What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-08-07 · 151 added, 134 removed, 434 unchanged (40% of the section changed)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2024 2023 2024 2023

3 unchanged sentences

Depreciation and amortization 10,844 11,577 35,152 34,643

Other operating expense (income), net ( 1,390 ) ( 956 ) ( 2,390 ) 105

Other operating income, net ( 895 ) ( 631 ) ( 3,285 ) ( 526 )

Loss from operations ( 3,750 ) ( 2,739 ) ( 10,680 ) ( 13,861 )

5 unchanged sentences

Net loss $ ( 2,557 ) $ ( 5,057 ) $ ( 17,297 ) $ ( 29,609 )

Other comprehensive loss:

Foreign currency translation loss $ ( 3,387 ) $ ( 2,374 ) $ ( 5,733 ) $ ( 534 )

Other comprehensive income (loss):

Foreign currency translation gain (loss) $ 3,970 $ ( 3,072 ) $ ( 1,763 ) $ ( 3,606 )

Interest rate swap:

1 unchanged sentence

Reclassification adjustments included in net loss, net of tax ( 109 ) ( 449 ) ( 1,007 ) ( 1,366 )

Other comprehensive loss $ ( 3,836 ) $ ( 2,823 ) $ ( 6,631 ) $ ( 1,681 )

Comprehensive loss $ ( 6,039 ) $ ( 17,200 ) $ ( 21,371 ) $ ( 26,233 )

Other comprehensive income (loss) $ 3,861 $ ( 3,521 ) $ ( 2,770 ) $ ( 5,202 )

Comprehensive income (loss) $ 1,304 $ ( 8,578 ) $ ( 20,067 ) $ ( 34,811 )

Basic and diluted net loss per share $ ( 0.13 ) $ ( 0.18 ) $ ( 0.59 ) $ ( 0.84 )

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except per share data) June 30,

(in thousands, except per share data) September 30,

2024 December 31,

1 unchanged sentence

Cash and cash equivalents $ 12,449 $ 21,903

Accounts receivable, net of allowances of $ 1,660 and $ 1,241 at June 30, 2024 and December 31, 2023

Accounts receivable, net of allowances of $ 1,913 and $ 1,241 at September 30, 2024 and December 31, 2023

64,447 65,545

4 unchanged sentences

Total current assets 173,904 182,554

Property, plant and equipment, net of accumulated depreciation of $ 246,892 and $ 254,013 at June 30, 2024 and December 31, 2023

Property, plant and equipment, net of accumulated depreciation of $ 248,473 and $ 254,013 at September 30, 2024 and December 31, 2023

172,947 185,812

20 unchanged sentences

Commitments and contingencies (Note 10)

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at June 30, 2024 and December 31, 2023

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at September 30, 2024 and December 31, 2023

89,289 77,799

Stockholders’ equity:

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 50,032 and 47,269 shares issued and outstanding at June 30, 2024 and December 31, 2023

Common stock - $ 0.01 par value per share, 90,000 shares authorized, 49,950 and 47,269 shares issued and outstanding at September 30, 2024 and December 31, 2023

Additional paid-in capital 459,245 457,632

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2024 2023

1 unchanged sentence

Net loss $ ( 17,297 ) $ ( 29,609 )

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 35,152 34,643

1 unchanged sentence

Paid-in-kind interest 2,064 1,491

Total derivative loss (gain), net of cash settlements ( 1,068 ) 5,691

Share of net income from joint venture ( 4,412 ) ( 1,374 )

Total derivative loss, net of cash settlements 582 3,139

Share of net income from joint venture, net of cash dividends received ( 6,597 ) 851

Gain on sale of business ( 7,154 ) —

Share-based compensation expense 2,347 2,058

8 unchanged sentences

Other operating liabilities 2,739 5,747

Net cash provided by (used in) operating activities ( 569 ) 8,643

Net cash provided by operating activities 4,389 23,890

Cash flows from investing activities

1 unchanged sentence

Proceeds from sale of property, plant, and equipment 266 2,876

Net cash used in investing activities ( 8,815 ) ( 9,419 )

Proceeds received from sale of business 17,000 —

Net cash provided by (used in) investing activities 1,914 ( 13,416 )

Cash flows from financing activities

7 unchanged sentences

Other ( 2,262 ) ( 1,276 )

Net cash provided by financing activities 1,569 2,258

Net cash used in financing activities ( 15,633 ) ( 1,205 )

Effect of exchange rate changes on cash flows ( 124 ) ( 287 )

4 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three Months Ended June 30, 2024 and 2023

Three Months Ended September 30, 2024 and 2023

Common Stock Additional

1 unchanged sentence

(in thousands) Number of shares Par

Balance as of March 31, 2024 49,520 $ 495 $ 464,081 $ ( 307,885 ) $ ( 40,550 ) $ 116,141

Balance as of June 30, 2024 50,032 $ 500 $ 462,410 $ ( 310,088 ) $ ( 44,386 ) $ 108,436

Net loss — — — ( 2,557 ) — ( 2,557 )

Dividends accrued for preferred stock — — ( 3,977 ) — — ( 3,977 )

Shares issued for warrants exercised 499 5 1,985 1,990

Shares issued under stock incentive plans, net of forfeitures ( 82 ) ( 1 ) 1 — — —

Share-based compensation expense — — 811 — — 811

Restricted shares surrendered for tax withholdings under stock incentive plans ( 134 ) ( 1 ) ( 502 ) — — ( 503 )

Other comprehensive loss — — — — ( 3,836 ) ( 3,836 )

Balance as of June 30, 2024 50,032 $ 500 $ 462,410 $ ( 310,088 ) $ ( 44,386 ) $ 108,436

Other comprehensive income — — — — 3,861 3,861

Balance as of September 30, 2024 49,950 $ 499 $ 459,245 $ ( 312,645 ) $ ( 40,525 ) $ 106,574

Common Stock Additional

1 unchanged sentence

(in thousands) Number of shares Par

Balance as of March 31, 2023 43,772 $ 438 $ 465,377 $ ( 255,373 ) $ ( 35,978 ) $ 174,464

Balance as of June 30, 2023 47,019 $ 470 $ 462,525 $ ( 269,750 ) $ ( 38,801 ) $ 154,444

Net loss — — — ( 5,057 ) — ( 5,057 )

Dividends accrued for preferred stock — — ( 3,347 ) — — ( 3,347 )

Shares issued under stock incentive plans, net of forfeitures and tax withholdings 3,306 33 ( 54 ) — — ( 21 )

Shares issued under stock incentive plans, net of forfeitures 292 3 ( 3 ) — — —

Share-based compensation expense — — 1,207 — — 1,207

Restricted shares surrendered for tax withholdings under stock incentive plans ( 59 ) ( 1 ) ( 72 ) — — ( 73 )

Other comprehensive loss — — — — ( 3,521 ) ( 3,521 )

Balance as of June 30, 2023 47,019 $ 470 $ 462,525 $ ( 269,750 ) $ ( 38,801 ) $ 154,444

Balance as of September 30, 2023 47,311 $ 473 $ 460,382 $ ( 274,807 ) $ ( 42,322 ) $ 143,726

See notes to condensed consolidated financial statements (unaudited).

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2024 and 2023

Nine Months Ended September 30, 2024 and 2023

Common Stock Additional

9 unchanged sentences

Other comprehensive loss — — — — ( 2,770 ) ( 2,770 )

Balance as of June 30, 2024 50,032 $ 500 $ 462,410 $ ( 310,088 ) $ ( 44,386 ) $ 108,436

Balance as of September 30, 2024 49,950 $ 499 $ 459,245 $ ( 312,645 ) $ ( 40,525 ) $ 106,574

Common Stock Additional

8 unchanged sentences

Other comprehensive loss — — — — ( 5,202 ) ( 5,202 )

Balance as of June 30, 2023 47,019 $ 470 $ 462,525 $ ( 269,750 ) $ ( 38,801 ) $ 154,444

Balance as of September 30, 2023 47,311 $ 473 $ 460,382 $ ( 274,807 ) $ ( 42,322 ) $ 143,726

See notes to condensed consolidated financial statements (unaudited).

Notes to Condensed Consolidated Financial Statements

June 30, 2024

September 30, 2024

Interim Financial Statements

1 unchanged sentence

NN, Inc., a Delaware corporation, is a diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of end markets on a global basis.

As of June 30, 2024, we had 27 facilities in North America, Europe, South America, and Asia.

As of September 30, 2024, we had 26 facilities in North America, Europe, South America, and Asia.

As used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc.

4 unchanged sentences

Securities and Exchange Commission (the “SEC”) on March 12, 2024.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments necessary to fairly state our results of operations for the three and six months ended June 30, 2024 and 2023;

financial position as of June 30, 2024 and December 31, 2023;

and cash flows for the six months ended June 30, 2024 and 2023, on a basis consistent with our audited consolidated financial statements.

financial position as of September 30, 2024 and December 31, 2023;

and cash flows for the nine months ended September 30, 2024 and 2023, on a basis consistent with our audited consolidated financial statements.

These adjustments are of a normal recurring nature and are, in the opinion of management, necessary to state fairly the Company’s financial position and operating results for the interim periods.

3 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the 2023 Annual Report.

The results for the three and six months ended June 30, 2024, are not necessarily indicative of results for the year ending December 31, 2024, or any other future periods.

The results for the three and nine months ended September 30, 2024, are not necessarily indicative of results for the year ending December 31, 2024, or any other future periods.

Except for per share data or as otherwise indicated, all U.S.

8 unchanged sentences

We participate in programs established by our customers, which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution.

During the six months ended June 30, 2024 and 2023, we incurred fees of $ 0.6 million and $ 0.5 million, respectively, related to the sale of receivables, which is recorded in the Other expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the nine months ended September 30, 2024 and 2023, we incurred fees of $ 0.9 million and $ 0.8 million, respectively, related to the sale of receivables, which is recorded in the Other expense (income), net line item on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Segment Information

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

16 unchanged sentences

The other category includes products sold in aerospace, defense, medical, and other industries.

Three Months Ended June 30, 2024 Mobile

Three Months Ended September 30, 2024 Mobile

Solutions Power

6 unchanged sentences

Total net sales $ 70,678 $ 42,935 $ ( 26 ) $ 113,587

Three Months Ended June 30, 2023 Mobile

Three Months Ended September 30, 2023 Mobile

Solutions Power

6 unchanged sentences

Total net sales $ 78,961 $ 45,484 $ ( 2 ) $ 124,443

Six Months Ended June 30, 2024 Mobile

Nine Months Ended September 30, 2024 Mobile

Solutions Power

6 unchanged sentences

Total net sales $ 216,593 $ 141,324 $ ( 140 ) $ 357,777

Six Months Ended June 30, 2023 Mobile

Nine Months Ended September 30, 2023 Mobile

Solutions Power

8 unchanged sentences

Deferred revenue relates to payments received in advance of performance under the contract and recognized as revenue as (or when) we perform under the contract.

The balance of deferred revenue was $ 0.2 million and $ 0.4 million as of June 30, 2024 and December 31, 2023, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the six months ended June 30, 2024 included $ 0.4 million that was included in deferred revenue as of December 31, 2023.

The balance of deferred revenue was $ 0.2 million and $ 0.4 million as of September 30, 2024 and December 31, 2023, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the nine months ended September 30, 2024 included $ 0.4 million that was included in deferred revenue as of December 31, 2023.

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2024, unless our contracts meet one of the practical expedients.

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2024, unless our contracts meet one of the practical expedients.

Our contracts met the practical expedient for a performance obligation that is part of a contract that has an original expected duration of one year or less.

Inventories are comprised of the following amounts:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Raw materials $ 24,141 $ 25,456

8 unchanged sentences

Amortization ( 2,515 ) ( 7,802 ) ( 10,317 )

Reclassified to assets held for sale (1)

Intangible assets sold (1)

— ( 591 ) ( 591 )

Balance as of June 30, 2024 $ 17,326 $ 33,895 $ 51,221

Balance as of September 30, 2024 $ 16,488 $ 31,328 $ 47,816

_______________________________

(1) Represents customer relationships associated with the Industrial Molding Corporation business, which was classified as held for sale as of June 30, 2024 (see Note 16).

(1) Represents customer relationships associated with the Industrial Molding Corporation business, which was sold during the nine months ended September 30, 2024 (see Note 16).

Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable.

There were no impairment charges for the six months ended June 30, 2024 and 2023.

There were no impairment charges for the nine months ended September 30, 2024 and 2023.

Investment in Joint Venture

5 unchanged sentences

Share of earnings 6,597

Foreign currency translation loss ( 783 )

Balance as of June 30, 2024 $ 36,330

Foreign currency translation gain 545

Balance as of September 30, 2024 $ 39,843

On March 22, 2021, we entered into a $ 150.0 million term loan facility (as amended from time to time, the “Term Loan Facility”) and a $ 50.0 million asset backed credit facility (as amended from time to time, the “ABL Facility”).

1 unchanged sentence

The following table presents the outstanding debt balances.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Term Loan Facility $ 114,187 $ 148,114

4 unchanged sentences

_______________________________

(1) In addition to this amount, costs of $ 0.4 million and $ 0.5 million related to the ABL Facility were recorded in other non-current assets as of June 30, 2024 and December 31, 2023, respectively.

We capitalized interest costs of $ 0.7 million and $ 0.7 million in the six months ended June 30, 2024 and 2023, respectively, related to construction in progress.

(1) In addition to this amount, costs of $ 0.3 million and $ 0.5 million related to the ABL Facility were recorded in other non-current assets as of September 30, 2024 and December 31, 2023, respectively.

We capitalized interest costs of $ 1.0 million and $ 1.1 million in the nine months ended September 30, 2024 and 2023, respectively, related to construction in progress.

Term Loan Facility

Outstanding borrowings under the Term Loan Facility bear interest at either:

1) one-month, three-month, or six-month SOFR with a duration adjustment (“Adjusted SOFR”), subject to a 1.00 % floor, plus an applicable margin of 6.875 %;

1) one-month, three-month, or six-month term SOFR with a duration adjustment (“Adjusted Term SOFR”), subject to a 1.00 % floor, plus an applicable margin of 6.875 %;

or 2) the greater of various benchmark rates plus an applicable margin of 5.875 %.

Beginning in the second quarter of 2023, interest was increased on a paid-in-kind basis at a rate between 1.00 % and 2.00 % (“PIK interest”), dependent on the our leverage ratio.

Beginning in the second quarter of 2023, interest was increased on a paid-in-kind basis at a rate between 1.00 % and 2.00 % (“PIK interest”), dependent on our net leverage ratio for the most recently reported fiscal quarter and subject to reduction upon the occurrence of certain conditions as set forth in the credit agreement governing the Term Loan Facility.

The PIK interest is payable on the loan maturity date of September 22, 2026.

At June 30, 2024, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted SOFR, at 14.319 %.

At September 30, 2024, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted Term SOFR, at 13.820 %.

The Term Loan Facility requires quarterly principal payments of $ 0.4 million with the remaining unpaid principal amount due at the loan maturity date.

2 unchanged sentences

The Term Loan Facility has a first lien on all domestic assets, other than accounts receivable and inventory and has a second lien on domestic accounts receivable and inventory.

We were in compliance with all requirements under the Term Loan Facility as of June 30, 2024.

We were in compliance with all requirements under the Term Loan Facility as of September 30, 2024.

The Term Loan Facility was issued at a $ 3.8 million discount and we have capitalized an additional $ 5.5 million in debt issuance costs.

2 unchanged sentences

During the first quarter of 2023, we terminated the interest rate swap and received cash proceeds of $ 2.5 million, which was equal to its then fair value.

The ABL Facility provides for a senior secured revolving credit facility, with an original commitment amount of $ 50.0 million, of which a maximum of $ 30.0 million is available in the form of letters of credit and a maximum of $ 5.0 million is available for the issuance of short-term swingline loans.

the issuance of short-term swingline loans.

The availability of credit under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States.

The maximum commitment amount may

be increased or decreased from time to time based on the terms of conditions of the ABL Facility.

The maximum commitment amount may be increased or decreased from time to time based on the terms of conditions of the ABL Facility.

Outstanding borrowings under the ABL Facility bear interest on a variable rate structure plus an interest rate spread that is based on the average amount of aggregate revolving commitment available.

The variable borrowing rate is either:

1) Adjusted SOFR plus an applicable margin of 1.75 % or 2.00 %, depending on availability;

1) Adjusted Term SOFR plus an applicable margin of 1.75 % or 2.00 %, depending on availability;

or 2) the greater of the federal funds rate or prime, plus an applicable margin of 0.75 % or 1.00 %, depending on availability.

We may elect whether to use one-month, three-month, or six-month Adjusted SOFR.

At June 30, 2024, using one-month Adjusted SOFR plus a 2.00 % margin, the interest rate on outstanding borrowings under the ABL Facility would have been 7.431 %.

We may elect whether to use one-month, three-month, or six-month Adjusted Term SOFR.

At September 30, 2024, using one-month Adjusted Term SOFR plus a 2.00 % margin, the interest rate on outstanding borrowings under the ABL Facility would have been 7.197 %.

We pay a commitment fee of 0.375 % for unused capacity under the ABL Facility and a 2.125 % fee on the amount of letters of credit outstanding.

The final maturity date of the ABL Facility is March 22, 2026.

As of June 30, 2024, we had no outstanding borrowings under the ABL Facility, $ 9.9 million of outstanding letters of credit, and $ 27.0 million available for future borrowings under the ABL Facility.

As of September 30, 2024, we had no outstanding borrowings under the ABL Facility, $ 9.9 million of outstanding letters of credit, and $ 21.9 million available for future borrowings under the ABL Facility.

The ABL Facility has a first lien on domestic accounts receivable and inventory.

We were in compliance with all requirements under the ABL Facility as of June 30, 2024.

We were in compliance with all requirements under the ABL Facility as of September 30, 2024.

Sale-Leaseback Transactions

2 unchanged sentences

Since the lease agreement allows for us to exercise renewal options that extend for substantially all of the remaining economic life, we have the ability to maintain the risks and rewards of ownership.

Since the transaction does not transfer control of the assets, it cannot be accounted for as a sale under ASC 606.

Since the transaction did not transfer control of the assets, it cannot be accounted for as a sale under ASC 606.

As a result, the properties remain on our Condensed Consolidated Balance Sheets and the non-land assets will continue to be depreciated over their remaining useful lives.

The $ 16.9 million of gross proceeds was recognized as a financing obligation as a component of long-term debt.

The monthly lease payments, which increase 3.0% each year, will be amortized as principal payments and interest expense based on an effective interest rate of 9.715 %.

We incurred $ 0.6 million in debt issuance costs related to this transaction, which will be amortized over the term of the debt.

The monthly lease payments, which increase 3.0% each year, are being amortized as principal payments and interest expense based on an effective interest rate of 9.715 %.

We incurred $ 0.6 million in debt issuance costs related to this transaction, which are being amortized over the term of the debt.

In March 2024, we sold multiple pieces of manufacturing equipment for an aggregate sales price of $ 4.9 million.

2 unchanged sentences

Since the three lease agreements allow for us to exercise an early buyout option, we have the ability to maintain the risks and rewards of ownership.

Since the transactions do not transfer control of the assets, they cannot be accounted for as sales under ASC 606.

Since the transactions did not transfer control of the assets, they cannot be accounted for as sales under ASC 606.

As a result, the assets remain on our Condensed Consolidated Balance Sheets and will continue to be depreciated over their remaining useful lives.

The $ 8.3 million of gross proceeds was recognized as a financing obligation as a component of long-term debt.

The monthly lease payments will be amortized as principal payments and interest expense on a weighted average effective interest rate of 10.540 %.

The monthly lease payments are being amortized as principal payments and interest expense on a weighted average effective interest rate of 10.540 %.

Preferred Stock

12 unchanged sentences

Note 15 discusses the accounting for these features.

As of June 30, 2024, the carrying value of the Series D Preferred Stock shares was $ 85.3 million, which included $ 38.6 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the six months ended June 30, 2024.

As of September 30, 2024, the carrying value of the Series D Preferred Stock shares was $ 89.3 million, which included $ 42.6 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the nine months ended September 30, 2024.

Balance as of December 31, 2023 $ 77,799

1 unchanged sentence

Amortization 3,104

Balance as of June 30, 2024 $ 85,312

Balance as of September 30, 2024 $ 89,289

The following table contains supplemental cash flow information related to leases.

Six Months Ended

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

6 unchanged sentences

(1) Includes new leases, renewals, and modifications.

We recognized sublease income of $ 1.9 million and $ 0.5 million in the six months ended June 30, 2024 and 2023, respectively.

We recognized sublease income of $ 2.9 million and $ 1.4 million in the nine months ended September 30, 2024 and 2023, respectively, which is recognized in the “Other operating income, net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following table presents finance lease-related assets and liabilities recorded on the balance sheet.

Financial Statement Line Item September 30, 2024 December 31, 2023

Finance lease assets Property, plant and equipment, net 14,079 13,599

Finance lease current liabilities Other current liabilities 2,656 2,047

Finance lease non-current liabilities Other non-current liabilities 3,751 4,488

Total finance lease liabilities $ 6,407 $ 6,535

Commitments and Contingencies

9 unchanged sentences

Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and, therefore, is dependent on the timing of the decision.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and, therefore, is dependent on the timing of the

For the remaining open lawsuits, we currently believe the cumulative potential liability in the event of unfavorable decisions on all matters will be less than $ 5.0 million, inclusive of interest and penalties.

1 unchanged sentence

Management believes the indemnification would include amounts owed for the tax, interest, and penalties related to this matter.

Accordingly, we do not expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of June 30, 2024.

Other Legal Matters

All other legal proceedings are of an ordinary and routine nature and are incidental to our operations.

Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial

condition, results of operations, or cash flows.

Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows.

In making that determination, we analyze the facts and circumstances of each case at least quarterly in consultation with our attorneys and determine a range of reasonably possible outcomes.

Our effective tax rate was 4.7 % and ( 1.5 )% for the three and six months ended June 30, 2024, respectively, and ( 2.1 )% and ( 6.7 )% for the three and six months ended June 30, 2023, respectively.

The effective tax rates for the three and six months ended June 30, 2024 differ from the U.S.

Our effective tax rate was ( 23.5 )% and ( 5.3 )% for the three and nine months ended September 30, 2024, respectively, and 3.5 % and ( 4.4 )% for the three and nine months ended September 30, 2023, respectively.

The effective tax rates for the three and nine months ended September 30, 2024 differ from the U.S.

federal statutory tax rate of 21 % primarily due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries, favorable return to provision and amended return adjustments in certain foreign and state jurisdictions and by limitation on the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

12 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

3 unchanged sentences

Total antidilutive securities 2,525 2,065 2,518 1,996

Stock options excluded from the calculations of diluted net loss per share have a per share exercise price ranging from $ 7.93 to $ 25.16 for the six months ended June 30, 2024.

Stock options excluded from the calculations of diluted net loss per share have a per share exercise price ranging from $ 7.93 to $ 25.16 for the three and nine months ended September 30, 2024.

Warrants excluded from the calculation of diluted net loss per share have a per share exercise price of $ 11.03 (see Note 15).

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

4 unchanged sentences

Restricted Stock

The following table presents the status of unvested restricted stock awards as of June 30, 2024, and activity during the six months then ended.

The following table presents the status of unvested restricted stock awards as of September 30, 2024, and activity during the nine months then ended.

Shares Weighted Average Grant-Date

3 unchanged sentences

Forfeited ( 221 ) 2.13

Unvested at June 30, 2024 2,533 $ 2.18

During the six months ended June 30, 2024, we granted 374,000 shares of restricted stock to non-executive directors, officers and certain other employees.

Unvested at September 30, 2024 2,385 $ 2.18

During the nine months ended September 30, 2024, we granted 390,000 shares of restricted stock to non-executive directors, officers and certain other employees.

The shares of these restricted stock awards vest pro-rata generally over three years for employees and over one year for non-executive directors.

During the six months ended June 30, 2024, we granted 270,000 shares of restricted stock to new executive officers as inducement awards, which vest pro-rata over five years.

Total grant date fair value of restricted stock that vested in the six months ended June 30, 2024, was $ 1.8 million.

During the nine months ended September 30, 2024, we granted 270,000 shares of restricted stock to new executive officers as inducement awards, which vest pro-rata over five years.

Total grant date fair value of restricted stock that vested in the nine months ended September 30, 2024, was $ 1.9 million.

Performance Share Units

Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value.

The following table presents the status of unvested PSUs as of June 30, 2024, and activity during the six months then ended.

The following table presents the status of unvested PSUs as of September 30, 2024, and activity during the nine months then ended.

Nonvested PSU Awards Weighted Average Grant-Date

2 unchanged sentences

Forfeited ( 413 ) 2.26

Nonvested at June 30, 2024 3,969 $ 1.58

During the six months ended June 30, 2024, we granted 144,000 PSUs to certain executive officers, which vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during the three-year performance period that ends December 31, 2026.

During the six months ended June 30, 2024, we granted 415,000 PSUs to new executive officers as inducement awards.

Nonvested at September 30, 2024 3,966 $ 1.55

During the nine months ended September 30, 2024, we granted 175,000 PSUs to certain executive officers, which vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during the three-year performance period that ends December 31, 2026.

During the nine months ended September 30, 2024, we granted 415,000 PSUs to new executive officers as inducement awards.

These inducement awards cliff-vest after five years and are contingent on the Company’s stock price meeting specified thresholds.

3 unchanged sentences

Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance as of March 31, 2024 $ ( 41,108 ) $ 558 $ — $ ( 40,550 )

Balance as of June 30, 2024 $ ( 44,495 ) $ 109 $ — $ ( 44,386 )

Other comprehensive income (loss) before reclassifications 3,970 — — 3,970

1 unchanged sentence

Net other comprehensive income (loss) 3,970 ( 109 ) — 3,861

Balance as of September 30, 2024 $ ( 40,525 ) $ — $ — $ ( 40,525 )

Balance as of June 30, 2023 $ ( 40,706 ) $ 1,905 $ — $ ( 38,801 )

Balance as of March 31, 2023 $ ( 38,332 ) $ 2,354 $ — $ ( 35,978 )

Other comprehensive income (loss) before reclassifications ( 3,072 ) — — ( 3,072 )

1 unchanged sentence

Net other comprehensive income (loss) ( 3,072 ) ( 449 ) — ( 3,521 )

Balance as of June 30, 2023 $ ( 40,706 ) $ 1,905 $ — $ ( 38,801 )

Balance as of September 30, 2023 $ ( 43,778 ) $ 1,456 $ — $ ( 42,322 )

Foreign Currency Translation Interest rate swap Income taxes (1) Total

3 unchanged sentences

Net other comprehensive income (loss) ( 1,763 ) ( 1,007 ) — ( 2,770 )

Balance as of June 30, 2024 $ ( 44,495 ) $ 109 $ — $ ( 44,386 )

Balance as of September 30, 2024 $ ( 40,525 ) $ — $ — $ ( 40,525 )

Balance as of December 31, 2022 $ ( 40,172 ) $ 3,149 $ ( 97 ) $ ( 37,120 )

2 unchanged sentences

Net other comprehensive income (loss) ( 3,606 ) ( 1,693 ) 97 ( 5,202 )

Balance as of June 30, 2023 $ ( 40,706 ) $ 1,905 $ — $ ( 38,801 )

Balance as of September 30, 2023 $ ( 43,778 ) $ 1,456 $ — $ ( 42,322 )

______________________

9 unchanged sentences

The 2023 Warrants include anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

During the six months ended June 30, 2024, 500,000 of the 2023 Warrants were exercised on a cashless basis, resulting in the issuance of 499,000 shares.

During the nine months ended September 30, 2024, 500,000 of the 2023 Warrants were exercised on a cashless basis, resulting in the issuance of 499,000 shares.

In conjunction with our placement of the Series D Preferred Stock, we issued the 2021 Warrants to purchase up to 1.9 million shares of our common stock.

The 2021 Warrants were exercisable, in full or in part, at an exercise price of $ 0.01 per share,

subject to anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

During the six months ended June 30, 2024, all of the 2021 Warrants were exercised on a cashless basis, resulting in the issuance of 1,896,000 shares.

The 2021 Warrants were exercisable, in full or in part, at an exercise price of $ 0.01 per share, subject to anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

During the nine months ended September 30, 2024, all of the 2021 Warrants were exercised on a cashless basis, resulting in the issuance of 1,896,000 shares.

In conjunction with our placement of Series B Preferred Stock in 2019, we issued detachable warrants to purchase up to 1.5 million shares of our common stock (the “2019 Warrants”).

The 2019 Warrants, are exercisable, in full or in part, at any time prior to December 11, 2026, at an exercise price of $ 11.03 per share, and are subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The following table presents the change in the liability balance of the embedded derivatives during the six months ended June 30, 2024.

The following table presents the change in the liability balance of the embedded derivatives during the nine months ended September 30, 2024.

Balance as of December 31, 2023 $ 16,556

1 unchanged sentence

Settlements ( 11,376 )

Balance as of June 30, 2024 $ 5,010

Balance as of September 30, 2024 $ 6,810

_______________________________

1 unchanged sentence

The following tables show the fair values of the embedded derivatives within the fair value hierarchy.

June 30, 2024 Quoted Prices in Active Markets for Identical Assets

September 30, 2024 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

7 unchanged sentences

The fair value of the 2019 Warrants is determined using a valuation model that utilizes unobservable inputs to determine the probability that the 2019 Warrants will remain outstanding for future periods (Level 3).

The probabilities resulted in a weighted average term of 2.9 years as of June 30, 2024 and December 31, 2023.

The probabilities resulted in a weighted average term of 2.9 years as of September 30, 2024 and December 31, 2023.

Interest Rate Swap

3 unchanged sentences

During the first quarter of 2023, we terminated the 2021 Swap and received cash proceeds of $ 2.5 million, which was the then fair value of the 2021 Swap.

Since the 2021 Swap was an effective cash flow hedge and the forecasted interest payments remain probable of occurring, the gain will be recognized as a reduction to interest expense through the original maturity date of July 31, 2024.

Since the 2021 Swap was an effective cash flow hedge and the forecasted interest payments remain probable of occurring, the gain was recognized as a reduction to interest expense through the original maturity date of July 31, 2024.

The following table presents the effects of the interest rate swap on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

4 unchanged sentences

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, and debt.

As of June 30, 2024 and December 31, 2023, the carrying values of these financial instruments,

except for debt, approximated fair value.

The fair value of our debt was $ 160.4 million and $ 162.2 million, with a carrying amount of $ 158.7 million and $ 153.3 million, as of June 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, the carrying values of these financial instruments, except for debt, approximated fair value.

The fair value of our debt was $ 145.4 million and $ 162.2 million, with a carrying amount of $ 143.6 million and $ 153.3 million, as of September 30, 2024 and December 31, 2023, respectively.

The fair value of debt was calculated by discounting the future cash flows to its present value using prevailing market interest rates for debt with similar creditworthiness, terms and maturities (Level 3).

Subsequent Events

Assets and Liabilities Held for Sale

On July 2, 2024, we completed the sale of our lone plastics injection-molding plant, known as Industrial Molding Corporation (“IMC”), for $ 17.0 million in cash, subject to customary purchase price adjustments.

We received net proceeds of $ 15.4 million after paying certain transaction costs, which was used to repay a portion of the outstanding borrowings under the Term Loan Facility in July 2024.

We determined that the sale of IMC does not represent a strategic shift that will have a major effect on the consolidated results of operations, therefore the results of this business were not classified as discontinued operations and will continue to be reported within our Power Solutions segment.

We determined that the IMC business met the criteria to be classified as held for sale as of June 30, 2024, and therefore have reclassified the related assets and liabilities as held for sale.

The following is a summary of the major categories of assets and liabilities that have been classified as held for sale, and the line item on the Condensed Consolidated Balance Sheet they are reported in:

Financial Statement Line Item June 30, 2024

Accounts receivable, net $ 3,725

Inventories 3,041

Prepaid assets 74

Current assets held for sale Other current assets 6,840

Property, plant and equipment, net 3,248

Intangible assets, net 591

Noncurrent assets held for sale Other non-current assets $ 3,839

Accounts payable $ 1,783

Accrued salaries, wages and benefits 343

Other current liabilities 272

Current liabilities held for sale Other current liabilities $ 2,398

On July 2, 2024, we completed the sale of our Lubbock operations, known as Industrial Molding Corporation (“IMC”), for $ 17.0 million in cash, subject to customary purchase price adjustments.

We received net proceeds of $ 15.4 million after paying certain transaction costs, which was used to repay a portion of the outstanding borrowings under the Term Loan Facility.

We determined that the sale of IMC did not represent a strategic shift that will have a major effect on the consolidated results of operations, therefore the results of this business will continue to be reported within our Power Solutions segment.

The gain on sale of business is recognized in the “Other expense (income), net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

The following is a summary of the net gain recognized in connection with the divestiture:

Net proceeds $ 17,000

Net assets disposed 8,281

Direct costs to sell 1,565

Gain on sale of business $ 7,154

Plant Optimization Activities

During the third quarter of 2024, we took specific steps to consolidate our footprint by identifying a manufacturing facility to close to reduce costs and improve operational efficiency.

In addition, we implemented operational and cost optimization actions to reduce indirect and overhead costs.

We expect the facility closure and organizational changes to be completed in the first half of 2025.

We estimate incurring $ 1.9 million in charges which will be recognized in 2024 and 2025.

Once fully implemented, we expect to recognize annual benefits of approximately $ 2.8 million.

All costs incurred have been recognized in Mobile Solutions segment.

The following is a summary of costs incurred and amounts accrued during the three months ended September 30, 2024.

Severance and employee related Costs associated with exit or disposal activities Total

Balance as of December 31, 2023 $ — $ — $ —

Restructuring costs 893 65 958

Amounts paid ( 388 ) ( 55 ) ( 443 )

Balance as of September 30, 2024 $ 505 $ 10 $ 515

Of the $ 1.0 million incurred during the nine months ended September 30, 2024, $ 0.6 million and are recognized in the “Cost of sales” line and $ 0.3 million in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Subsequent to September 30, 2024, we began identifying certain manufacturing equipment that we plan to discontinue use of and may sell in 2025 as part of our plant optimization activities.

The equipment, which is currently being used in production activities, has a net book value of approximately $ 11.0 million as of September 30, 2024.

The expected proceeds from any planned sales may be significantly lower than the carrying value of the equipment, which would cause us to recognize an impairment in the fourth quarter of 2024.

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

What changed 10-Q

Item 1. Financial Statements