What changed in this filing

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Item 9A. Controls and Procedures

2022-06-14 compared with 2021-06-14 · 681 added, 443 removed, 869 unchanged (56% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,”) as of the end of the period covered by this Annual Report on Form 10-K.

Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO, CFO and CAO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Based on this evaluation, our CEO, CFO and CAO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2021.

controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act,”) as of the end of the period covered by this Annual Report on Form 10-K.

to our management, including our CEO, CFO and CAO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

on this evaluation, our CEO, CFO and CAO have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d- 15(f) under the Exchange Act.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.

Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2021 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

Our internal control over financial

reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.

Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2022 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in

Internal Control—Integrated Framework (2013).

Based on its assessment, our management, including our CEO and CFO, has concluded that our internal control over financial reporting was effective as of March 31, 2022.

The effectiveness of our internal control over financial reporting as of March 31, 2022 has been audited by the Company’s independent registered public accounting firm, Ernst & Young LLP.

Their assessment is included in the accompanying Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.

Their assessment is

included in the accompanying Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.

Change in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control performed during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

during the period covered by this report, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected.

These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake.

Further, the design of a

control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide

absolute assurance that all control issues and instances of fraud or error, if any, have been detected.

These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a

simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.

The design of any system of controls also is based in

part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions;

over time, controls may become inadequate because

of changes in conditions, or the degree of compliance with policies or procedures may deteriorate.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Directors, Executive Officers and Corporate Governance

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Index to Consolidated Financial Statements:

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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Notes to Consolidated Financial Statements

(2) Schedules.

Schedule II — Valuation and Qualifying Accounts

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Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 22, 2017.

Third Amendment to the Amended and Restated By-Laws of the Company

Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 1, 2022.

2004 Non-Employee Director Stock Option Plan

26 unchanged sentences

Method of Filing

Revolving Credit, Term Loan and Security Agreement, dated as of June 3, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

administrative agent

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 8, 2015.

First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of November 5, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of November 5, 2015, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank,

National Association, as administrative agent

Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on November 9, 2015.

Consent and Second Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 19, 2016, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

Bank, National Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 9, 2016.

Third Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of March 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

Association, as administrative agent

Incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K filed on June 14, 2017.

Fourth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of April 24, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative agent

Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on April 27, 2017.

Fifth Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of July 18, 2017, among Motorcar Parts of America, Inc., each lender from time to time party thereto and PNC Bank, National Association, as administrative agent

Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on July 24, 2017.

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Method of Filing

First Amendment to Amended and Restated Loan Agreement, dated as of November 14, 2018, among Motorcar Parts of America, Inc., D & V Electronics Ltd., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

Bank, National Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 20, 2018.

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Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q filed on February 11, 2019.

Second Amendment to Amended and Restated Loan Agreement, dated as of June 4, 2019, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

time to time party thereto, and PNC Bank, National Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 7, 2019.

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Incorporated by reference to exhibit 10.1 to the Quarterly Report filed on August 10, 2020.

Third Amendment to Amended and Restated Loan Agreement, dated as of May 28, 2021, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party thereto, and PNC Bank, National Association, as administrative agent

time to time party thereto, and PNC Bank, National Association, as administrative agent

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 2, 2021.

Amendment No.

5 to Employment Agreement, dated as of June 18, 2021, between Motorcar Parts of America, Inc., and Selwyn Joffe

Incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 9, 2021.

List of Subsidiaries

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Portions of this exhibit have been granted confidential treatment by the SEC.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose.

In particular, any representations and warranties made by us in those agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

on them for that purpose.

of affairs as of the date they were made or at any other time.

Form 10-K Summary

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June 14, 2022

/s/ Patricia Warfield

June 14, 2022

Patricia Warfield

MOTORCAR PARTS OF AMERICA, INC.

AND SUBSIDIARIES

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

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We have audited Motorcar Parts of America, Inc.

and subsidiaries’ internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

and subsidiaries’ internal control over financial reporting as of March 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Motorcar Parts of America, Inc.

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and financial statement schedule and our report dated June 14, 2021 expressed an unqualified opinion thereon.

and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting

as of March 31, 2022, based on the COSO criteria.

operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2022, and the related notes and financial statement schedule and our report dated June 14, 2022 expressed an

unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to

be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in

all material respects.

assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

generally accepted accounting principles.

transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and

that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

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We have audited the accompanying consolidated balance sheets of Motorcar Parts of America, Inc.

and subsidiaries (the Company) as of March 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2021, in conformity with U.S.

and subsidiaries (the Company) as of March 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss),

shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial

statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2022 and 2021, and the results of its operations and its cash flows for each of the

three years in the period ended March 31, 2022, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 14, 2021 expressed an unqualified opinion thereon.

Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 14, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and

are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether

due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

(1) relate to accounts or

disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial

statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Contractual Agreements with Core Exchange Programs

Description of the matter

As more fully described in Note 2 to the consolidated financial statements, the Company enters into contractual arrangements with customers (core exchange programs) which represent the majority of the Company’s sales for products that contain remanufactured cores.

contain remanufactured cores.

At March 31, 2022, contract assets and contract liabilities related to core exchange programs recorded on the consolidated balance sheet were $337,755,000 and $215,260,000, respectively.

Auditing contract assets and contract liabilities related to the core exchange programs involved complex auditor judgment due to the unique terms of each customer arrangement which impact the completeness, existence, valuation and classification of contract assets and liabilities.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s review of contracts with customers, management’s assessment of the accounting for core exchange programs, including unique contractual terms, and management’s review of the related contract assets and liabilities including controls over the completeness and accuracy of data.

Our audit procedures to test the contract assets and contract liabilities related to core exchange programs included, among others, (i) reviewing agreements and amendments for significant customers, (ii) testing the completeness of management’s identification of contractual terms, (iii) evaluating the consistency of the accounting treatment with the Company's policies;

classification of contract assets and liabilities.

How we addressed the

matter in our audit

unique contractual terms, and management’s review of the related contract assets and liabilities including controls over the completeness and accuracy of data.

management’s identification of contractual terms, (iii) evaluating the consistency of the accounting treatment with the Company’s policies;

and (v) testing the completeness and accuracy of the underlying data used in management’s analyses.

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As more fully described in Note 2 and Note 14 to the consolidated financial statements, revenue is recognized net of applicable marketing allowances.

These marketing allowances vary by contract and can include (i) the issuance of a specified amount of credits against receivables, (ii) support for research or marketing efforts, (iii) discounts granted in connection with shipments of product, and (iv) other marketing, research, store expansion or product development support.

These marketing allowances vary by contract and can include (i) the issuance of a

specified amount of credits against receivables, (ii) support for research or marketing efforts, (iii) discounts granted in connection with shipments of product, and (iv) other marketing, research, store expansion or product development

At March 31, 2022, marketing allowances recorded on the Company’s consolidated balance sheet was $22,059,000, which is presented within contract liabilities.

Auditing the completeness of marketing allowances was complex because marketing allowances vary by contract and could be impacted by unrecorded marketing allowances provided to customers.

How We Addressed the Matter in Our Audit

How we addressed the

matter in our audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the marketing allowances processes.

For example, we tested controls over management’s review of contracts with customers containing marketing allowances, management’s review of the completeness and accuracy of data used in the marketing accrual analysis at period end and management’s review of credits issued to customers subsequent to the balance sheet date.

Our audit procedures to test marketing allowances included, among others, reviewing significant contracts with customers, obtaining confirmations of contractual terms and conditions from a sample of the Company’s customers, and testing credits issued or payments made to customers throughout the year.

For example, we tested controls over management’s review of contracts with customers

containing marketing allowances, management’s review of the completeness and accuracy of data used in the marketing accrual analysis at period end and management’s review of credits issued to customers subsequent to the balance sheet date.

credits issued or payments made to customers throughout the year.

We tested the completeness and accuracy of data used in the calculation of the marketing allowance by agreeing contractual terms to the underlying agreements.

In addition, we evaluated the relationship between revenue and marketing allowances and assessed subsequent events to determine whether there was any new information that would require adjustments to the amounts recorded.

In addition, we

evaluated the relationship between revenue and marketing allowances and assessed subsequent events to determine whether there was any new information that would require adjustments to the amounts recorded.

/s/ Ernst & Young LLP

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AND SUBSIDIARIES

Consolidated Balance Sheets

Balance Sheets

March 31, 2022

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Intangible assets — net

1,015,698,000

LIABILITIES AND SHAREHOLDERS’ EQUITY

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par value $ 0.01 per share, 50,000,000 shares authorized;

19,045,386 and 18,969,380 shares issued and outstanding at March 31, 2021 and 2020, respectively

19,104,751 and 19,045,386

shares issued and outstanding at March 31, 2022 and 2021, respectively

Additional paid-in capital

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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

1,015,698,000

The accompanying notes to consolidated financial statements are an integral part hereof.

1 unchanged sentence

AND SUBSIDIARIES

Consolidated Statements of Operations

Consolidated Statements of

Years Ended March 31,

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AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of

Comprehensive Income (Loss)

Years Ended March 31,

Net income (loss)

Other comprehensive loss, net of tax:

Foreign currency translation loss

Total other comprehensive loss, net of tax

Other comprehensive income (loss), net of tax:

Foreign currency translation income (loss)

Total other comprehensive income (loss), net of tax

Comprehensive income (loss)

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AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of

Shareholders’ Equity

Additional Paid-in

1 unchanged sentence

Retained Earnings

Accumulated Other

Comprehensive Loss

Comprehensive

Balance at March 31, 2019

Cumulative-effect adjustment for the adoption of ASU 2016-01

Balance at April 1, 2018

Compensation recognized under employee stock plans

Exercise of stock options

Exercise of stock options, net of shares withheld for employee taxes

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

Repurchase and cancellation of treasury stock, including fees

Foreign currency translation

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Compensation recognized under employee stock plans

Exercise of stock options

Exercise of stock options, net of shares withheld for employee taxes

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

Repurchase and cancellation of treasury stock, including fees

Foreign currency translation

1 unchanged sentence

Compensation recognized under employee stock plans

Exercise of stock options

Exercise of stock options, net of shares withheld for employee taxes

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

5 unchanged sentences

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Consolidated Statements of

Years Ended March 31,

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Net income (loss)

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

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

Depreciation and amortization

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Foreign exchange impact of lease liabilities and forward contracts

Foreign currency remeasurement (gain) loss

Foreign currency remeasurement loss (gain)

Loss (gain) due to the change in the fair value of the contingent consideration

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Other liabilities

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Purchase of plant and equipment

Purchase of business, net of cash acquired

Proceeds from sale of plant and equipment

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Repayments under revolving loan

Borrowings under term loan

Repayments of term loan

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Repurchase of common stock, including fees

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents — Beginning of year

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Assets acquired under operating leases

Contingent consideration

Non-cash capital expenditures

5 unchanged sentences

Motorcar Parts of America, Inc.

and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions and diagnostic equipment.

These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”).

The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain testing market.

The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake calipers, brake boosters, brake rotors, brake pads, and brake master cylinders, and (iv) test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators, starters, belt starter generators and bench-top testers used by the automotive retail segment and turbochargers.

The Company primarily ships its products from its facilities and various third-party warehouse distribution centers in North America, including the Company’s 410,000 square foot distribution center in Tijuana, Mexico.

and its subsidiaries (the “Company”, or “MPA”) is a

leading supplier of automotive aftermarket non-discretionary replacement parts, and test solutions and diagnostic equipment.

These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North

America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”).

The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain

testing market.

rotors, brake pads, and brake master cylinders, and (iv) other products, which include (a) turbochargers and (b) test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test

systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators and starters, belt starter generators, bench-top testers, and specialized test services for electric vehicle inverters.

The Company primarily ships its products from its facilities, including the Company’s 410,000 square foot distribution center in Tijuana, Mexico, and various third-party warehouse distribution centers in North America.

Impact of the Novel Coronavirus (“COVID-19”)

The outbreak of the COVID-19 pandemic adversely impacted the U.S.

and global economies and created uncertainty regarding the potential effects on the Company’s employees, supply chain, operations, and customer demand.

The COVID-19 pandemic could impact the Company’s operations and the operations of its customers, suppliers, and vendors because of quarantines, facility closures, travel, and logistics restrictions.

The outbreak of the COVID-19 pandemic continues to adversely impact the U.S.

economies – creating uncertainty regarding the potential effects on the Company’s employees, supply chain, operations, and customer demand.

The COVID-19 pandemic could

impact the Company’s operations and the operations of its customers, suppliers, and vendors because of quarantines, facility closures, travel, and logistics

restrictions.

The extent to which the COVID-19 pandemic impacts the Company will depend on numerous factors and future developments, which are highly uncertain and cannot be predicted, including, but not limited to:

(i) the severity of the virus, (ii) the occurrence and duration of additional spikes, (iii) the effects of the pandemic on customers, suppliers, and vendors, (iv) the remedial actions and stimulus measures adopted by local, state and federal governments, (v) the availability and acceptance of vaccines, and (vi) the extent to which normal economic and operating conditions can resume.

Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business because of an economic recession or depression that has occurred or may occur in the future.

(i) the severity of the virus,

(ii) the occurrence and duration of additional spikes in infections, (iii) the effects of the pandemic on customers, suppliers, and vendors, (iv) the remedial actions and stimulus measures adopted by local, state and federal governments, (v) the

availability and acceptance of vaccines, and (vi) the extent to which normal economic and operating conditions can resume.

Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business because

of an economic recession or depression that has occurred or may occur in the future.

Summary of Significant Accounting Policies

Recently Adopted Accounting Pronouncements

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued an accounting pronouncement related to the measurement of credit losses on financial instruments.

This pronouncement, along with a subsequent Accounting Standards Updates (“ASU”) issued to clarify certain provisions of the new guidance, changed the impairment model for most financial assets and requires the use of an “expected loss” model for instruments measured at amortized cost.

Under this model, entities are required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.

The adoption of this guidance on April 1, 2020 increased the Company’s disclosures for its expected credit losses but did not have a material effect on its consolidated financial statements.

Prior to April 1, 2020, accounts receivable were recorded at cost less an allowance for doubtful accounts.

The net amount of accounts receivable and corresponding allowance for doubtful accounts were presented in the consolidated balance sheets.

The Company maintained an allowance for uncollectible accounts receivable for estimated losses resulting from the failure or inability of its customers to make required payments.

Furthermore, receivable balances were assessed quarterly for impairment and an allowance was recorded if the receivable was considered impaired.

Subsequent to April 1, 2020, accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.

The net amount of accounts receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets.

The Company maintains allowances for credit losses resulting from the expected failure or inability of its customers to make required payments.

The Company recognizes the allowance for credit losses at inception and reassess quarterly based on the asset’s expected collectability.

The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, such as COVID-19, as well as expectations of conditions in the future, if applicable.

The Company’s allowance for credit losses is based on the assessment of the collectability of assets pooled together with similar risk characteristics.

The Company records a provision for expected credit losses using a loss-rate method based on the ratio of its historical write-offs to its average trade accounts receivable.

At each reporting period, the Company assesses whether financial assets in a pool continue to display similar risk characteristics.

If particular receivables no longer display risk characteristics that are similar to those of the receivables in the pool, the Company may determine that it needs to move those receivables to a different pool or perform an individual assessment of expected credit losses for those specific receivables.

Fair Value Measurements

In August 2018, the FASB issued guidance which changed the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures, including the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 measurements, and the narrative description of measurement uncertainty are applied prospectively only for the most recent interim or annual period presented in the initial year of adoption.

All other amendments should be applied retrospectively applied to all periods presented upon their effective date.

The adoption of this guidance on April 1, 2020 modified certain of the Company’s disclosures for its Level 3 fair value measurements but did not have an impact on its consolidated financial statem ents.

Reference Rate Reform

In March 2020, the FASB issued guidance that, for a limited time, eases the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued due to reference rate reform.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

The Company will apply these amendments prospectively.

The adoption of this guidance on April 1, 2020 did not have an impact on the Company’s consolidated financial statements for the year ended March 31, 2021.

Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance that simplifies the accounting for income taxes, eliminates certain exceptions within

Accounting Standards Codification (“ASC”) 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application.

This guidance is effective for annual and interim periods in fiscal years beginning after December

Early adoption is permitted.

The adoption of this guidance on April 1, 2021 is not expected to have any material impact on the Company’s consolidated financial statements.

The adoption of this guidance on April 1, 2021 did not have any material impact on the Company’s consolidated financial statements.

Reclassifications

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and its wholly owned subsidiaries.

All significant inter-company accounts and transactions have been eliminated.

All significant inter-company

accounts and transactions have been eliminated.

Segment Reporting

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions.

Pursuant to the guidance provided under the FASB ASC for segment reporting, the Company has identified its chief operating decision maker (“CODM”),

reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions.

The Company has determined through this review process that its business comprises three separate operating segments.

Two of the operating segments meet all the aggregation criteria, and are aggregated.

The remaining operating segment does not meet the quantitative thresholds for individual disclosure and the Company has combined its operating segments into one reportable segment.

All of the operating segments meet all the aggregation criteria and are aggregated.

Cash and Cash Equivalents

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Cash equivalents consist of money market funds.

The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.

The Company considers all highly liquid investments purchased

with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents.

Cash and cash equivalents are maintained with various financial institutions.

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The Company’s accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered.

The net amount of accounts receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets.

The net amount of accounts

receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets.

The Company maintains allowances for credit losses resulting from the expected failure or inability of its customers to make required payments.

The Company does not require collateral for accounts receivable.

The Company believes its credit risk with respect to trade accounts receivable is limited due to its credit evaluation process and the long-term nature of its relationships with its largest customers.

The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit losses each period.

When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable.

The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s contracts with its customers.

The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability.

The Company believes its credit risk with respect to trade accounts receivable is limited due to its

credit evaluation process and the long-term nature of its relationships with its largest customers.

The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its

expected credit losses each period.

When developing an estimate of expected credit losses, the Company considers all available relevant information regarding

the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable.

The historical loss rate method considers

past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s contracts with its customers.

The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on

management’s expectation of the asset’s collectability.

The Company’s accounts receivable are short-term in nature and written off only when all collection attempts have failed.

The Company has receivable discount programs that have been established with certain major customers and their respective banks.

Under these programs, the Company has the option to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.

Once the customer chooses which outstanding invoices are going to be made available for discounting, the Company can accept or decline the bundle of invoices provided.

Under these programs, the Company has the

option to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.

Once the customer chooses which outstanding invoices are going to be made available for discounting, the Company can

accept or decline the bundle of invoices provided.

The receivable discount programs are non-recourse, and funds cannot be reclaimed by the customer or its bank after the related invoices have been discounted.

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Used Core, component raw materials, and purchased finished goods are stated at the lower of average cost or net realizable value.

Work-in-process is in various stages of production and is valued at the average cost of Used Cores and component raw materials issued to work orders still open, including allocations of labor and overhead costs.

Work-in-process is in various stages of production and is valued at the average cost of Used Cores and component raw materials issued to work orders still open, including

allocations of labor and overhead costs.

Historically, work-in-process inventory has not been material compared to the total inventory balance.

Remanufactured finished goods include:

(i) the Used Core cost and (ii) the cost of component raw materials, and allocations of labor and variable and fixed overhead costs (the “Unit Cost”).

(i) the Used Core cost and (ii) the cost of component raw materials, and allocations of labor and variable and fixed overhead costs

(the “Unit Cost”).

The allocations of labor and variable and fixed overhead costs are based on the actual use of the production facilities over the prior 12 months which approximates normal capacity.

This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production.

In addition, the Company excludes certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expenses these unallocated overhead as period costs.

Purchased finished goods also include an allocation of fixed overhead costs.

The estimate of net realizable value is subjective and based on management’s judgment and knowledge of current industry demand and management’s projections of industry demand.

In addition, the Company excludes

certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expenses these unallocated overhead costs as period costs.

Purchased finished goods also

include an allocation of fixed overhead costs.

The estimate of net realizable value is subjective and based on management’s judgment and knowledge of current industry demand and management’s projections of industry

The estimates may, therefore, be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment impact its ability to sell or liquidate potentially excess or obsolete inventory.

Net realizable value is determined at least quarterly as follows:

Net realizable value for finished goods by customer by product line are determined based on the agreed upon selling price with the customer for a product in the trailing 12 months.

Net realizable value for finished goods by customer, by product line are determined based on the agreed upon selling price with the customer for a product in the

trailing 12 months.

The Company compares the average selling price, including any discounts and allowances, to the finished goods cost of on-hand inventory, less any reserve for excess and obsolete inventory.

Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified.

Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant.

Any reduction of value is

recorded as cost of goods sold in the period in which the revaluation is identified.

Net realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12

months are significant.

Remanufacturing consumes, on average, more than one Used Core for each remanufactured unit produced since not all Used Cores are reusable.

The yield rates depend upon both the product and consumer specifications.

The Company purchases Used Cores from core brokers to supplement its yield rates and Used Cores not returned under the core exchange programs.

The Company also considers the net selling price its customers have agreed to pay for Used Cores that are not returned under its core exchange programs to assess whether Used Core cost exceeds Used Core net realizable value on a by customer by product line basis.

Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified.

The Company records an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory.

Company purchases Used Cores from core brokers to supplement its yield rates and Used Cores not returned under the core exchange programs.

The Company also considers the net selling price its customers have agreed to pay for Used Cores that

are not returned under its core exchange programs to assess whether Used Core cost exceeds Used Core net realizable value on a by customer, by product line basis.

Any reduction of core cost is recorded as cost of goods sold in the period in

which the revaluation is identified.

The Company records an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast

of potential use of the inventory.

The Company periodically reviews inventory to identify excess quantities and part numbers that are experiencing a reduction in demand.

Any part numbers with quantities identified during this process are reserved for at rates based upon management’s judgment, historical rates, and consideration of possible scrap and liquidation values which may be as high as 100 % of cost if no liquidation market exists for the part.

As a result of this process, the Company recorded reserves for excess and obsolete inventory of $ 13,246,000 and $ 13,208,000 at March 31, 2021 and 2020, respectively.

Any part numbers with quantities identified during this process are

reserved for at rates based upon management’s judgment, historical rates, and consideration of possible scrap and liquidation values which may be as high as 100 % of cost if no liquidation market exists for the part.

As a result of this process, the Company recorded reserves for excess and obsolete inventory of $ 13,520,000 and $ 13,246,000 at March

31, 2022 and 2021, respectively.

The Company records vendor discounts as a reduction of inventories and are recognized as a reduction to cost of sales as the inventories are sold.

Inventory Unreturned

Inventory unreturned represents the Company’s estimate, based on historical data and prospective information provided directly by the customer, of finished goods shipped to customers that the Company expects to be returned under its general right of return policy, after the balance sheet date.

Inventory unreturned represents the Company’s estimate, based on historical data and prospective information provided directly by the customer, of

finished goods shipped to customers that the Company expects to be returned under its general right of return policy, after the balance sheet date.

Inventory unreturned includes only the Unit Cost of a finished good.

The return rate is calculated based on expected returns within the normal operating cycle, which is generally one year .

As such, the related amounts are classified in current assets.

The return rate is calculated

based on expected returns within the normal operating cycle, which is generally one year .

As such, the related amounts are classified in

current assets.

Inventory unreturned is valued in the same manner as the Company’s finished goods inventory.

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Contract assets consists of:

(i) the core portion of the finished goods shipped to customers, (ii) upfront payments to customers in connection with customer contracts, (iii) core premiums paid to customers, (iv) finished goods premiums paid to customers, and (v) long-term core inventory deposits.

(i) the core portion of the finished goods shipped to customers, (ii) upfront payments to customers in connection with

customer contracts, (iii) core premiums paid to customers, (iv) finished goods premiums paid to customers, and (v) long-term core inventory deposits.

Remanufactured Cores held at customers’ locations as a part of the finished goods sold to the customer are classified as long-term contract assets.

These assets are valued at the lower of cost or net realizable value of Used Cores on hand (See Inventory above).

For these Remanufactured Cores, the Company expects the finished good containing the Remanufactured Core to be returned under the Company’s general right of return policy or a similar Used Core to be returned to the Company by the customer, under the Company’s core exchange programs in each case, for credit.

The Remanufactured Cores and Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as “Cores expected to be returned by customers”, which are included in short-term contract assets until the Company physically receives them during its normal operating cycle, which is generally one year.

Upfront payments to customers represent the marketing allowances, such as sign-on bonuses, slotting fees, and promotional allowances provided by the Company to its customers.

For these Remanufactured Cores, the Company expects the finished good containing the Remanufactured Core to be returned under the

Company’s general right of return policy or a similar Used Core to be returned to the Company by the customer, under the Company’s core exchange programs, in each case for credit.

The Remanufactured Cores and Used Cores returned by consumers to the

Company’s customers but not yet returned to the Company are classified as “Cores expected to be returned by customers”, which are included in short-term contract assets until the Company physically receives them during its normal operating cycle,

which is generally one year.

Upfront payments to customers represent the marketing allowances, such as sign-on bonuses, slotting fees, and promotional allowances provided by the

Company to its customers.

These allowances are recognized as an asset and amortized over the appropriate period of time as a reduction of revenue if the Company expects to generate future revenues associated with the upfront payment.

If the Company does not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue.

Upfront payments expected to be amortized during the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.

Core premiums paid to customers represent the difference between the Remanufactured Core acquisition price paid to customers generally in connection with new business, and the related Used Core cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered.

The Company considers, among other things, the length of its largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums.

If the Company

does not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue.

Upfront payments expected to be amortized during the Company’s normal

operating cycle, which is generally one year, are classified as short-term contract assets.

Core premiums paid to customers represent the difference between the Remanufactured Core acquisition price paid to customers, generally in connection

with new business, and the related Used Core cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered.

Company considers, among other things, the length of its largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these

These core premiums are amortized over a period typically ranging from six to eight years , adjusted for specific circumstances associated with the arrangement.

Core premiums are recorded as long-term contract assets.

Core premiums expected to be amortized within the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.

Finished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business, and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered.

Finished goods premiums are amortized over a period typically ranging from six to eight years , adjusted for specific circumstances associated with the arrangement.

Core premiums expected to be amortized

within the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.

Finished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business,

and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is

recognized or the date at which the sales incentive is offered.

The Company considers, among other things, the length of its largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road

in determining the appropriate period of time over which to amortize these premiums.

Finished goods premiums are amortized over a period typically ranging from six to eight years , adjusted for specific circumstances associated with the

Finished goods premiums are recorded as long-term contract assets.

Finished goods premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.

Long-term core inventory deposits represent the cost of Remanufactured Cores the Company has purchased from customers, which are held by the customers and remain on the customers’ premises.

Finished goods premiums expected to be amortized within our normal operating cycle,

which is generally one year, are classified as short-term contract assets.

Long-term core inventory deposits represent the cost of Remanufactured Cores the Company has purchased from customers, which are held by the customers

and remain on the customers’ premises.

The costs of these Remanufactured Cores were established at the time of the transaction based on the then current cost.

The selling value of these Remanufactured Cores was established based on agreed upon amounts with these customers.

The Company expects to realize the selling value and the related cost of these Remanufactured Cores should its relationship with a customer end, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.

The selling value of these Remanufactured Cores was established based on agreed upon

amounts with these customers.

customer agreements and historical experience.

Customer Finished Goods Returns Accrual

The customer finished goods returns accrual represents the Company’s estimate of its exposure to customer returns, including warranty returns, under its general right of return policy to allow customers to return items that their end user customers have returned to them and from time to time, stock adjustment returns when the customers’ inventory of certain product lines exceeds the anticipated sales to end-user customers.

The customer finished goods returns accrual represents the Unit Value of the estimated returns and is classified as a current liability due to the expectation that these returns will occur within the normal operating cycle of one year.

The Company accounts for income taxes using the liability method, which measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

The customer finished goods returns accrual represents the Company’s estimate of its exposure to customer returns, including warranty returns, under

its general right of return policy to allow customers to return items that their end user customers have returned to them and from time to time, stock adjustment returns when the customers’ inventory of certain product lines exceeds the anticipated

sales to end-user customers.

cycle of one year.

The Company accounts for income taxes using the liability method, which measures deferred income taxes by applying enacted statutory rates in effect at

the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements.

The resulting asset or liability is adjusted to reflect changes in the tax laws as they occur.

A valuation allowance is provided to reduce deferred tax assets when it is more likely than not that a portion of the deferred tax asset will not be realized.

The primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with uncertain tax positions, and (vii) the impact of net operating loss carry-backs in connection with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was signed into law on March 27, 2020 .

valuation allowance is provided to reduce deferred tax assets when it is more likely than not that a portion of the deferred tax asset will not be realized.

The primary components of the Company’s income tax expense were (i) federal income

taxes, (ii) state income taxes, (iii) foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue

Code Section 162(m), and (vi) income taxes associated with uncertain tax positions.

Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income.

Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets.

The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans.

A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.

In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.

Deferred tax assets arising primarily as a result of net operating loss carry-forwards and research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.

Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted.

Significant judgment is

required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets.

The Company makes these estimates and judgments about its future

taxable income that are based on assumptions that are consistent with the Company’s future plans.

A valuation allowance is established when the Company believes it is not more likely than not all or some deferred tax assets will be realized.

evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.

Deferred tax assets arising primarily as a result of net operating loss

carry-forwards and research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.

Should the actual amount

differ from the Company’s estimates, the amount of the valuation allowance could be impacted.

The Company has made an accounting policy election to recognize the U.S.

tax effects of global intangible low-taxed income as a component of income tax expense in the period the tax arises.

tax effects of global intangible low-taxed income as a component of income tax

expense in the period the tax arises.

Plant and Equipment

Plant and equipment are stated at cost, less accumulated depreciation.

The cost of additions and improvements are capitalized, while maintenance and repairs are charged to expense when incurred.

Depreciation is provided on a straight-line basis in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives.

additions and improvements are capitalized, while maintenance and repairs are charged to expense when incurred.

Depreciation is provided on a straight-line basis in amounts sufficient to relate the cost of depreciable assets to operations over

their estimated service lives.

Machinery and equipment are depreciated over a range from five to ten years .

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Leasehold improvements are depreciated over the lives of the respective leases or the service lives of the leasehold improvements, whichever is shorter.

Depreciation of assets recorded under finance leases is included in depreciation expense.

The Company evaluates plant and equipment, including leasehold improvements, equipment, construction in progress, and right-of-use assets for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable.

There were no indicators of impairment at March 31, 2021.

Depreciation of assets recorded under finance leases is included in

depreciation expense.

of an asset or asset group may not be recoverable.

There was no impairment recorded during the years ended March 31, 2022, 2021, or

The Company determines if an arrangement contains a lease at inception.

Lease assets and lease liabilities are recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease.

Lease assets and lease liabilities are recorded based on the present value of lease payments over

the lease term, which includes the minimum unconditional term of the lease.

Certain of the Company’s leases include options to extend the leases for up to five years .

When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that it will exercise the option, the option is considered in determining the classification and measurement of the lease.

is considered in determining the classification and measurement of the lease.

The lease assets are recorded net of any lease incentives received.

The Company exempts leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combines non-lease components with lease components.

The Company exempts leases with an initial term of 12 months or less from balance sheet recognition and,

for all classes of assets, combines non-lease components with lease components.

Lease assets are tested for impairment in the same manner as long-lived assets used in operations.

The Company uses its incremental borrowing rate for each of its leases in determining the present value of its expected lease payments based on the information available at the lease commencement date as the rate implicit for each of its leases is not readily detainable.

The Company’s incremental borrowing rate is determined by analyzing and combining (i) an applicable risk-free rate, (ii) a financial spread adjustment, and (iii) any lease specific adjustment.

Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services, which are expensed as incurred and not included in the determination of lease assets and lease liabilities.

The Company uses its incremental borrowing rate for each of its leases in determining the present value of its expected lease payments based on the information available at

the lease commencement date as the rate implicit for each of its leases is not readily detainable.

The Company’s incremental borrowing rate is determined by analyzing and combining (i) an applicable risk-free rate, (ii) a financial spread adjustment,

and (iii) any lease specific adjustment.

expensed as incurred and not included in the determination of lease assets and lease liabilities.

These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees, and other factors.

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The Company has material non-functional currency leases.

As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates.

The Company recorded a gain of $ 9,893,000 and a loss of $ 11,710,000 during the years ended March 31, 2021 and 2020, respectively, which are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.

As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability

using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates.

The Company recorded gains of $ 1,989,000 and $ 9,893,000 during the years

ended March 31, 2022 and 2021, respectively, and a loss of $ 11,710,000 during the year ended March 31, 2020, which are included in “foreign

exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.

See Note 10 for additional information regarding the Company’s leases.

The Company evaluates goodwill for impairment at least annually during the fourth quarter of each fiscal year or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.

The Company evaluates goodwill for impairment at least annually during the fourth quarter of each fiscal year or more frequently when an event occurs

or circumstances change that indicate the carrying value may not be recoverable.

The goodwill impairment test is performed at the reporting unit level, which represents the Company’s operating segments.

In testing for goodwill impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the Company’s qualitative assessment indicates that goodwill impairment is more likely than not, it will proceed with performing the quantitative assessment.

In testing for goodwill impairment, the Company

may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If the Company’s qualitative assessment indicates that goodwill impairment is

more likely than not, it will proceed with performing the quantitative assessment.

If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired.

If the carrying value of the reporting unit exceeds its fair value an impairment loss will be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value.

The Company completed the required annual testing of goodwill impairment for each of the reporting units during the fourth quarter of the year ended March 31, 2021, and determined through the qualitative assessment that its goodwill of $ 3,205,000 was not impaired.

If the carrying value of the reporting unit exceeds its fair

value an impairment loss will be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value.

The Company completes the required annual testing of goodwill impairment for each of the reporting units during the fourth

quarter of the year.

No impairment was recorded during the years ended March 31, 2022, 2021, or 2020.

Intangible Assets

The Company’s intangible assets other than goodwill are finite–lived and amortized on a straight-line basis over their respective useful lives.

The Company analyzes its finite-lived intangible assets for impairment when and if indicators of impairment exist.

At March 31, 2021, the Company’s intangible assets were $ 5,329,000 , and there were no indicators of impairment.

The Company analyzes its

finite-lived intangible assets for impairment when and if indicators of impairment exist.

No impairment was recorded during the years

ended March 31, 2022, 2021, or 2020.

Debt Issuance Costs

Debt issuance costs include fees and costs incurred to obtain financing.

Debt issuance costs related to the Company’s term loans are presented in the balance sheet as a direct deduction from the carrying amount of the term loans.

Debt issuance costs related to the Company’s revolving loan are presented in prepaid expenses and other current assets in the accompanying consolidated balance sheets, regardless of whether or not there are any outstanding borrowings under the revolving loan.

These fees and costs are amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the related loans and are included in interest expense in the Company’s consolidated statements of operations.

Debt issuance costs related to the Company’s term loans are presented in the balance sheet as a

direct deduction from the carrying amount of the term loans.

Debt issuance costs related to the Company’s revolving loan are presented in prepaid expenses and other current assets in the accompanying consolidated balance sheets, regardless of whether

or not there are any outstanding borrowings under the revolving loan.

These fees and costs are amortized using the straight-line method, which approximates the effective interest rate method, over the terms of the related loans and are included in

interest expense in the Company’s consolidated statements of operations.

Foreign Currency Translation

For financial reporting purposes, the functional currency of the foreign subsidiaries is the local currency.

The assets and liabilities of foreign operations for which the local currency is the functional currency are translated into the U.S.

The assets and liabilities of foreign operations for which the

local currency is the functional currency are translated into the U.S.

dollar at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average exchange rates during the year.

The accumulated foreign currency translation adjustment is presented as a component of comprehensive income or loss in the consolidated statements of shareholders’ equity.

During the years ended March 31, 2021 and 2020, aggregate foreign currency transaction gains of $ 1,144,000 and losses of $ 789,000 , respectively, were recorded in general and administrative expenses.

The accumulated foreign

currency translation adjustment is presented as a component of comprehensive income or loss in the consolidated statements of shareholders’ equity.

During the years ended March 31, 2022 and 2021, aggregate foreign currency transaction gains of $ 239,000 and $ 1,144,000 , respectively, and a

loss of $ 789,000 for the year ended March 31, 2020, were recorded in general and administrative expenses.

Revenue Recognition

Revenue is recognized when performance obligations under the terms of a contract with its customers are satisfied;

generally, this occurs with the transfer of control of its products.

generally, this occurs with the transfer of control of

its products.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

Revenue is recognized net of all anticipated returns, marketing allowances, volume discounts, and other forms of variable consideration .

Revenue is recognized either when products are shipped or when delivered, depending on the applicable contract terms.

Bill and hold shipments are shipped out to the customer as ex-works;

in which the customer makes arrangements and is responsible for their shipping cost.

No freight or shipping costs are accrued for revenue under the terms of shipments made as ex-works.

The price of a finished remanufactured product sold to customers is generally comprised of separately invoiced amounts for the Remanufactured Core included in the product (“Remanufactured Core value”) and the unit portion included in the product (“Unit Value”), for which revenue is recorded based on our then current price list, net of applicable discounts and allowances.

The Remanufactured Core value is recorded as a net revenue based upon the estimate of Used Cores that will not be returned by the customer for credit.

Revenue is recognized either when products are shipped or when delivered, depending on the applicable contract

The price of a finished remanufactured product sold to customers is generally comprised of separately invoiced amounts for the Remanufactured Core included in the product

(“Remanufactured Core value”) and the unit portion included in the product (“Unit Value”), for which revenue is recorded based on our then current price list, net of applicable discounts and allowances.

The Remanufactured Core value is recorded as a

net revenue based upon the estimate of Used Cores that will not be returned by the customer for credit.

These estimates are subjective and based on management’s judgment and knowledge of historical, current, and projected return rates.

As reconciliations are completed with the customers the actual rates at which Used Cores are not being returned may differ from the current estimates.

This may result in periodic adjustments of the estimated contract asset and liability amounts recorded and may impact the projected revenue recognition rates used to record the estimated future revenue.

reconciliations are completed with the customers the actual rates at which Used Cores are not being returned may differ from the current estimates.

This may result in periodic adjustments of the estimated contract asset and liability amounts recorded

and may impact the projected revenue recognition rates used to record the estimated future revenue.

These estimates may also be revised if there are changes in contractual arrangements with customers, or changes in business practices.

A significant portion of the remanufactured automotive parts sold to customers are replaced by similar Used Cores sent back for credit by customers under the core exchange programs (as described in further detail below).

The number of Used Cores sent back under the core exchange programs is generally limited to the number of similar Remanufactured Cores previously shipped to each customer.

A significant

portion of the remanufactured automotive parts sold to customers are replaced by similar Used Cores sent back for credit by customers under the core exchange programs (as described in further detail below).

The number of Used Cores sent back under

the core exchange programs is generally limited to the number of similar Remanufactured Cores previously shipped to each customer.

Revenue Recognition — Core Exchange Programs

Full price Remanufactured Cores:

When remanufactured products are shipped, certain customers are invoiced for the Remanufactured Core value of the product at the full Remanufactured Core sales price.

For these Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs.

The remainder of the full price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.

When remanufactured products are shipped, certain customers are invoiced for the Remanufactured Core value of the product at the full

Remanufactured Core sales price.

under the core exchange programs.

the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.

Nominal price Remanufactured Cores:

Certain other customers are invoiced for the Remanufactured Core value of the product shipped at a nominal (generally $ 0.01 or less) Remanufactured Core price.

For these nominal Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs.

Revenue amounts are calculated based on contractually agreed upon pricing for these Remanufactured Cores for which the customers are not returning similar Used Cores.

The remainder of the nominal price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.

For these nominal Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which

these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs.

Revenue amounts are calculated based on contractually agreed upon pricing for these Remanufactured Cores

for which the customers are not returning similar Used Cores.

The remainder of the nominal price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the

period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.

Revenue Recognition;

General Right of Return

Customers are allowed to return goods that their end-user customers have returned to them, whether or not the returned item is defective (warranty returns).

In addition, under the terms of certain agreements and industry practice, customers from time to time are allowed stock adjustments when their inventory of certain product lines exceeds the anticipated sales to end-user customers (stock adjustment returns).

Customers have various contractual rights for stock adjustment returns, which are typically less than 5 % of units sold.

Customers are allowed to return goods that their end-user customers have returned to them, whether or not the returned item is defective (warranty

adjustment returns).

Customers have various contractual rights for stock adjustment returns, which are typically less than 5 % of units

In some instances, a higher level of returns is allowed in connection with significant restocking orders.

The aggregate returns are generally limited to less than 20 % of unit sales.

The allowance for warranty returns is established based on a historical analysis of the level of this type of return as a percentage of total unit sales.

The allowance for warranty returns is established based on a historical analysis of the level of this type of return as a percentage of total unit

The allowance for stock adjustment returns is based on specific customer inventory levels, inventory movements, and information on the estimated timing of stock adjustment returns provided by customers.

Stock adjustment returns do not occur at any specific time during the year.

Stock adjustment returns do not occur

at any specific time during the year.

The return rate for stock adjustments is calculated based on expected returns within the normal operating cycle, which is generally one year.

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As is standard in the industry, the Company only accepts returns from on-going customers.

If a customer ceases doing business with the Company, it has no further obligation to accept additional product returns from that customer.

If a customer ceases doing business with the Company, it has no further obligation

to accept additional product returns from that customer.

Similarly, the Company accepts product returns and grants appropriate credits to new customers from the time the new customer relationship is established.

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The Company includes shipping and handling charges in the gross invoice price to customers and classifies the total amount as revenue.

All shipping and handling costs are expensed as cost of sales as inventory is sold.

All shipping and handling costs are

expensed as cost of sales as inventory is sold.

Contract Liability

Contract liability consists of:

(i) customer allowances earned, (ii) accrued core payments, (iii) customer core returns accruals, (iv) core bank liability, (v) finished goods liabilities, and (vi) customer deposits.

(i) customer allowances earned, (ii) accrued core payments, (iii) customer core returns accruals, (iv) core bank

liability, (v) finished goods liabilities, and (vi) customer deposits.

Customer allowances earned includes all marketing allowances provided to customers.

Such allowances include sales incentives and concessions.

Voluntary marketing allowances related to a single exchange of product are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered.

Voluntary marketing allowances related to a single exchange of product are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are

Other marketing allowances, which may only be applied against future purchases, are recorded as a reduction to revenues in accordance with a schedule set forth in the relevant contract.

Sales incentive amounts are recorded based on the value of the incentive provided.

Sales incentive amounts are recorded based on the

value of the incentive provided.

See Note 14 for a description of all marketing allowances.

Customer allowances to be provided to customers within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Accrued core payments represent the sales price of Remanufactured Cores purchased from customers, generally in connection with new business, which are held by these customers and remain on their premises.

The sales price of these Remanufactured Cores will be realized when the Company’s relationship with a customer ends, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience.

The payments to be made to customers for purchases of Remanufactured Cores within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Customer allowances to be provided to customers within the

Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Accrued core payments represent the sales price of Remanufactured Cores purchased from customers, generally in connection with new business, which

are held by these customers and remain on their premises.

The sales price of these Remanufactured Cores will be realized when the Company’s relationship with a customer ends, a possibility that the Company considers remote based on existing

long-term customer agreements and historical experience.

The payments to be made to customers for purchases of Remanufactured Cores within the Company’s normal operating cycle, which is generally one year, are considered short-term contract

liabilities and the remainder are recorded as long-term contract liabilities.

Customer core returns accruals represent the full and nominally priced Remanufactured Cores shipped to the Company’s customers.

When the Company ships the product, it recognizes an obligation to accept a similar Used Core sent back under the core exchange programs based upon the Remanufactured Core price agreed upon by the Company and its customer.

The Contract liability related to Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as short-term contract liabilities until the Company physically receives these Used Cores as they are expected to be returned during the Company’s normal operating cycle, which is generally one year and the remainder are recorded as long-term contract liabilities.

When the Company

ships the product, it recognizes an obligation to accept a similar Used Core sent back under the core exchange programs based upon the Remanufactured Core price agreed upon by the Company and its customer.

The Contract liability related to Used

Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as short-term contract liabilities until the Company physically receives these Used Cores as they are expected to be returned during the

Company’s normal operating cycle, which is generally one year and the remainder are recorded as long-term contract liabilities.

The core bank liability represents the full Remanufactured Core sales price paid for cores returned under the core exchange programs.

The payment for these cores are made over a contractual repayment period pursuant to the Company’s agreement with this customer.

Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

The payment for

these cores are made over a contractual repayment period pursuant to the Company’s agreement with this customer.

Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract

liabilities and the remainder are recorded as long-term contract liabilities.

Finished goods liabilities represents the agreed upon price of finished goods purchased from customers, generally in connection with new business.

The payment for these finished goods are made over a contractual repayment period pursuant to the Company’s agreement with the customer.

Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered

short-term contract liabilities and the remainder are recorded as long-term contract liabilities.

Customer deposits represent the receipt of prepayments from customers for the obligation to transfer goods or services in the future.

The Company classifies these customer deposits as short-term contract liabilities as the Company expects to satisfy these obligations within its normal operating cycle, which is generally one year.

classifies these customer deposits as short-term contract liabilities as the Company expects to satisfy these obligations within its normal operating cycle, which is generally one year.

Advertising Costs

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Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock to the extent such impact is not anti-dilutive.

net income (loss) per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options and warrants, which would result in the issuance of incremental shares of common stock to the extent such impact

is not anti-dilutive.

The following presents a reconciliation of basic and diluted net income (loss) per share.

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Diluted net income (loss) per share

Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net income (loss) per share.

For the years ended March 31, 2021, 2020 and 2019, there were 1,279,251 , 1,738,106 , and 1,580,299 , respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive.

Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive

and as such, these shares are not included in calculating diluted net income (loss) per share.

For the years ended March 31, 2022, 2021 and 2020, there were 725,998 ,

1,279,251 , and 1,738,106 ,

respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make

estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

On an on-going basis, the Company evaluates its estimates, including allowances for credit losses, valuation of inventory, valuation of long-lived assets, goodwill and intangible assets, depreciation and amortization of long-lived assets, litigation matters, valuation of deferred tax assets, share-based compensation, sales returns and other customer marketing allowances, and the incremental borrowing rate used in determining the present value of lease liabilities.

Although the Company does not believe that there is a reasonable likelihood that there will be a material change in the future estimate or in the assumptions used in calculating the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on its business, financial condition and results of operations.

On an on-going basis, the Company evaluates its estimates, including

allowances for credit losses, valuation of inventory, valuation of long-lived assets, goodwill and intangible assets, depreciation and amortization of long-lived assets, litigation matters, valuation of deferred tax assets, share-based compensation,

sales returns and other customer marketing allowances, and the incremental borrowing rate used in determining the present value of lease liabilities.

Although the Company does not believe that there is a reasonable likelihood that there will be a

material change in the future estimate or in the assumptions used in calculating the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on its business, financial

condition and results of operations.

Financial Instruments

The carrying amounts of cash, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments.

The carrying amounts of cash, short-term investments, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term

nature of these instruments.

The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on current rates for instruments with similar characteristics.

Share-Based Payments

The Black-Scholes option-pricing model requires the input of subjective assumptions including the expected volatility of the underlying stock and the expected holding period of the option.

The Company has share-based compensation plans and recognizes

compensation expense over the requisite service period for its share-based plans based on the fair value of the awards on the date of the grant, award or issuance and accounts for forfeitures as they occur.

Share-based plans include stock option

awards, restricted stock units, restricted stock awards, and performance stock units issued under the Company’s incentive plans.

The cost is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option

pricing model for stock options, based on the closing share price of the Company’s stock on the grant date for restricted stock units and restricted stock awards, based on the closing share price of the Company’s stock on the grant date for

performance stock units subject to performance conditions, and based on the estimated fair value of the award using the Monte Carlo valuation model for performance stock units subject to market conditions.

See Note 18 for further information

concerning the Company’s share-based payments.

The Black-Scholes option-pricing model and Monte Carlo valuation model require the input of subjective assumptions including the expected volatility of the underlying stock

and the expected holding period of the option.

These subjective assumptions are based on both historical and other information.

Changes in the values assumed and used in the model can materially affect the estimate of fair value.

The following summarizes the Black-Scholes option-pricing model assumptions used to derive the weighted average fair value of the stock options granted during the periods noted.

Years Ended March 31,

Weighted average risk free interest rate

Weighted average expected holding period (years)

Weighted average expected volatility

Weighted average expected dividend yield

Weighted average fair value of options granted

The Company regularly reviews its accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality and age of the accounts receivable, and the current economic conditions that may affect a customer’s ability to pay.

The Company regularly reviews its accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality and age of the

accounts receivable, and the current economic conditions that may affect a customer’s ability to pay.

The majority of the Company’s sales are to leading automotive aftermarket parts suppliers.

Management believes the credit risk with respect to trade accounts receivable is limited due to the Company’s credit evaluation process, the nature of its customers, and its accounts receivable discount programs.

However, should the Company’s customers experience significant cash flow problems, its financial position and results of operations could be materially and adversely affected, and the maximum amount of loss that would be incurred would be the outstanding receivable balance, Used Cores expected to be returned by customers, and the value of the Remanufactured Cores held at customers’ locations.

Management believes the credit risk with respect to trade

accounts receivable is limited due to the Company’s credit evaluation process, the nature of its customers, and its accounts receivable discount programs.

However, should the Company’s customers experience significant cash flow problems, its

financial position and results of operations could be materially and adversely affected, and the maximum amount of loss that would be incurred would be the outstanding receivable balance, Used Cores expected to be returned by customers, and the value

of the Remanufactured Cores held at customers’ locations.

The Company maintains an allowance for credit losses that, in its opinion, provides for an adequate reserve to cover losses that may be incurred.

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The plan allows participants to defer salary and bonuses.

The assets of the plan, which are held in a trust and are subject to the claims of the Company’s general creditors under federal and state laws in the event of insolvency, are recorded as short-term investments in the consolidated balance sheets.

Consequently, the trust qualifies as a Rabbi trust for income tax purposes.

The assets of the plan, which are

held in a trust and are subject to the claims of the Company’s general creditors under federal and state laws in the event of insolvency, are recorded as short-term investments in the consolidated balance sheets.

Consequently, the trust qualifies as

a Rabbi trust for income tax purposes.

The plan’s assets consist primarily of mutual funds and are recorded at market value with any unrealized gain or loss recorded as general and administrative expense.

The carrying value of plan assets was $ 1,652,000 and $ 850,000 , and the deferred compensation liability, which is included in other current liabilities in the accompanying consolidated balance sheets, was $ 1,652,000 and $ 850,000 at March 31, 2021 and 2020, respectively.

During the years ended March 31, 2021, 2020, and 2019, the Company made contributions of $ 96,000 , $ 79,000 and $ 113,000 , respectively.

During the years ended March 31, 2021 and 2020, the Company redeemed $ 46,000 and $ 2,802,000 , respectively, of its short-term investments for the payment of deferred compensation liabilities.

The carrying value of plan assets was $ 2,202,000 and $ 1,652,000 , and the deferred

compensation liability, which is included in other current liabilities in the accompanying consolidated balance sheets, was $ 2,202,000 and

$ 1,652,000 at March 31, 2022 and 2021, respectively.

During the years ended March 31, 2022, 2021, and 2020, the Company made contributions

of $ 119,000 , $ 96,000 and $ 79,000 , respectively.

During the year ended March 31, 2022, the Company did no t

redeem any of its short-term investments for the payment of deferred compensation liabilities.

During the year ended March 31, 2021, the Company redeemed $ 46,000

of its short-term investments for the payment of deferred compensation liabilities.

The following summarizes the gain (loss) on the Company’s equity investments:

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Comprehensive Income or Loss

Comprehensive income or loss is defined as the change in equity during a period resulting from transactions and other events and circumstances from non-owner sources.

Comprehensive income or loss is defined as the change in equity during a period resulting from transactions and other events and circumstances from

non-owner sources.

The Company’s total comprehensive income or loss consists of net unrealized income or loss from foreign currency translation adjustments.

Goodwill and Intangible Assets

The Company had goodwill of $ 3,205,000 at March 31, 2021 and 2020.

The Company had goodwill of $ 3,205,000 at March 31, 2022

Intangible Assets

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The Company has trade accounts receivable that result from the sale of goods and services.

Accounts receivable — net includes offset accounts related to customer payment discrepancies, returned goods authorizations (“RGAs”) issued for in-transit unit returns, and allowances for credit losses.

Accounts receivable — net includes offset accounts related

to customer payment discrepancies, returned goods authorizations (“RGAs”) issued for in-transit unit returns, and allowances for credit losses.

Accounts receivable — net is comprised of the following:

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During the year ended March 31, 2021, the Company wrote off amounts previously fully reserved for in connection the bankruptcy filing of one of its customers.

March 31, 2021

Years Ended March 31,

Balance at beginning of period

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Contract Assets

During the year ended March 31, 2021, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $ 4,600,000 .

During the years ended March 31, 2022 and 2021, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $ 4,671,000 and $ 4,600,000 , respectively.

Contract assets are comprised of the following:

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Less accumulated depreciation

Plant and equipment located in the foreign countries where the Company has facilities, net of accumulated depreciation, totaled $ 45,831,000 and $ 35,410,000 , of which $ 42,215,000 and $ 31,845,000 is located in Mexico, at March 31, 2021 and 2020, respectively.

The Company is party to a $ 268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $ 238,620,000 revolving loan facility, subject to borrowing base restrictions, a $ 24,000,000 sublimit for borrowings by Canadian borrowers, and a $ 20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $ 30,000,000 term loan facility (the “Term Loans”).

Plant and equipment located in the foreign countries where the Company has facilities, net of accumulated depreciation, totaled $ 44,348,000 and $ 45,831,000 , of which $ 40,912,000 and $ 42,215,000 is located in

Mexico, at March 31, 2022 and 2021, respectively.

The Company is party to a $ 268,620,000 senior secured

financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders and PNC Bank, National Association, as administrative agent, consisting of (i) a $ 238,620,000 revolving loan facility, subject to borrowing base restrictions, a $ 24,000,000

sublimit for borrowings by Canadian borrowers, and a $ 20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $ 30,000,000 term loan facility (the “Term Loans”).

The loans under the Credit Facility mature on June 5, 2023 .

The Credit Facility currently permits the payment of up to $ 30,000,000 of dividends and share repurchases for fiscal year 2021, subject to pro forma compliance with financial covenants.

The Credit Facility currently permits the payment of up to $ 29,430,000

of dividends and share repurchases for fiscal year 2022, subject to pro forma compliance with financial covenants.

In connection with the Credit Facility, the lenders have a security interest in substantially all of the assets of the Company.

May 2021, the Company entered into a third amendment to the Credit Facility (the “Third Amendment”).

The Third Amendment, among other things, (i) extended the maturity date from June 5, 2023 to May 28, 2026 , (ii) modified the fixed charge

coverage ratio financial covenant, and (iii) modified the definition of “Consolidated EBITDA”.

The Company capitalized $ 1,159,000

of new debt issuance costs in connection with the Third Amendment.

The Term Loans require quarterly principal payments of $ 937,500 .

The Credit Facility bears interest at rates equal to either LIBOR plus a margin of 2.25 %, 2.50 % or 2.75 % or a reference rate plus a margin of 1.25 %, 1.50 % or 1.75 %, in each case depending on the senior leverage ratio as of the applicable measurement date.

There is also a facility fee of 0.375 % to 0.50 %, depending on the senior leverage ratio as of the applicable measurement date.

The interest rate on the Company’s Term Loans and Revolving Facility was 2.62 % at March 31, 2021, and 4.34 % and 3.64 %, respectively, at March 31, 2020.

The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio.

There is also a facility fee of 0.375 % to 0.50 %, depending on the senior

leverage ratio as of the applicable measurement date.

The interest rate on the Company’s Term Loans and Revolving Facility was 2.99 % and 3.13 % respectively, at March 31, 2022, and 2.62 % at March 31, 2021.

The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a

minimum fixed charge coverage ratio.

The Company was in compliance with all financial covenants at March 31, 2022.

On May 28, 2021, the Company entered into a third amendment to the Amended Credit Facility (the “Third Amendment”).

The Third Amendment, among other things, (i) extends the maturity date to May 28, 2026 from June 5, 2023 , (ii) modifies the fixed charge coverage ratio financial covenant, and (iii) modifies the definition of “Consolidated EBITDA”.

The modifications to the financial covenants were effective as of March 31, 2021.

The Company had cash of $ 15,523,000 at March 31, 2021 and paid down its outstanding debt by $ 71,750,000 during the year ended March 31, 2021.

In addition to other covenants, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem or purchase subordinated debt, and amend or otherwise alter debt agreements.

The Company had cash of $ 23,016,000 at March 31, 2022, however, the Credit Facility allows up to $ 6,000,000 of credit for cash when computing the senior leverage ratio.

In addition to other covenants, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans

and investments, engage in mergers and acquisitions, engage in asset sales, redeem, or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem, or purchase subordinated

debt, and amend or otherwise alter debt agreements.

The Company’s Term Loans are comprised of the following:

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The Company leases various facilities in North America and Asia under operating leases expiring through August 2033.

During the year ended March 31, 2021, the following material operating leases commenced:

(i) the lease of the Company’s 173,000 square foot core induction, warehouse, and office facility in Mexico, which resulted in an increase in the operating lease liability of $ 12,724,000 and (ii) the renewal of the Company’s 157,000 square foot remanufacturing, warehouse, and office facility in Canada, which resulted in an increase in the operating lease liability of $ 2,715,000 .

During the first quarter of fiscal 2022, the Company renewed the lease for its corporate headquarters in Torrance, California, for an additional 10 -year period, and accordingly it is not included in the operating lease assets and operating lease liabilities as of March 31, 2021.

Total commitments for this agreement, which expires in March 2032 , are $ 20,789,000 .

The Company also has finance leases for certain office and manufacturing equipment, which generally range from three to five years .

The Company has material non-functional currency leases, which resulted in a remeasurement gain of $ 9,893,000 compared with a loss of $ 11,710,000 during the years ended March 31, 2021 and 2020, respectively.

These remeasurement gains and losses are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.

During the first quarter of fiscal 2022, the Company

renewed the lease for its corporate headquarters in Torrance, California, for an additional 10 -year period, which resulted in an increase

in the operating lease liability of $ 15,537,000 .

The Company also has finance leases for certain office and manufacturing equipment, which

generally range from three to five years .

The Company has material non-functional currency leases, which resulted in a remeasurement gains of $ 1,989,000 and $ 9,893,000 during the years ended March 31, 2022 and

2021, respectively, and a loss of $ 11,710,000 during the year ended March 31, 2020.

These remeasurement gains are included in “foreign

exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations.

Balance sheet information for leases is comprised of the following:

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Total lease cost

During the year ended March 31, 2019, the Company incurred total operating lease expenses of $ 6,188,000 .

Maturities of lease commitments at March 31, 2022 were as follows:

Maturity of lease liabilities

Maturity of lease liabilities by fiscal year

Operating Leases

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The Company uses receivable discount programs with certain customers and their respective banks.

Under these programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.

Under these programs, the Company may sell those

customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold.

These discount arrangements allow the Company to accelerate receipt of payment on customers’ receivables.

The following is a summary of the Company’s accounts receivable discount programs:

Years Ended March 31,

Fiscal Years Ended March 31,

Receivables discounted

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Purchases and expenses denominated in currencies other than the U.S.

dollar, which are primarily related to the Company’s facilities overseas, expose the Company to market risk from material movements in foreign exchange rates between the U.S.

dollar, which are primarily related to the Company’s facilities overseas, expose

the Company to market risk from material movements in foreign exchange rates between the U.S.

dollar and the foreign currencies.

The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the Chinese yuan.

The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the

Chinese yuan.

To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S.

dollars for these foreign currencies.

The extent to which forward foreign currency exchange contracts are used is modified periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.

The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in currency speculation.

The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S.

The extent to which forward foreign currency exchange contracts are used is modified

periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.

The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in

currency speculation.

changes in exchange rates between the U.S.

dollar and the foreign currencies.

The Company does not hold or issue financial instruments for trading purposes.

The forward foreign currency exchange contracts are designated for forecasted expenditure requirements to fund foreign operations.

The forward foreign currency exchange contracts are designated for forecasted expenditure

requirements to fund foreign operations.

The Company had forward foreign currency exchange contracts with a U.S.

dollar equivalent notional value of $ 41,819,000 and $ 42,052,000 at March 31, 2021 and 2020, respectively.

These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts.

equivalent notional value of $ 44,968,000 and $ 41,819,000 at March 31, 2022 and 2021, respectively.

These contracts

generally have a term of one year or less, at

rates agreed at the inception of the contracts.

The counterparty to this derivative transaction is a major financial institution with investment grade credit rating;

however, the Company is exposed to credit risk with this institution.

The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted.

Any changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations .

risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted.

Any changes in the fair values of forward foreign currency

exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of operations .

The following shows the effect of the Company’s derivative instruments on its consolidated statements of operations:

Gain (Loss) Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts

(Loss) Gain Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts

Derivatives Not Designated as

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Forward foreign currency exchange contracts

The fair value of the forward foreign currency exchange contracts of $ 1,429,000 is included in prepaid and other current assets in the consolidated balance sheet at March 31, 2021.

The fair value of the forward foreign currency exchange contracts of $ 6,284,000 is included other current liabilities in the accompanying consolidated balance sheet at March 31, 2020.

The changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the consolidated statements of cash flows for the years ended March 31, 2021, 2020, and 2019.

The fair value of the forward foreign currency exchange contracts of $ 1,113,000

and $ 1,429,000 are included in prepaid and other current assets in the consolidated balance sheets at March 31, 2022 and 2021,

respectively.

31, 2022, 2021, and 2020.

Fair Value Measurements

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or

most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company uses a three-tier valuation hierarchy based upon observable and unobservable inputs:

Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or

liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.

The fair value hierarchy requires the use of observable market data when available.

In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis according to the valuation techniques the Company used to determine their fair values at:

In instances in which the inputs used to measure fair value fall

into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a

particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value

on a recurring basis according to the valuation techniques the Company used to determine their fair values at:

March 31, 2022

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Deferred compensation

Forward foreign currency exchange contracts

Other liabilities

Long-term contingent consideration

Short-term Investments and Deferred Compensation

The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds.

These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

These investments are

classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

Forward Foreign Currency Exchange Contracts

The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 12).

The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or

foreign currency dealers (See Note 12).

Contingent Consideration

In December 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from Mechanical Power Conversion, LLC (“E&M”).

In connection with this acquisition, the Company is contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $ 5,200,000 over a three-year period.

E&M Research and Development (“R&D”) Event Milestone

In connection with the Company’s E&M acquisition in December 2018, it had a two-year R&D event milestone based on technology development and transfer.

The milestone was achieved and, as a result, the Company paid $ 1,250,000 to the former owners of E&M during the year ended March 31, 2021.

The fair value of the two-year R&D event milestone was $ 1,130,000 at March 31, 2020, determined using a probability weighted method with commensurate with the term of the contingent consideration.

E&M Gross Profit Earn-out Consideration

The fair value of the three-year gross profit earn-out consideration was $ 910,000 and $ 1,230,000 at March 31, 2021 and 2020, respectively, determined using a Monte Carlo Simulation Model.

Any subsequent changes in the fair value of the contingent consideration liability will be recorded in current period earnings as a general and administrative expense.

The second year milestone was achieved and, as a result, the Company paid $ 723,000 to the former owners of E&M during the year ended March 31, 2021.

The assumptions used to determine the fair value is as follows:

March 31, 2021

March 31, 2020

Risk free interest rate

Counter party rate

Expected volatility

Weighted average cost of capital

Dixie Revenue Earn-out Consideration

In January 2019, the Company completed the acquisition of all the equity interests of Dixie.

In connection with this acquisition, the Company was contingently obligated to make additional payments to the former owners of Dixie up to $ 1,130,000 over a two-year period.

The fair value of the two-year revenue earn-out consideration was $ 0 and $ 293,000 at March 31, 2021 and 2020, determined using a Monte Carlo Simulation Model.

Company was contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $ 5,200,000 over a three-year period.

During the year ended

March 31, 2022, the Company paid $ 977,000 to the former owners of E&M.

The following table summarizes the activity for financial assets and liabilities utilizing Level 3 fair value measurements:

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Ending balance

During the years ended March 31, 2021 and 2020, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments.

The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics.

During the years ended March 31, 2022 and 2021, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring

basis subsequent to their initial recognition.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to

the short-term nature of these instruments.

similar characteristics.

Commitments and Contingencies

Warranty Returns

The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty returns”).

The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty

The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of total unit sales.

Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.

Amounts charged to expense for these warranty returns are

considered in arriving at the Company’s net sales.

The following summarizes the changes in the warranty return accrual:

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Balance at beginning of year

Acquisition (1)

Charged to expense

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Balance at end of year

Warranty reserve established in the opening balance sheet in connection with the Company's Dixie acquisition.

Commitments to Provide Marketing Allowances under Long-Term Customer Contracts

The Company has or is renegotiating long-term agreements with many of its major customers.

Under these agreements, which in most cases have initial terms of at least four years , the Company is designated as the exclusive or primary supplier for specified categories of the Company’s products.

Because of the very competitive nature of the market and the limited number of customers for these products, the Company’s customers have sought and obtained price concessions, significant marketing allowances, and more favorable delivery and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier.

These incentives differ from contract to contract and can include (i) the issuance of a specified amount of credits against receivables in accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with each individual shipment of product, and (iv) other marketing, research, store expansion or product development support.

Under these agreements, which in most cases have initial

terms of at least four years , the Company is designated as the exclusive or primary supplier for specified categories of the Company’s

and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier.

These incentives differ from contract to contract and can include (i) the issuance of a specified amount of credits against receivables in

accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with each individual shipment of product, and

(iv) other marketing, research, store expansion or product development support.

These contracts typically require that the Company meet ongoing performance standards.

The Company’s contracts with its customers expire at various dates through December 2024.

While these longer-term agreements strengthen the Company’s customer relationships, the increased demand for the Company’s products often requires that the Company increase its inventories and personnel.

Customer demands that the Company purchase their Remanufactured Core inventory also require the use of the Company’s working capital.

The marketing and other allowances the Company typically grants its customers in connection with its new or expanded customer relationships adversely impact the near-term revenues, profitability, and associated cash flows from these arrangements.

While these longer-term agreements strengthen the Company’s customer relationships,

the increased demand for the Company’s products often requires that the Company increase its inventories and personnel.

Customer demands that the Company purchase their Remanufactured Core inventory also require the use of the Company’s working

The marketing and other allowances the Company typically grants its customers in connection with its new or expanded customer relationships adversely

impact the near-term revenues, profitability, and associated cash flows from these arrangements.

Such allowances include sales incentives and concessions and typically consist of:

(i) allowances which may only be applied against future purchases and are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers generally in connection with new business.

(i) allowances which may only be applied against future purchases and

are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are

recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers generally in connection with new business.

The following summarizes the breakout of allowances discussed above, recorded as a reduction to revenues:

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Total customer allowances recorded as a reduction of revenues

The following presents the Company’s commitments to incur allowances, excluding allowances related to a single exchange of product, which will be recognized as a reduction to revenue when the related revenue is recognized:

The following presents the Company’s commitments to incur allowances, excluding allowances related to a single exchange of product, which will be

recognized as a reduction to revenue when the related revenue is recognized:

Year Ending March 31,

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The Company is subject to various lawsuits and claims.

In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business.

In addition, government agencies and self-regulatory organizations have the ability to conduct

periodic examinations of and administrative proceedings regarding the Company’s business.

Following an audit in fiscal 2019, the U.S.

Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $ 17 million from 2011 through mid-2018 relating to products that it imported from Mexico.

The Company does not believe that this amount is correct and believes that it has numerous defenses and is disputing this amount vigorously.

The Company does not believe that this amount is correct and

believes that it has numerous defenses and is disputing this amount vigorously.

The Company cannot assure that the U.S.

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Less valuation allowance

As of March 31, 2021, the Company had federal net operating loss carryforwards of $ 828,000 related to its January 2019 acquisition, state net operating loss carryforwards of $ 1,130,000 and foreign net operating loss carryforwards of $ 14,931,000 .

The federal net operating loss carryforwards expire beginning fiscal year 2033 , the state net operating loss carryforwards expire beginning fiscal year 2033 , and the foreign net operating loss carryforwards expire beginning fiscal year 2038 .

As of March 31, 2021, the Company also had non-US tax credit carryforwards of $ 1,828,000 , which will expire beginning fiscal year 2034 .

A full valuation allowance was established on the federal and foreign net operating loss and tax credits carryforward as the Company believes it is more likely than not these tax attributes would not be realizable in the future.

As of March 31, 2022, the Company had federal net operating loss carryforwards of $ 789,000 related to its January 2019 acquisition, state net operating loss carryforwards of $ 537,000 and

foreign net operating loss carryforwards of $ 16,709,000 .

The federal net operating loss carryforwards expire beginning in fiscal year 2033 , the state net operating loss carryforwards expire beginning in fiscal year 2033 , and the foreign net operating loss carryforwards expire beginning in fiscal year 2038 .

As of March 31, 2022, the Company also had non-US tax credit carryforwards of $ 2,018,000 , which

will expire beginning in fiscal year 2034 .

A full valuation allowance was established on the federal and foreign net operating loss and

tax credits carryforward as the Company believes it is more likely than not these tax attributes would not be realizable in the future.

The net increase in the valuation allowance was $ 653,000 during the year ended March 31, 2022.

Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income.

The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans.

A valuation allowance is established when the Company believes it is not more likely than not all or some of a deferred tax assets will be realized.

In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.

Deferred tax assets arising primarily as a result of non-US net operating loss carry-forwards and non-US research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.

Should the actual amount differ from the Company’s estimates, the amount of the valuation allowance could be impacted.

For the years ended March 31, 2021, 2020, and 2019, the primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), (vi) income taxes associated with uncertain tax positions, and (vii) the impact of net operating loss carry-backs in connection with the CARES Act.

Significant judgment is required in determining the

Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets.

The Company makes these estimates and judgments about its future taxable income that are

based on assumptions that are consistent with the Company’s future plans.

A valuation allowance is established when the Company believes it is not more likely than not all or some deferred tax assets will be realized.

In evaluating the Company’s

ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence.

Deferred tax assets arising primarily as a result of non-US net operating loss carry-forwards and

non-US research and development credits in connection with the Company’s Canadian operations have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.

Should the actual amount differ from the

Company’s estimates, the amount of the valuation allowance could be impacted.

For the years ended March 31, 2022, 2021, and 2020, the primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii)

foreign income taxed at rates that are different from the federal statutory rate, (iv) change in realizable deferred tax items, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), and (vi) income taxes

associated with uncertain tax positions

The difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate is as follows:

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Research and development credit

Non-deductible transaction costs

Other income tax

The Company and its subsidiaries file income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions with varying statutes of limitations.

federal jurisdiction and various state and foreign jurisdictions with varying

statutes of limitations.

At March 31, 2022, the Company is not under examination in any jurisdiction and the years ended March 31, 2017 through 2022 remain subject to examination.

The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.

The Company believes no significant changes in the unrecognized tax

benefits will occur within the next 12 months.

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

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Balance at end of period

At March 31, 2021, 2020 and 2019, there are $ 923,000 , $ 823,000 and $ 938,000 of unrecognized tax benefits that if recognized would affect the annual effective tax rate.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as part of income tax expense.

During the years ended March 31, 2021, 2020, and 2019, the Company recognized approximately $( 16,000 ), $( 50,000 ), and $( 23,000 ) in interest and penalties, respectively.

The Company had approximately $ 58,000 and $ 74,000 for the payment of interest and penalties accrued at March 31, 2021 and 2020, respectively.

The Company intends to indefinitely reinvest its undistributed earnings from foreign subsidiaries in foreign operations and no incremental U.S.

tax or withholding taxes have been provided for these earnings.

At March 31, 2022, 2021 and 2020, there are $ 1,632,000 , $ 923,000 , and $ 823,000 , respectively, of

unrecognized tax benefits that if recognized would affect the annual effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as part of income tax expense.

During the years ended March 31, 2022, 2021, and 2020, the

Company recognized interest and penalties of approximately $ 112,000 , $( 16,000 ), and $( 50,000 ), respectively.

The Company had

approximately $ 170,000 and $ 58,000

for the payment of interest and penalties accrued at March 31, 2022 and 2021, respectively.

With the exception of its earnings from its Singapore subsidiary, the Company intends to indefinitely reinvest its undistributed earnings from foreign subsidiaries in

foreign operations.

No incremental U.S.

Federal tax or withholding taxes have been provided for these earnings.

Defined Contribution Plans

The Company has a 401(k) plan covering all employees who are 21 years of age with at least six months of service.

The plan permits eligible employees to make contributions up to certain limitations, with the Company matching 50 % of each participating employee’s contribution up to the first 6 % of employee compensation.

Employees are immediately vested in their voluntary employee contributions and vest in the Company’s matching contributions ratably over five years .

The plan permits eligible

employees to make contributions up to certain limitations, with the Company matching 50 % of each participating employee’s contribution up

to the first 6 % of employee compensation.

Employees are immediately vested in their voluntary employee contributions and vest in the

Company’s matching contributions ratably over five years .

The Company’s matching contribution to the 401(k) plan was $ 578,000 , $ 507,000 , and $ 496,000 for the years ended March 31, 2022, 2021, and 2020, respectively.

Share-based Payments

At March 31, 2021 , there were 342,000 shares of the Company’s common stock reserved for grants to the Company’s non-employee directors under the 2014 Non-Employee Director Incentive Award Plan (the “2014 Plan”).

Under the 2014 Plan, (i) 69,732 and 53,784 of restricted stock units were outstanding and (ii) 76,746 and 143,909 shares of common stock were available for grant under this plan at March 31, 2021 and 2020, respectively.

At March 31, 2021, there were 5,150,000 shares of common stock reserved for grant to all employees of the Company under the 2010 Incentive Award Plan (the “2010 Plan”).

Under the 2010 Plan, (i) 184,752 and 148,199 shares of restricted stock units were outstanding, (ii) options to purchase 1,714,885 and 1,485,123 shares of common stock were outstanding, (iii) 100,000 and no restricted shares were outstanding, and (iv) 1,267,802 and 629,823 shares of common stock were available for grant at March 31, 2021 and 2020, respectively.

In addition, at March 31, 2021 and 2020, options to purchase 30,000 and 51,000 shares of common stock, respectively, were outstanding under the 2004 Non-Employee Director Stock Option Plan.

At March 31, 2022 , there were 342,000 shares of the Company’s common stock reserved for grants to the Company’s non-employee directors under the 2014 Non-Employee Director Incentive Award Plan (the “2014

Under the 2014 Plan, (i) 82,324 and 69,732

of restricted stock units were outstanding and (ii) 628 and 76,746 shares of common stock were available for grant under this plan at March 31, 2022 and 2021, respectively.

At March 31, 2022, there were 5,150,000 shares of common

stock reserved for grant to all employees of the Company under the 2010 Incentive Award Plan (the “2010 Plan”).

At March 31, 2022 and 2021, respectively, there was (i) 216,739 and 184,752 shares of restricted stock units were outstanding, (ii)

options to purchase 1,674,499 and 1,714,885

shares of common stock were outstanding, (iii) 100,000 and 100,000 restricted shares were outstanding, and (iv) 84,593 and no shares of performance stock units were outstanding under the 2010 Plan.

At March 31, 2022 and 2021, there were 682,160 and 1,267,802 shares of common

stock were available for grant, respectively.

In addition, at March 31, 2022 and 2021, options to purchase 21,000

and 30,000 shares of common stock, respectively, were outstanding under the 2004 Non-Employee Director Stock Option Plan.

No options remain available for grant under this plan.

The shares of common stock issued upon exercise of a previously granted stock option are considered new issuances from shares reserved for issuance upon adoption of the various plans.

Stock Options

The Company did no t grant any stock

options during the year ended March 31, 2022.

The following summarizes the Black-Scholes option-pricing model assumptions used to derive the weighted average fair value of the stock

options granted during the years ended March 31, 2021 and 2020.

Years Ended March 31,

Weighted average risk free interest rate

Weighted average expected holding period (years)

Weighted average expected volatility

Weighted average expected dividend yield

Weighted average fair value of options granted

The following is a summary of stock option transactions:

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Outstanding at March 31, 2022

At March 31, 2021, options to purchase 603,256 shares of common stock were unvested at the weighted average exercise price of $ 17.10 .

At March 31, 2022, options to purchase 314,359 shares of

common stock were unvested at the weighted average exercise price of $ 16.52 .

Based on the market value of the Company’s common stock at March 31, 2022, 2021, and 2020, the pre-tax intrinsic value of options exercised was $ 245,000 , $ 546,000 , and $ 508,000 , respectively.

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28.05 to $ 34.17

The aggregate intrinsic values in the above table represent the pre-tax value of all in-the-money options if all such options had been exercised on March 31, 2021 based on the Company’s closing stock price of $ 22.50 as of that date.

At March 31, 2021, there was $ 2,745,000 of total unrecognized compensation expense from stock-based compensation granted under the plans, which is related to non-vested shares.

The compensation expense is expected to be recognized over a weighted average vesting period of 1.8 years.

The aggregate intrinsic values in the above table represent the pre-tax value of all in-the-money options if all such options had been exercised on March 31, 2022 based on

the Company’s closing stock price of $ 17.83 as of that date.

At March 31, 2022, there was $ 1,065,000 of total unrecognized

compensation expense from stock-based compensation granted under the plans, which is related to non-vested shares.

The compensation expense is expected to be recognized over a weighted average vesting period of 1.0 year.

Restricted Stock Units and Restricted Stock (collectively “RSUs”)

During the years ended March 31, 2021 and 2020 the Company granted 251,801 and 113,483 shares of RSUs, respectively, with an estimated grant date fair value of $ 4,150,000 and $ 2,112,000 , respectively, which was based on the closing market price on the date of grant.

During the years ended March 31, 2022 and 2021 the Company granted 263,703

and 251,801 shares of RSUs, respectively, with an estimated grant date fair value of $ 5,775,000 and $ 4,150,000 , respectively, which was based on the

closing market price on the date of grant.

The fair value related to these awards is recognized as compensation expense over the vesting period.

These awards generally vest in three equal installments beginning each anniversary from the grant date, subject to continued employment.

Upon vesting, these awards may be net share settled to cover the required withholding tax with the remaining amount converted into an equivalent number of shares of common stock.

Total shares withheld during the years ended March 31, 2021 and 2020 were 22,202 and 58,802 , respectively, based on the value of these awards as determined by the Company’s closing stock price on the vesting date.

Upon vesting, these awards may be net share settled to cover the required withholding

tax with the remaining amount converted into an equivalent number of shares of common stock.

Total shares withheld during the years ended March 31, 2022 and 2021 were 84,762 and 22,202 , respectively, based on the value of these awards as

determined by the Company’s closing stock price on the vesting date.

The following is a summary of non-vested RSUs:

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Grant Date Fair

Non-vested at March 31, 2020

Non-vested at March 31, 2021

As of March 31, 2021, there was $ 3,637,000 of unrecognized compensation expense related to these awards, which will be recognized over the remaining vesting period of approximately 1.6 years.

Outstanding at March 31, 2021

Outstanding at March 31, 2022

As of March 31, 2022, there was $ 4,080,000

of unrecognized compensation expense related to these awards, which will be recognized over the remaining vesting period of approximately 1.5

Performance Stock Units (“PSUs”)

In June 2021, the Company granted performance-based PSUs to its executives, which typically cliff vest after three-years subject to continued employment.

These awards are contingent and granted separately for each of the following metrics:

adjusted EBITDA, net

sales, and relative total shareholder return (“TSR”).

Compensation cost is determined at the grant date and recognized on a straight-line basis over the requisite service period to the extent the conditions are deemed probable.

The number of shares

earned at the end of the three-year period will vary, based only on actual performance, from 0 % to 150 % of the target number of PSUs granted.

PSUs are not considered issued or outstanding ordinary shares of the Company.

Adjusted EBITDA and net sales are considered performance conditions.

The Company will reassess the probability of achieving each performance

condition separately at each reporting period.

TSR is considered a market condition because it measures the Company’s return against the performance of the Russell 3000, excluding companies classified as financials and real estate, over a given

period of time.

Compensation cost related to the TSR award will not be adjusted even if the market condition is not met.

The Company calculated the fair value of the PSUs for each component individually.

The fair value of PSUs subject to performance conditions is equal

to the closing stock price on the grant date.

The fair value of PSUs subject to the market condition is determined using the Monte Carlo valuation model.

The following table summarizes the assumptions used in determining the fair value of the TSR awards:

Year Ended March 31,

Risk free interest rate

Expected life in years

Expected volatility of MPA common stock

Expected average volatility of peer companies

Average correlation coefficient of peer companies

Expected dividend yield

Grant date fair value

The following is a summary of non-vested PSUs:

Number of Shares

Weighted Average

Grant Date Fair

Outstanding at March 31, 2021

Outstanding at March 31, 2022

At March 31, 2022, there was $ 1,448,000

of unrecognized compensation expense related to these awards, which will be recognized over the weighted average remaining vesting period of approximately 2.2

Share Repurchase Program

The Company’s board of directors approved a stock repurchase program of up to $ 37,000,000 of its common stock.

During the years ended March 31, 2021 and 2019, the Company repurchased 54,960 and 163,815 shares of its common stock, respectively, for $ 1,139,000 and $ 4,062,000 , respectively.

In August 2018, the Company’s board of directors approved an increase in its share repurchase program from $ 20,000,000 to $ 37,000,000 of its common stock.

During the years

ended March 31, 2022 and 2021, the Company repurchased 106,486 and 54,960 shares of its common stock, respectively, for $ 1,914,000 and

$ 1,139,000 , respectively.

During the year ended March 31, 2020 the Company did no t repurchase any shares of its common stock.

As of March 31, 2021, $ 16,831,000 was utilized and $ 20,169,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in the Company’s Credit Facility.

As of March 31, 2022, $ 18,745,000

was utilized and $ 18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in

the Company’s Credit Facility.

The Company retired the 837,007 shares repurchased under this program through March 31, 2022.

The Company’s share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Subsequent Event

Credit Facility

On May 28, 2021, the Company entered into a third amendment to the Amended Credit Facility (the “Third Amendment”).

The modifications to the financial covenants were effective as of March 31, 2021.

Unaudited Quarterly Financial Data

The following summarizes selected quarterly financial data for the year ended March 31, 2021 :

Cost of goods sold

Operating expenses:

General and administrative

Sales and marketing

Research and development

Foreign exchange impact of lease liabilities and forward contracts

Total operating expenses

Operating income

Other expense:

Interest expense, net

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

The following summarizes selected quarterly financial data for the year ended March 31, 2020:

Cost of goods sold

Operating expenses:

General and administrative

Sales and marketing

Research and development

Foreign exchange impact of lease liabilities and forward contracts

Total operating expenses

Operating income

Other expense:

Interest expense, net

Income (loss) before income tax expense (benefit)

Income tax expense (benefit)

Net income (loss)

Basic net income (loss) per share

Diluted net income (loss) per share

Quarterly and year-to-date computations of per share amounts are made independently.

Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year shown elsewhere in the Annual Report on Form 10-K.

Schedule II — Valuation and Qualifying Accounts

The Company’s

share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Schedule II —

Valuation and Qualifying Accounts

Accounts Receivable — Allowance for credit losses

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Allowance for credit losses

Allowance for credit losses established in the opening balance sheet in connection with the Company’s January 2019 acquisition.

Accounts Receivable — Allowance for customer-payment discrepancies

9 unchanged sentences

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-K

Item 9A. Controls and Procedures