate of Eldridge.

Pursuant to the terms of the Exchange Agreement, the Holder has agreed with us to exchange all of the shares of our Series E and Series F Redeemable Preferred Stock held by it for shares of our common stock.

Under the terms of the Exchange Agreement, LSB would exchange, at the closing, approximately $ 300 million of preferred stock held by Eldridge into an equivalent value of our common stock based on an exchange price of $ 6.16 , which is equal to the 30-day volume weighted average price as of the date of the Exchange Agreement.

In connection with the transaction, our common stockholders will receive a special dividend in the form of 0.30 shares of our common stock for every share owned as of the record date and any such amount received by the Holder will reduce the exchange consideration otherwise payable under the Exchange Agreement.

Completion of the exchange transaction is subject to a number of customary closing conditions, including receipt of stockholder approval from the holders of a majority of the shares of our outstanding common stock not held by Eldridge or any of its affiliates.

This summary description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement included as exhibit 10.2 in this Form 10-Q.

Subsequent Events (continued)

Pursuant to the Indenture, LSB may redeem the Notes at its option, in whole or in part, at certain redemption prices, including a “make-whole” premium, as set forth in the Indenture but also includes redemption requirements associated with a change of control.

In addition, the Indenture contains customary covenants that limit, among other things, LSB and certain of its subsidiaries’ ability to engage in certain transactions and also provides for customary events of default (subject in certain cases to customary grace and cure periods).

Generally, if an event of default occurs and is continuing, the trustee or holders of at least 25 % in principal amount of the then outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable.

This summary description of the Indenture and Notes does not purport to be complete and is qualified in its entirety by reference to the Indenture and the form of the Notes included as exhibits to our Current Report on Form 8-K, filed on October 15, 2021.

The net proceeds from the Notes were used to redeem $ 435 million in aggregate principal amount of the Senior Secured Notes, representing all of the Senior Secured Notes outstanding, to pay related transaction fees, expenses and premiums and, to the extent of any remaining net proceeds, will be used for general corporate purposes.

On September 29, 2021 , LSB issued a conditional notice of redemption to redeem all of the Existing Notes (the “Redemption”), conditioned on the closing of the offering of the Notes, which condition was satisfied as of October 14, 2021.

Also on October 14, 2021, LSB satisfied and discharged its obligations under the indenture governing the Senior Secured Notes by irrevocably depositing with the trustee for the Senior Secured Notes funds sufficient to redeem the Senior Secured Notes in full and to pay related fees and expenses.

The Redemption was completed by the trustee on October 29, 2021 .

We are currently evaluating the impact on our financial statements as the result of the debt financing transaction discussed above.

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