What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-14 compared with 2023-04-14 · 243 added, 287 removed, 779 unchanged (40% of the section changed)

3 unchanged sentences

Consolidated Financial Statements of Power Solutions International, Inc.

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP , Chicago, IL , PCAOB ID# 243 )

Report of Independent Registered Public Accounting Firm ( BDO USA, P.C.

, Chicago, IL , PCAOB ID# 243 )

Consolidated Balance Sheets as of December 31, 2023 and 2022 38

Consolidated Statements of Operations for 2022 and 2021 41

Consolidated Statements of Stockholders’ Equity (Deficit) for 2022 and 2021 42

Consolidated Statements of Income for 2023 and 2022 39

Consolidated Statements of Stockholders’ Deficit for 2023 and 2022 40

Consolidated Statements of Cash Flows for 2023 and 2022 41

6 unchanged sentences

We have audited the accompanying consolidated balance sheets of Power Solutions International, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years then ended and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

20 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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

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

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

The communication of a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accrued Product Warranty

As more fully described in Note 1 to the consolidated financial statements, the Company’s consolidated accrued product warranty balance was $21.6 million as of December 31, 2022.

As described in Note 1 to the consolidated financial statements, the Company’s consolidated accrued product warranty balance was $19.3 million as of December 31, 2023.

The Company offers a standard limited warranty on the workmanship of its products.

1 unchanged sentence

These estimates are established using historical warranty claims information including failure rates, repair costs and timing of failures.

New product launches require a greater use of judgment in developing estimates, until historical experience becomes available.

Previous estimates are adjusted as actual warranty claims data becomes available.

We identified the accrued product warranty liability as a critical audit matter.

Auditing management’s estimates and assumptions to determine the accrued product warranty liability involved especially challenging auditor judgment due to i) the significant judgment by management when determining the accrued product warranty liability estimate;

ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to the significant assumptions, specifically the applicability of historical claims experience including failure rates and repair costs per unit;

and iii) the estimates in frequency and average cost of warranty claims.

We identified the estimation of certain accrued product warranties as a critical audit matter.

The principal consideration for this determination was the significant judgment used by management when determining the accrued product warranty estimates.

Auditing management’s estimates and assumptions to determine certain accrued product warranties involved especially

challenging auditor judgment due to the significant audit effort in performing procedures related to the significant assumptions, specifically the applicability of historical claims experience.

The primary procedures we performed to address this critical audit matter included:

Evaluating the reasonableness of management’s assumptions to estimate the future warranty claims by (i) comparing the current product warranty claims estimates to the prior year estimates, and investigating significant differences and (ii) reviewing recent trends, specific issues, and agreements to evaluate the applicability of the historic claims experience, including failure rates and repair costs per unit, being used in this estimate.

Testing the completeness and accuracy of the underlying historical warranty claims information used to estimate future warranty claims.

Testing the mathematical accuracy of management’s calculation of the product warranty.

/s/ BDO USA, LLP

Evaluating the reasonableness of management’s assumptions to estimate certain future warranty claims by comparing the current product warranty claims estimates to the prior year estimates and investigating significant differences to evaluate the applicability of the historical claims experience.

Testing the completeness and accuracy of certain underlying historical warranty claims information used to estimate future warranty claims.

Testing the mathematical accuracy of management’s calculation of certain accrued product warranties.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2018.

Chicago, Illinois

April 14, 2023

March 14, 2024

POWER SOLUTIONS INTERNATIONAL, INC.

4 unchanged sentences

Restricted cash 3,836 3,604

Accounts receivable, net of allowances of $ 4,308 and $ 3,420 as of December 31, 2022 and December 31, 2021, respectively;

(from related parties $ 2,325 and $ 168 as of December 31, 2022 and December 31, 2021, respectively)

Accounts receivable, net of allowances of $ 5,975 and $ 4,308 as of December 31, 2023 and 2022, respectively;

(from related parties $ 777 and $ 2,325 as of December 31, 2023 and 2022, respectively)

66,979 89,894

4 unchanged sentences

Property, plant and equipment, net 14,928 13,844

Right-of-use assets, net 13,282 13,545

Operating lease right-of-use assets, net 27,145 13,282

Intangible assets, net 3,914 5,660

4 unchanged sentences

Current liabilities:

Accounts payable (to related parties $ 23,358 and $ 12,548 as of December 31, 2022 and December 31, 2021, respectively)

Accounts payable (to related parties $ 24,496 and $ 23,358 as of December 31, 2023 and 2022, respectively)

$ 67,355 $ 76,430

3 unchanged sentences

Operating lease liability, current 3,912 2,894

Other short-term financing (from related parties $ 75,020 and $ 25,000 as of December 31, 2022 and December 31, 2021, respectively)

Other short-term financing (from related parties $ 94,820 and $ 75,020 as of December 31, 2023 and 2022, respectively)

94,820 75,614

Other accrued liabilities (from related parties $ 5,232 and $ 385 as of December 31, 2022 and December 31, 2021, respectively)

Other accrued liabilities (from related parties $ 1,833 and $ 5,232 as of December 31, 2023 and 2022, respectively)

31,999 34,109

1 unchanged sentence

Deferred income taxes 1,478 1,278

Long-term debt, net of current maturities (from related parties $ 4,800 and $ 25,000 as of December 31, 2022 and December 31, 2021, respectively)

Long-term debt, net of current maturities (from related parties $ 0 and $ 4,800 as of December 31, 2023 and 2022, respectively)

Finance lease liability, long-term 94 170

3 unchanged sentences

TOTAL LIABILITIES $ 288,220 $ 350,285

Commitments and Contingencies (Note 10)

STOCKHOLDERS’ DEFICIT

4 unchanged sentences

50,000 shares authorized;

23,117 and 23,117 shares issued;

22,951 and 22,926 shares outstanding at December 31, 2022 and December 31, 2021, respectively

23,117 shares issued;

22,968 and 22,951 shares outstanding at December 31, 2023 and 2022, respectively

Additional paid-in capital 157,770 157,673

Accumulated deficit ( 160,790 ) ( 187,096 )

Treasury stock, at cost, 166 and 191 shares at December 31, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 149 and 166 shares at December 31, 2023 and 2022, respectively

( 920 ) ( 972 )

3 unchanged sentences

POWER SOLUTIONS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts) For the Year Ended December 31,

(from related parties $ 2,749 and $ 493 for the year ended December 31, 2022 and December 31, 2021, respectively)

(from related parties $ 2,449 and $ 2,749 for the year ended December 31, 2023 and 2022, respectively)

$ 458,973 $ 481,333

Cost of sales

(from related parties $ 2,262 and $ 346 for the year ended December 31, 2022 and December 31, 2021, respectively)

(from related parties $ 1,790 and $ 2,262 for the year ended December 31, 2023 and 2022, respectively)

353,109 392,770

1 unchanged sentence

Operating expenses:

Research, development and engineering expenses 18,896 22,435

Research and development expenses 19,457 18,896

Selling, general and administrative expenses 40,386 42,941

1 unchanged sentence

Total operating expenses 61,589 63,961

Operating income (loss) 24,602 ( 41,570 )

Other expense, net:

Interest expense 13,028 7,307

Other expense, net — 1

Total other expense, net 13,028 7,308

Income (Loss) before income taxes 11,574 ( 48,878 )

Income tax expense (benefit) 304 ( 406 )

Net income (loss) $ 11,270 $ ( 48,472 )

Operating income 44,275 24,602

Interest expense (from related parties $ 7,729 and $ 4,680 for the year ended December 31, 2023 and 2022, respectively)

17,069 13,028

27,206 11,574

Income tax expense 900 304

Net income $ 26,306 $ 11,270

Weighted-average common shares outstanding:

1 unchanged sentence

Diluted 22,973 22,948

Earnings (Loss) per common share:

Earnings per common share:

Basic $ 1.15 $ 0.49

2 unchanged sentences

POWER SOLUTIONS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Stockholders’ Equity (Deficit)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Stockholders’ Deficit

Balance at December 31, 2021 $ 23 $ 157,436 $ ( 198,366 ) $ ( 1,116 ) $ ( 42,023 )

Net loss — — ( 48,472 ) — ( 48,472 )

Net income — — 11,270 — 11,270

Stock-based compensation expense — 237 — 148 385

4 unchanged sentences

Common stock issued for stock-based awards, net — — — ( 2 ) ( 2 )

Restricted Stock Awards — ( 105 ) — 105 —

Balance at December 31, 2023 $ 23 $ 157,770 $ ( 160,790 ) $ ( 920 ) $ ( 3,917 )

3 unchanged sentences

(in thousands) For the Year Ended December 31,

Cash used in operating activities

Net income (loss) $ 11,270 $ ( 48,472 )

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

Cash provided by (used in) operating activities

Net income $ 26,306 $ 11,270

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

Amortization of intangible assets 1,746 2,124

3 unchanged sentences

Deferred income taxes 200 189

Provision for losses in accounts receivable 1,668 888

Increase in allowance for inventory obsolescence 1,826 533

Other adjustments, net 229 529

7 unchanged sentences

Other noncurrent liabilities ( 3,254 ) ( 11,506 )

Net cash used in operating activities ( 8,845 ) ( 61,478 )

Net cash provided by (used in) operating activities 70,512 ( 8,845 )

Cash (used in) provided by investing activities

Capital expenditures ( 5,036 ) ( 1,354 )

Return of investment in joint venture — 2,263

Other investing activities, net — 103

Net cash (used in) provided by investing activities ( 1,354 ) 398

Cash provided by financing activities

Repayments of long-term debt and lease liabilities ( 256 ) ( 380 )

Proceeds from debt financings 31,582 51,309

Proceeds from disposal of assets 16 —

Net cash used in investing activities ( 5,020 ) ( 1,354 )

Cash (used in) provided by financing activities

Repayment of debt ( 80,000 ) —

Repayment of long-term debt and lease liabilities ( 215 ) ( 256 )

Proceeds from short-term financings 15,000 31,582

Repayment of short-term financings ( 594 ) ( 1,168 )

1 unchanged sentence

Other financing activities, net ( 2 ) ( 4 )

Net cash provided by financing activities 28,367 46,545

Net increase (decrease) in cash, cash equivalents, and restricted cash 18,168 ( 14,535 )

Net cash (used in) provided by financing activities ( 66,798 ) 28,367

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 1,306 ) 18,168

Cash, cash equivalents, and restricted cash at beginning of the year 27,900 9,732

23 unchanged sentences

Stock Ownership and Control

In April 2019, Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

(HK2338, SZ000338) (herein collectively referred to as “Weichai”), exercised the stock purchase warrant (the “Weichai Warrant”) and owns a majority of the outstanding shares of the Company’s Common Stock.

Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

(HK2338, SZ000338) (herein collectively referred to as “Weichai”), owns a majority of the outstanding shares of the Company’s Common Stock.

As a result, Weichai is able to exercise control over matters requiring stockholders’ approval, including the election of the directors, amendment of the Company’s Charter and approval of significant corporate transactions.

This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.

Weichai also entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company upon execution of the SPA.

Weichai also entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company upon execution of the share purchase agreement (the “SPA”).

The Rights Agreement provides Weichai with representation on the Company’s Board and management representation rights.

3 unchanged sentences

Significant uncertainties exist about the Company’s ability to refinance, extend, or repay its outstanding indebtedness, maintain sufficient liquidity to fund its business activities, and maintain compliance with the covenants and other requirements under the Company’s debt arrangements.

As of December 31, 2022, the Company’s total outstanding debt obligations under the Third Amended and Restated Credit Agreement, the second Amended Shareholder’s Loan Agreement, the third Amended Shareholder's Loan Agreement , the fourth Amended Shareholder's Loan Agreement and for finance leases and other debt were $ 211.0 million in the aggregate, and its cash and cash equivalents were $ 24.3 million.

As of December 31, 2023, the Company’s total outstanding debt obligations under the Third Amended and Restated Uncommitted Revolving Credit Agreement (the "Credit Agreement")” , the second amended Shareholder’s Loan Agreement (the “second Amended Shareholder’s Loan Agreement”) , the third amended Shareholder’s Loan Agreement (the “third Amended Shareholder’s Loan Agreement”) , the fourth amended Shareholder’s Loan Agreement (the “fourth Amended Shareholder’s Loan Agreement”) and for finance leases and other debt were $ 145.2 million in the aggregate, and its cash and cash equivalents were $ 22.8 million.

Debt , for further information regarding the terms and conditions of the Company’s debt agreements.

Without additional financing, the Company anticipates that it will not have sufficient cash and cash equivalents to repay amounts owing under its existing debt arrangements as they become due.

In order to provide the Company with a more

permanent source of liquidity, management plans to seek an extension and amendment and/or replacement of its existing debt agreements or seek additional liquidity from its current or other lenders before the maturity dates in 2023 and 2024.

Without additional financing, the Company anticipates that it will not have sufficient cash and cash equivalents to repay amounts owed under its existing debt arrangements as they become due.

In order to provide the Company with a more permanent source of liquidity, management plans to seek an extension and amendment and/or replacement of its existing debt agreements or seek additional liquidity from its current or other lenders before the maturity dates in 2024.

There can be no assurance that the Company’s management will be able to successfully complete an extension and amendment of its existing debt agreements or obtain new financing on acceptable terms, when required or if at all.

5 unchanged sentences

Macroeconomic volatility and uncertainties further increase the potential for continued supply chain disruptions, economic uncertainty, and unfavorable oil and gas market dynamics which may continue to have a material adverse impact on the results of operations, financial position and liquidity of the Company.

Lastly, in addition to incurring higher total debt levels during 2022, the Company’s debt is tied to LIBOR and SOFR, both of which have seen significant increases during the year.

As a result of these factors, the Company’s interest expense has increased and is subject to further increases.

Lastly, national inflationary pressures have continued to cause interest rates to remain elevated.

As a result, the Company’s interest expense has increased and is subject to further increases.

Accordingly, the above challenges may continue to have a material adverse impact on the Company’s future results of operations, financial position, and liquidity.

The Company’s management has concluded that, due to uncertainties surrounding the Company’s future ability to refinance, extend and amend, or repay its outstanding indebtedness under its existing debt arrangements, maintain sufficient liquidity to fund its business activities, and maintain compliance with the covenants and other requirements under the Third Amended and Restated Credit Agreement and other outstanding debt, in the future, substantial doubt exists as to its ability to continue as a going concern within one year after the date that these financial statements are issued.

The Company’s management has concluded that, due to uncertainties surrounding the Company’s future ability to refinance, extend and amend, or repay its outstanding indebtedness under its existing debt arrangements, maintain sufficient liquidity to fund its business activities, and maintain compliance with the covenants and other requirements under the Credit Agreement and other outstanding debt, in the future, substantial doubt exists as to its ability to continue as a going concern within one year after the date that these financial statements are issued.

The Company’s plans to alleviate the substantial doubt about its ability to continue as a going concern may not be successful, and it may be forced to limit its business activities or be unable to continue as a going concern, which would have a material adverse effect on its results of operations and financial condition.

The consolidated financial statements included herein have been prepared assuming that the Company will continue as a going concern and contemplating the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company’s ability to continue as a going concern is dependent on generating profitable operating results, having sufficient liquidity, maintaining compliance with the covenants and other requirements under the Third Amended and Restated Credit Agreement and other outstanding debt, in the future, and extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements.

The Company’s ability to continue as a going concern is dependent on generating profitable operating results, having sufficient liquidity, maintaining compliance with the covenants and other requirements under the Credit Agreement and other outstanding debt, in the future, and extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements.

Basis of Presentation and Consolidation

8 unchanged sentences

A single management team reports to the CODM, who manages the entire business.

The Company’s CODM reviews consolidated statements of operations to make decisions, allocate resources and assess performance, and the CODM does not evaluate the profit or loss from any separate geography or product line.

The Company’s CODM reviews consolidated statements of income to make decisions, allocate resources and assess performance, and the CODM does not evaluate the profit or loss from any separate geography or product line.

Concentrations

2 unchanged sentences

Customer A 14 % 19 %

Customer B ** 21 %

The following table presents customers individually accounting for more than 10% of the Company’s trade accounts receivable:

1 unchanged sentence

Customer A 12 % 30 %

Customer B 13 % **

The following table presents suppliers individually accounting for more than 10% of the Company’s purchases:

For the Year Ended December 31,

Supplier A 13 % **

Supplier B 14 % **

4 unchanged sentences

GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, stock-based compensation, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, and determination of useful lives of long-lived assets.

Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, stock-based compensation, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, income tax valuation allowances and determination of useful lives of long-lived assets.

Actual results could materially differ from those estimates.

7 unchanged sentences

The liability is included within Noncurrent Contract Liabilities on the Consolidated Balance Sheet.

Research and Development

R&D expenses are expensed when incurred.

R&D expenses consist primarily of wages, materials, testing and consulting related to the development of new engines, parts and applications.

These costs were $ 18.9 million and $ 21.4 million for 2022 and 2021, respectively.

From time to time, the Company enters into agreements with its customers to fund a portion of the research, development and engineering costs of a particular project.

These reimbursements are accounted for as a reduction of the related research, development and engineering expenditure.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

4 unchanged sentences

The Company records uncertain tax positions in accordance with accounting guidance, on the basis of a two-step process whereby (i) it determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority.

Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such

benefits meet a more-likely-than-not threshold.

Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more-likely-than-not threshold.

Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the appropriate taxing authority has completed its examination even though the statute of limitations remains open, or the statute of limitation has expired.

Interest and penalties related to uncertain tax positions are recognized as part of income tax expense and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized.

Accounts Receivable and Allowance for Doubtful Accounts

Interest and penalties related to uncertain tax positions are

recognized as part of income tax expense and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized.

Accounts Receivable and Allowances

Trade accounts receivable represent amounts billed to customers and not yet collected.

Trade accounts receivable are recorded at the invoiced amount, which approximates net recoverable value, and generally do not bear interest.

The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable and is established through a charge to selling, general and administrative expenses.

The allowance is primarily determined based on historical collection experience and reviews of customer creditworthiness.

Trade accounts receivable and the allowance for doubtful accounts are reviewed on a regular basis.

The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable and is established through a charge to selling, general and administrative expenses.

We estimate losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding and the geographic region.

Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms.

Trade accounts receivable and the allowance for credit losses are reviewed on a regular basis.

When necessary, an allowance for the full amount of specific accounts deemed uncollectible is recorded.

Accounts receivable losses are deducted from the allowance and the account balance is written off when the customer receivable is deemed uncollectible.

Accounts receivable losses are deducted from the allowance and the account balance is written off when means of collection have been exhausted and the potential for recovery is considered remote.

Recoveries of previously written off balances are recognized when received.

An allowance associated with anticipated future sales returns is also included in the allowance for doubtful accounts.

An allowance associated with anticipated future sales returns and accrued pricing adjustments are also included in the accounts receivable, net.

The Company’s inventories consist primarily of engines and parts.

45 unchanged sentences

The Company also periodically reassesses the useful lives of its long-lived assets due to advances and changes in technologies.

No impairment losses were recorded during the periods ended December 31, 2023 and 2022.

Goodwill rep resents the excess of the cost of an acquired business over the amounts assigned to the net acquired assets.

13 unchanged sentences

The asset approach estimates the selling price the unit could achieve under assumed market conditions.

The Company used the income and market approaches when determining its estimated fair value as of October 1, 2023 and 2022 .

During the years ended December 31, 2023 and 2022, the Company performed a quantitative assessment and determined that the estimated fair value of the reporting unit exceeded the carrying value;

12 unchanged sentences

* As of December 31, 2023 and 2022 , litigation reserves related to various ongoing legal matters including associated legal fees.

Commitments and Contingencies for further information regarding the various ongoing legal matters.

Warranty Costs

17 unchanged sentences

When collection is reasonably assured, the Company also estimates the amount of warranty claim recoveries to be received from its suppliers.

Warranty costs and recoveries are included in Cost of sales in the Consolidated Statements of Operations.

As of December 31, 2022, included in accounts receivable is approximately $ 1.0 million of reimbursements of warranty costs due from a significant supplier.

Accrued product warranty activities are presented below:

Warranty costs and recoveries are included in Cost of sales in the Consolidated Statements of Income.

As of December 31, 2023 and 2022, included in accounts receivable is approximately $ 1.3 million and $ 1.0 million , respectively, of reimbursements of warranty costs due from a significant supplier.

Accrued product warranty activities included in Other noncurrent liabilities on the Consolidated Balance Sheet are presented below:

(in thousands) For the Year Ended December 31,

7 unchanged sentences

Noncurrent accrued product warranty $ 7,973 $ 8,513

* Warranty costs, net of supplier recoveries , and other adjustments, were $ 6.4 million and $ 22.8 million for the year ended December 31, 2022 and 2021 , respectively.

Supplier recoveries were $ 4.1 million and $ 4.8 million for the year ended December 31, 2022 and 2021 , respectively.

* Warranty costs, net of supplier recoveries , and other adjustments, were $ 13.0 million and $ 6.4 million for the years ended December 31, 2023 and 2022 , respectively.

Supplier recoveries were $ 1.1 million and $ 4.1 million for the years ended December 31, 2023 and 2022 , respectively.

** Changes in estimates for preexisting warranties reflect changes in the Company’s estimate of warranty costs for products sold in prior periods.

Such adjustments typically occur when claims experience deviates from historical and expected trends.

As of December 31, 2022 , the Company recorded a cost for changes in estimates of preexisting warranties of $ 4.6 million, or $ 0.20 per diluted share, for the year ended December 31, 2022 , which includes a favorable experience for preexisting warranties attributable to a contract revision during the quarter ended March 31, 2022, and costs of $ 9.4 million, or $ 0.41 per diluted share, for the year ended December 31, 2021.

For the year December 31, 2023 , the Company recorded a cost for changes in estimates of preexisting warranties of $ 7.6 million, or $ 0.33 per diluted share, and costs of $ 4.6 million, or $ 0.20 per diluted share, for the year ended December 31, 2022, which includes a favorable experience for preexisting warranties attributable to a contract revision executed during the quarter ended March 31, 2022.

Revenue Recognition

1 unchanged sentence

Recently Issued Accounting Pronouncements – Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provided optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The amendment allows entities to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met.

An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination.

Entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met.

The guidance was effective upon issuance and expires after December 31, 2024.

There was no impact on the Company’s Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows or Statement of Stockholders’ Equity (Deficit) since the third Shareholder's Loan Agreement that referenced LIBOR was amended in November 2022 and refers to an alternative reference rate other than LIBOR.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) .

3 unchanged sentences

The new standard is effective for non-public companies, and public business entities that meet the definition of a smaller reporting company as defined by the SEC, for interim and annual periods beginning after December 15, 2022.

The Company will adopt this guidance effective January 1, 2023.

The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

The Company adopted this guidance effective January 1, 2023.

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

Recently Issued Accounting Pronouncements – Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures – Segment Reporting (Topic 280).

The amendments to this standard require public entities to disclose more detailed information about their reportable segments’ significant expenses on an interim and annual basis.

The amendments to this standard do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The amendments to this standard apply to all public entities that are required to report segment information in accordance with Topic 280, Segment Reporting and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company plans to adopt this guidance in its annual reporting for the year ending December 31, 2024 and subsequent interim periods.

The Company is continuing to assess the impact of the amendment to this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures - Income Taxes (Topic 740) .

The amendments to this standard enhance the transparency and decision usefulness of income tax disclosures, primarily related to rate reconciliation and income taxes paid information as well as effectiveness of overall income tax disclosures.

The Company currently plans to adopt this guidance on December 15, 2024 when it becomes effective.

The Company is continuing to assess the impact of the amendment to this standard on its consolidated financial statements.

Revenue Recognition

5 unchanged sentences

• recognition of revenue when, or as, the Company satisfies the performance obligations.

Revenue for the Company is generated from contracts that may include a single performance obligation (generally, a single type of engine) or multiple performance obligations (which may include an engine with aftermarket parts, different types of engines,

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.

4 unchanged sentences

For contracts with multiple performance obligations, the Company allocates the total transaction price to distinct performance obligations based on directly observable data, if available, or the Company’s best estimate of the stand-alone selling price of each distinct performance obligation.

The primary method used to estimate stand-alone selling price is the cost plus a margin approach.

The Company applies significant judgment in order to identify and determine the number of performance obligations, determine the total transaction price, allocate the transaction price to each performance obligation, and determine the appropriate timing of revenue recognition.

The primary methods used to determine stand-alone selling price are directly observable prices and the cost plus a margin approach.

The Company applies judgment in order to identify and determine the number of performance obligations, determine the total transaction price, allocate the transaction price to each performance obligation, and determine the appropriate timing of revenue recognition.

Taxes collected from customers and remitted to governmental authorities are presented on a net basis;

10 unchanged sentences

The Company recognizes revenue related to extended warranty programs based on the passage of time over the extended warranty period.

For both years ended December 31, 2022 and 2021, the Company recognized revenue of $ 47.3 million and $ 40.6 million, respectively, for products manufactured and services provided over time.

For the years ended December 31, 2023 and 2022, the Company recognized revenue of $ 73.4 million and $ 47.3 million, respectively, for products manufactured and services provided over time.

Shipping and handling costs.

The Company accounts for shipping and handling costs as fulfillment costs which are recorded in Cost of sales in the Consolidated Statements of Operations.

The Company accounts for shipping and handling costs as fulfillment costs which are recorded in Cost of sales in the Consolidated Statements of Income.

This includes shipping and handling costs incurred after control of the asset has transferred to the customer as the Company has elected the practical expedient in ASC 606.

1 unchanged sentence

agent considerations.

For transactions that involve more than one party when providing goods or services to a customer, the Company determines whether it is the principal or agent in these transactions by evaluating the nature of its promise to the customer.

From time to time, the Company may involve more than one party when providing goods or services to a customer, the Company determines whether it is the principal or agent in these transactions by evaluating the nature of its promise to the customer.

The analysis of whether the Company is a principal or an agent in a transaction is performed for each good or services provided to the customer.

5 unchanged sentences

If the Company determines that is an agent in the transaction, it recognizes revenue at the net amount of the transaction price.

The Company had two significant supply agreements with multiple performance obligations related to the sale of 6.0L engines in 2021.

As a result of the Weichai ownership change in April 2019 (see additional discussion in Note 3.

Weichai Transactions) , the Company was required to be compliant with Phase 1 GHG standards beginning January 1, 2020 for its 6.0L

and 8.8L engines.

In order to address the impact of the transition of its emission regulation requirements in 2021, the Company licensed its technology to a third-party small manufacturer to produce and certify the 6.0L gasoline engine and utilized averaging, banking, and trading compliance provisions for the sale of its 8.8L gasoline engine.

As a result of outsourcing the production of the 6.0L gasoline engine, the Company considered whether it was the principal or agent in the transactions with its customers related to the 6.0L gasoline engine.

With the exception of certain parts sold directly to customers, the Company concluded that it remained the principal in the transactions.

The Company ended the program to outsource and sell the certified 6.0L engines effective December 31, 2021 and recognized revenue related to contracts with customers for 6.0L engines of $ 103.7 million in 2021.

Variable consideration .

2 unchanged sentences

Variable consideration is recorded as a reduction of revenue to the extent that it is probable that there will not be significant changes to the Company’s estimate of variable consideration when any uncertainties are settled.

Costs to obtain and fulfill a contract.

Costs to obtain a contract.

The Company has elected the practical expedient to recognize incremental costs to obtain a contract (primarily commissions) as expense when incurred since the amortization period of the asset that the Company otherwise would have recognized is one year or less.

18 unchanged sentences

Most of the Company’s contracts are for a period of less than one year;

however, certain long-term manufacturing and extended warranty contracts extend beyond one year.

however, extended warranty contracts extend beyond one year.

The timing of revenue recognition may differ from the time of invoicing to customers and these timing differences result in contract assets, or contract liabilities on the Company’s Consolidated Balance Sheet.

3 unchanged sentences

(in thousands) As of December 31,

2023 2022 2021

Short-term contract assets (included in Prepaid expenses and other current assets )

4 unchanged sentences

( 2,401 ) ( 3,199 ) ( 3,330 )

Net contract liabilities $ ( 1,835 ) $ ( 2,442 )

During the year ended December 31, 2022 and 2021, the Company recognized $ 1.6 million and $ 47.2 million of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of

December 31, 2021 and 2020, respectively.

The decrease in the net contract liabilities from December 31, 2021 to December 31, 2022 is primarily related to the prepayment for 6.0L gasoline engine by a customer under a long-term supply agreement.

At both December 31, 2022 and 2021 the Company had no contract liability related to prepayments of 6.0L gasoline engines.

Net contract assets (liabilities) $ 10,412 $ ( 1,835 ) $ ( 2,442 )

During the years ended December 31, 2023 and 2022, the Company recognized $ 1.4 million and $ 1.6 million of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of December 31, 2022 and 2021, respectively.

Remaining Performance Obligations

The Company has elected the practical expedient to not disclose remaining performance obligations that have expected original durations of one year or less.

For performance obligations that extend beyond one year, the Company had $ 4.6 million of remaining performance obligations as of December 31, 2022 primarily related to a long-term manufacturing contract with a customer and extended warranties.

For performance obligations that extend beyond one year, the Company had $ 3.9 million of remaining performance obligations as of December 31, 2023 primarily related to extended warranties.

The Company expects to recognize revenue related to these remaining performance obligations of approximately $ 1.5 million in 2024, $ 0.5 million in 2025, $ 0.2 million in 2026, $ 1.0 million in 2027, $ 0.6 million in 2028 and $ 0.1 million in 2029 and beyond.

10 unchanged sentences

For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties are recorded on a gross basis in the financial statements.

The Company’s sales to Weichai were $ 0.6 million and $ 0.5 million during 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the Company had outstanding receivables from Weichai of $ 0.4 million and $ 0.2 million , respectively.

The Company purchased $ 6.2 million and $ 13.3 million of inventory from Weichai during 2023 and 2022, respectively.

As of December 31, 2022 and 2021, the Company had outstanding payables to Weichai of $ 23.4 million and $ 12.5 million, respectively.

In January 2022, PSI and Baudouin, a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets.

In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests.

The Company’s sales to Baudouin were $ 2.2 million for the year ended December 31, 2022 .

As of December 31, 2022 and 2021 , the Company had $ 1.9 million and no receivables from Baudouin, respectively.

Refer to the Consolidated Balance Sheet and Statements of Income for detailed related party information.

Property, Plant and Equipment

10 unchanged sentences

The carrying amount of goodwill at both December 31, 2023 and 2022 was $ 29.8 million.

Accumulated impairment losses at both December 31, 2023 and 2022 were $ 11.6 million.

Other Intangible Assets

18 unchanged sentences

The Company’s outstanding debt consisted of the following:

(in thousands) As of December 31,

(in thousands) As of December 31, 2023 As of December 31, 2022

Amount Rate (1)

Maturity Date

Short-term financing:

Revolving credit facility $ 130,000 $ 130,000

Other short-term financing 75,614 25,000

Revolving credit facility * $ 50,000 8.71 % $ 130,000 7.04 % March 22, 2024

Amended Shareholder’s Loan Agreement (second) 25,000 9.44 % 25,000 9.10 % May 20, 2024

Amended Shareholder's Loan Agreement (third) 50,000 9.44 % 50,000 9.01 % November 30, 2024

Amended Shareholder's Loan Agreement (fourth) 19,820 9.41 % — March 31, 2024

Other short-term financing — 614 Various

Total short-term debt $ 144,820 $ 205,614

Long-term debt:

Long-term financing $ 4,800 $ 25,000

Finance leases and other debt $ 619 $ 890

Amended Shareholder's Loan Agreement (fourth) $ — $ 4,800 9.00 % March 31, 2024

Finance leases and other debt 399 ** 619 ** Various

Total long-term debt and finance leases 399 5,419

1 unchanged sentence

Long-term debt $ 184 $ 5,199

* Unamortized financing costs and deferred fees on the Revolving Credit Facility are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

* Unamortized financing costs and deferred fees on the revolving credit facility are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet.

Unamortized debt issuance costs, were $ 0.2 million and $ 0.4 million at December 31, 2023 and 2022 , respectively.

** Finance lease obligations are a non-cash financing activity.

(1) Includes the weighted average interest rate.

The Company paid $ 19.9 million and $ 6.1 million in cash for interest in 2023 and 2022, respectively.

Credit Agreement and Shareholders’ Loan Agreements

On March 25, 2022, the Company amended and restated its $ 130.0 million uncommitted senior secured revolving credit agreement with Standard Chartered by entering into the Second Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement extends the maturity date of loans outstanding under its previous credit facility to the earlier of March 24, 2023 or the demand of Standard Chartered.

The Second Amended and Restated Credit Agreement is subject to customary events of default and covenants, as well as financial covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants, as further defined in the Second Amended and Restated Credit Agreement, required only for the second and third quarters of 2022.

The Company was in compliance with these financial covenants for the second and third quarter of 2022.

Borrowings under the Second Amended and Restated Credit Agreement will incur interest at either the alternate base rate or the SOFR plus 2.95 % per annum .

The Second Amended and Restated Credit Agreement continues to be secured by substantially all of the Company’s assets and provides Standard Chartered the right to demand payment of any and all of the outstanding borrowings and other amounts owed under the Second Amended and Restated Credit Agreement at any point in time prior to the maturity date at Standard Chartered’s discretion.

Furthermore, the Second Amended and Restated Credit Agreement grants Standard Chartered a power of attorney to submit a borrowing request to Weichai under the first Amended Shareholder's Loan Agreement (see discussion below) if the Company did not submit a borrowing request to Weichai within five business days of receiving a request from Standard Chartered to submit said borrowing request.

As of December 31, 2022 , the Company had $ 130.0 million outstanding under the Amended and Restated Credit Agreement.

In connection with the Second Amended and Restated Credit Agreement, on March 25, 2022, the Company also amended two of its shareholder’s loan agreements with Weichai, to among other things, extend the maturities thereof.

The first Amended Shareholder's Loan Agreement continues to provide the Company with a $ 130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the Second Amended and Restated Credit Agreement if the Company is unable to pay such borrowings.

The second Amended Shareholder’s Loan Agreement continues to provide the Company with a $ 25.0 million subordinated loan at the discretion of Weichai.

The maturity of the first Amended Shareholder's Loan Agreement was extended to April 24, 2023 and the maturity of the second Amended Shareholder’s Loan Agreement was extended to May 20, 2023.

The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the Second Amended and Restated Credit Agreement.

As of December 31, 2022 , there were no borrowings under the first Amended Shareholder's Loan Agreement and $ 25.0 million under the second Amended Shareholder’s Loan Agreement .

The Company is also party to the third Shareholder's Loan Agreement with Weichai, which was entered into on December 10, 2021.

The third Shareholder's Loan Agreement provides the Company with a $ 50.0 million uncommitted facility that is subordinated to the Third Amended and Restated Credit Agreement and any borrowing requests made under the third Shareholder's Loan Agreement are subject to Weichai’s discretionary approval.

Borrowings under the third Shareholder's Loan Agreement will incur interest at the applicable SOFR, plus 4.65 % per annum and can be used for general corporate purposes, except for certain legal expenditures which require additional approval from Weichai.

Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.65 % per annum.

If the interest rate for any loan is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1 %.

Shareholder's Loan Agreement was amended on November 29, 2022 and expires on November 30, 2023 with any outstanding principal and accrued interest due upon maturity.

As of December 31, 2022 , the Company had $ 50.0 million outstanding under the third Shareholder's Loan Agreement .

On April 20, 2022, the Company entered into the fourth Shareholder's Loan Agreement (the "fourth Shareholder's Loan Agreement") with Weichai.

The fourth Shareholder's Loan Agreement which matures on March 31, 2023, provides the Company with access to up to $ 30.0 million of credit at the discretion of Weichai to supplement the Company’s working capital.

The fourth Shareholder's Loan Agreement is subordinated in all respects to the Third Amended and Restated Credit Agreement.

Borrowings under the first Amended Shareholder's Loan Agreement , the second Amended Shareholder’s Loan Agreement and the fourth Shareholder's Loan Agreement will incur interest at the applicable SOFR, plus 4.65 % per annum.

Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.65 % per annum.

If the interest rate for any loan is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1 %.

As of December 31, 2022 , the Company had $ 4.8 million outstanding under the fourth Shareholder's Loan Agreement .

As of December 31, 2022 , the Company’s total outstanding debt obligations under the Third Amended and Restated Credit Agreement, the second Amended Shareholder’s Loan Agreement , the third Amended Shareholder's Loan Agreement , the fourth Amended Shareholder's Loan Agreement and for finance leases and other debt were $ 211.0 million in the aggregate, and its cash and cash equivalents were $ 24.3 million .

The Company's total accrued interest for all shareholder loans was $ 5.3 million and $ 0.6 million as of December 31, 2022 and December 31, 2021, respectively.

Accrued interest is included within Other Accrued Liabilities on the Consolidated Balance Sheet.

Credit Agreement and Shareholder’s Loan Agreements

On March 24, 2023, the Company amended and restated its $ 130.0 million Second Amended and Restated Uncommitted Revolving Credit Agreement with Standard Chartered.

The Third Amended and Restated Credit Agreement extends the maturity date of loans outstanding under its previous credit facility to the earlier of March 22, 2024 or the demand of Standard Chartered.

The Third Amended and Restated Uncommitted Revolving Credit Agreement is subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the second and third quarters of 2023.

Borrowings under the Third Amended and Restated Credit Agreement will incur interest at either the alternate base rate or the SOFR plus 3.35 % per annum.

In addition, the Company paid fees of $ 1.0 million related to the Third Amended and Restated Uncommitted Revolving Credit Agreement, which will be deferred and amortized over the term of the Third Amended and Restated Uncommitted Revolving Credit Agreement.

The Third Amended and Restated Credit Agreement continues to be secured by substantially all of the Company’s assets and contains the same provisions as described above with respect to Standard Chartered’s demand rights and its power of attorney (POA).

As of April 12, 2023, the Company had $ 130.0 million outstanding under the Third Amended and Restated Credit Agreement.

In connection with this Third Amended and Restated Uncommitted Revolving Credit Agreement, on March 24, 2023, the Company also amended two of the four shareholder’s loan agreements with Weichai, to among other things, extend the maturities thereof.

The first Amended Shareholder's Loan Agreement continues to provide the Company with a $ 130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the $ 130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement if the Company is unable to pay such borrowings.

The Credit Agreement extends the maturity date of loans outstanding under its previous credit facility to the earlier of March 22, 2024 or the demand of Standard Chartered.

The Credit Agreement is subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the second and third quarters of 2023.

Borrowings under the Credit Agreement will incur interest at either the alternate base rate or the Secured Overnight Financing Rate (“SOFR”) plus applicable rate of 3.35 % per annum.

In addition, the Company paid fees of $ 1.0 million related to the Credit Agreement which will be deferred and amortized over the term of the Credit Agreement.

The Credit Agreement continues to be secured by substantially all of the Company’s assets and provides Standard Chartered the right to demand payment of any and all of the outstanding borrowings and other amounts owed under the Credit Agreement at any point in time prior to the maturity date at Standard Chartered’s discretion.

The Company made payments totaling $ 80.0 million related to the Credit Agreement with no additional borrowings during 2023.

As of December 31, 2023 , the Company had $ 50.0 million outstanding under the Credit Agreement .

In connection with this Credit Agreement, on March 24, 2023, the Company also amended two of the four shareholder’s loan agreements with Weichai, to among other things, extend the maturities thereof.

The first Amended Shareholder’s Loan Agreement continues to provide the Company with a $ 130.0 million subordinated loan under which Weichai is obligated to advance funds solely for purposes of repaying outstanding borrowings under the $ 130.0 million Credit Agreement if the Company is unable to pay such borrowings.

The fourth Amended Shareholder’s Loan Agreement continues to provide the Company with access to up to $ 30.0 million of credit at the discretion of Weichai.

1 unchanged sentence

Borrowings under the first Amended Shareholder’s Loan Agreement and the fourth Amended Shareholder’s Loan Agreement will bear interest at an annual rate equal to SOFR plus 4.05 % per annum.

Further, if the applicable SOFR rate is negative, the interest rate per annum shall be deemed as 4.05 % per annum.

If the interest rate for any loan is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing

cost plus 1 %.

All of the amended shareholder loan agreements with Weichai are subject to customary events of default and covenants.

The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the $ 130.0 million Credit Agreement.

As of December 31, 2023 , there were no borrowings under the first Amended Shareholder’s Loan Agreement.

On May 12, 2023, the Company amended and extended the maturity of its second Amended Shareholder’s Loan Agreement with Weichai to May 20, 2024 .

The second Amended Shareholder’s Loan Agreement continues to provide the Company with a $ 25.0 million subordinated loan.

Borrowings under the second Amended Shareholder’s Loan Agreement will incur interest at the applicable SOFR rate, plus 4.05 % per annum.

Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.05 % per annum.

If the interest rate for any loan under the second Amended Shareholder’s Loan Agreement is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1 % .

The Company is also party to a third Amended Shareholder’s Loan Agreement with Weichai, which was entered into on December 10, 2021.

The third Amended Shareholder’s Loan Agreement provides the Company with a $ 50.0 million uncommitted facility that is subordinated to the Credit Agreement and any borrowing requests made under the third Amended Shareholder’s Loan Agreement are subject to Weichai’s discretionary approval.

Borrowings under the third Amended Shareholder’s Loan Agreement will incur interest at the applicable SOFR, plus 4.05 % per annum and can be used for general corporate purposes, except for certain legal expenditures which require additional approval from Weichai.

Further, if the applicable term SOFR is negative, the interest rate per annum shall be deemed as 4.05 % per annum.

If the interest rate for any loan is lower than Weichai’s borrowing cost, the interest rate for such loan shall be equal to Weichai’s borrowing cost plus 1 % .

All of the amended shareholder loan agreements with Weichai are subject to customary events of default and covenants.

The Company has covenanted to secure any amounts borrowed under either of the agreements upon payment in full of all amounts outstanding under the $ 130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement.

The following table summarizes the Company’s total outstanding debt obligations under all Credit Agreements and Shareholders’ Loan Agreements:

(in thousands) As of December 31,

Third Amended and Restated Credit Agreement $ 130,000

second Amended Shareholder’s Loan Agreement 50,000

third Amended Shareholder's Loan Agreement 25,000

fourth Amended Shareholder's Loan Agreement 4,820

Other debt 1,213

Total $ 211,033

Borrowings under the third Amended Shareholder’s Loan Agreement can be used for general corporate purposes, except for certain legal expenditures which require additional approval from Weichai.

The third Amended Shareholder’s Loan Agreement was amended on November 29, 2023 and expires on November 30, 2024 with any outstanding principal and accrued interest due upon maturity.

As of December 31, 2023, the Company’s total outstanding debt obligations under the Credit Agreement , its second Amended Shareholder’s Loan Agreement , its third Amended Shareholder’s Loan Agreement , its fourth Amended Shareholder’s Loan Agreement and for finance leases and other debt were $ 145.2 million in the aggregate, and its cash and cash equivalents were $ 22.8 million .

The Company's total accrued interest for all shareholder loans was $ 1.9 million and $ 5.3 million as of December 31, 2023 and 2022 , respectively.

Accrued interest is included within Other Accrued Liabilities on the Consolidated Balance Sheet.

See Item 8., Note 1.

3 unchanged sentences

Year Ending December 31, Maturities of Long-Term Debt

Total $ 5,029

Lease Policies

12 unchanged sentences

The Company has obligations under lease arrangements primarily for facilities, equipment and vehicles.

These leases have original lease periods expiring between April 2023 and July 2034.

The following table summarizes the lease expense by category in the Consolidated Statement of Operations:

These leases have original lease periods expiring between May 2024 and July 2034.

The following table summarizes the lease expense by category in the Consolidated Statements of Income:

(in thousands) For the Year Ended December 31,

4 unchanged sentences

Total $ 8,600 $ 6,757

The following table summarizes the components of lease expense:

The following table summarizes the components of lease expense and income:

(in thousands) For the Year Ended December 31,

7 unchanged sentences

Sublease income ( 619 ) ( 1,062 )

Total lease cost $ 5,695 $ 6,623

Total lease cost, net $ 7,981 $ 5,695

The following table presents supplemental cash flow information related to leases:

7 unchanged sentences

Finance leases — —

As of December 31, 2022 and 2021, the weighted-average remaining lease term for both periods was 5.8 years for operating leases and 3.0 years and 3.4 years for finance leases, respectively.

As of December 31, 2022 and 2021, the weighted-average discount rate for both periods was 7.1 % for operating leases, and 6.6 % and 6.5 % for finance leases, respectively.

As of December 31, 2023 and 2022, t he weighted-average remaining lease term was 6.2 years and 5.8 years for operating leases and 2.2 years and 3.0 years for finance leases, respectively.

As of December 31, 2023 and 2022, the weighted-average discount rate was 7.6 % and 7.1 % for operating leases, and 6.5 % and 6.6 % for finance leases, respectively.

The following table presents supplemental balance sheet information related to leases:

10 unchanged sentences

Total finance lease liabilities

Included in Other noncurrent assets for operating leases and Property, plant and equipment , net for finance leases on the Consolidated Balance Sheets.

Included in Property, plant and equipment , net for finance leases on the Consolidated Balance Sheets.

The following table presents maturity analysis of lease liabilities as of December 31, 2023:

4 unchanged sentences

2026 5,931 17

2026 2,421 17

Thereafter 7,534 —

12 unchanged sentences

Current Assets

Cash and cash equivalents are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.

The Company measures the Revolving Credit Facility and Other financing at original carrying value including accrued interest, net of unamortized deferred financing costs and fees.

The fair value of the revolving credit facility and other financing approximates carrying value, as it consists of short-term variable rate loans.

Cash and cash equivalents (Level 1) are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.

The Company measured its revolving credit facility and other short-term financing at original carrying value.

Unamortized financing costs and deferred f ees of $ 0.2 million and $ 0.4 million as of December 31, 2023 and 2022 , respec tively, on the revolving credit facility are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet.

The fair value of the revolving credit facility and other short-term financing approximated carrying value, as it consisted primarily of short-term variable rate loans.

The Company measures its material debt obligations using Level 2 inputs:

(in thousands) As of December 31, 2023

7 unchanged sentences

Revolving credit facility $ 130,000 $ — $ 130,000 $ —

Unsecured Senior Notes 50,000 — 50,000

Other financing 75,614 — 75,614

Other Financial Assets and Liabilities

In addition to the methods and assumptions used for the financial instruments discussed above, accounts receivable, net, income tax receivable, and accounts payable and certain accrued expenses are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.

In addition to the methods and assumptions used for the financial instruments discussed above, accounts receivable, net, income tax receivable, and accounts payable and certain accrued expenses are measured at carrying value, which approximates fair value (Level 1) because of the short-term maturities of these instruments.

Defined Contribution Plans

For the years ending December 31, 2022 and 2021, the Company incurred plan costs of $ 0.8 million.

The Company sponsors a defined contribution plan for its current employees.

For the years ended December 31, 2023 and 2022, the Company incurred plan costs of $ 1.2 million and $ 0.8 million, respectively.

Commitments and Contingencies

15 unchanged sentences

On April 12, 2021, the SEC granted the Company’s request for an extension of time until March 31, 2022 in which to comply with the requirements of the administrative order to remediate the remaining outstanding material weaknesses.

In April 2022, the SEC granted a further extension of time until March 31, 2023 for the Company to remediate any outstanding material weaknesses in accordance with the administrative order.

Subsequent to the filing of this Form 10-K, the Company will submit documentation to the SEC for its review to assess the Company’s compliance with the administrative order.

In April 2022, the SEC granted a further

extension of time until March 31, 2023 to fully comply with the administrative orde r.

In May 2023, the Company submitted documentation to the SEC for its review to assess the Company’s compliance with the administrative order.

In July 2023, the Company was notified by the SEC that no additional information was required with respect to the administrative order.

Jerome Treadwell v.

15 unchanged sentences

The court also ordered the parties to schedule a settlement conference with the Magistrate Judge in May 2021 which went forward without a settlement being reached.

The stay remains in place pending further guidance from the Court.

As of December 31, 2022 and December 31, 2021, the Company had recorded an estimated liabili ty of $ 2.0 million and $ 0.3 million, respectively , recorded within Other accrued liabilities on the Consolidated Balance Sheet related to the settlement of this matter.

On May 22, 2023, the Company filed its answer to the amended complaint.

As of December 31, 2023 and 2022, the Company had recorded an estimated liabili ty of $ 2.4 million and $ 2.0 million, respectively , recorded within Other accrued liabilities on the Consolidated Balance Sheet related to the potential settlement of this matter.

Mast Powertrain v.

3 unchanged sentences

Mast subsequently clarified its claim for past royalties owed to be approximately $ 4.5 million.

In July 2021, the Company reached a settlement with Mast to resolve past claims for royalties owed for $ 1.5 million which the Company had previously recorded within Selling, general and administrative expenses in the Statement of Operations for the year-ended December 31, 2020 .

The Company fully paid the settlement and had no recognized liability as of December 31, 2022 and $ 0.5 million was outstanding as of December 31, 2021.

In addition, the Company entered into an agreement with Mast under which Mast will provide various technical services.

The Company fully paid the settlement and had no recognized liability as of both December 31, 2023 and 2022.

In September 2023, Mast filed a lawsuit against the Company in the Eastern District of Texas Federal Court, alleging, among other things, damages of approximately $ 6.0 million for fraudulent inducement leading to the 2021 arbitration settlement agreement and breach of said settlement agreement.

As of December 31, 2023 the Company had recorded an estimated liabili ty of $ 0.9 million , recorded within Other accrued liabilities on the Consolidated Balance Sheet related to the potential settlement of this matter.

Gary Winemaster Litigation v.

In August 2021, the Company’s former Chairman of the Board and former Chief Executive Officer and President, Gary Winemaster (“Winemaster”) filed suit in the Court of Chancery of the State of Delaware against the Company and Travelers Casualty and Surety Company of America (“Travelers”) alleging the Company’s breach of its advancement obligations under Winemaster’s indemnification agreement and Travelers’ breach of the side A policy between Traveler’s and the Company of which Winemaster is a beneficiary.

In his complaint, Winemaster is seeking reimbursement under his indemnification agreement in excess of $ 7.2 million of attorney’s fees plus interest incurred by Winemaster in his defense of the Department of Justice (“DOJ”) case, U.S.

In his complaint, Winemaster was seeking reimbursement under his indemnification agreement in excess of $ 7.2 million of attorney’s fees plus interest incurred by Winemaster in his defense of the Department of Justice (“DOJ”) case, U.S.

Winemaster et al.

Since the filing of the complaint, Travelers has paid approximately $ 8.8 million to Winemaster’s attorneys, Latham and Watkins, under the Company’s side A policy to settle existing outstanding attorney’s fees.

Since the filing of the complaint, the Company estimates that Travelers has paid approximately $ 8.8 million to Winemaster’s attorneys, Latham and Watkins, under the Company’s side A policy to settle existing outstanding attorney’s fees.

Travelers is seeking reimbursement from the Company for those advances pursuant to the terms of the side A policy.

The Company is negotiating the amount and payment terms of the reimbursement with Travelers.

In October 2021, the Company and Winemaster entered into a Stipulation and Advancement Order to handle all future attorney’s fees relating to his DOJ and SEC cases, to the extent not reimbursed by Travelers under the side A po licy.

As of December 31, 2022 , the Company has approximately $ 8.8 million accrued for the reimbursement to Travelers recorded within Accounts payable on the Consolidated Balance Sheet.

As of both December 31, 2023 and 2022 , the Company has approximately $ 8.8 million accrued for the reimbursement to Travelers recorded within Accounts payable on the Consolidated Balance Sheet.

Jeffrey Ehlers and Rick Lulloff Litigation

In September 2021 Jeffrey Ehlers and Rick Lulloff (“Lulloff”), former employees of the Company, made demands against the Company for approximately $ 2.4 million and $ 1.2 million, respectively, for alleged wages due and owing under each employee’s employment contract related to “Incentive Bonuses” for revenues generated in the Company’s transportation end market.

In November 2021, Lulloff and Ehlers separately filed complaints against the Company in the Circuit Court of Cook County, Illinois, alleging breach of contract and violations of the Illinois Wage and Payment Collection Act incorporating their claims in the above referenced demand lett er.

In September 2021, Jeffrey Ehlers (“Ehlers”) and Rick Lulloff (“Lulloff”), former employees of the Company, made demands against the Company for approximately $ 2.4 million and $ 1.2 million, respectively, for alleged wages due and owing under

each employee’s employment contract related to “Incentive Bonuses” for revenues generated in the Company’s transportation end market.

In November 2021, Ehlers and Lulloff separately filed complaints against the Company in the Circuit Court of Cook County, Illinois, alleging breach of contract and violations of the Illinois Wage and Payment Collection Act incorporating their claims in the above referenced demand lett er.

The Company filed a notice of removal from the Circuit Court of Cook County, Illinois and has also moved to consolidate the cases, which has been granted by the Court.

In December 2022, the Company reached a settlement with both Jeffrey Ehlers and Rick Lulloff, for $ 0.8 million and $ 0.5 million , respectively.

As of December

31, 2022 , the Company has recorded the aforementioned settlement liabilities within Other accrued liabilities on the Consolidated Balance Sheet and will pay the settlement amounts in installments.

No estimated liability was recorded for the year ended December 31, 2021 .

In December 2022, the Company reached a settlement with both Ehlers and Lulloff, for $ 0.8 million and $ 0.5 million , respectively.

As of December 31, 2022 , the Company recorded the aforementioned settlement liabilities within Other accrued liabilities on the Consolidated Balance Sheet.

As of December 31, 2023, the Company paid the settlement in full to both Ehlers and Lulloff.

Indemnification Agreements

Under the Company’s bylaws and certain indemnification agreements, the Company has obligations to indemnify current and former officers and directors and certain current and former employees.

As a result of cumulative legal fees and settlements previously paid, the Company fully exhausted its primary directors’ and officers’ insurance coverage of $ 30.0 million during the first quarter of 2020.

Additional expenses currently expected to be incurred and that will occur in the future and/or liabilities that may be imposed in connection with actions against certain of the Company’s past directors and officers and certain former employees who are entitled to indemnification will be funded by the Company with its existing cash resources.

The Company accrues for such costs as incurred within Selling, general and administrative expenses in the Company’s Consolidated Statements of Operations.

For the year ended December 31, 2022, the Company incurred $ 0.1 million of costs related to these indemnification obligations and $ 15.7 million for the year ended December 31, 2021.

In June 2020, the Company entered into a new directors’ and officers’ liability insurance policy, which was renewed in June 2021, and again in June 2022.

In June 2020, the Company entered into a new directors’ and officers’ liability insurance policy, which has been renewed annually and expires in July 2024.

The insurance policy includes standard exclusions including for any ongoing or pending litigation such as the previously disclosed investigations by the SEC and USAO.

Other Commitments

At December 31, 2022, the Company had five outstanding letters of credit totaling $ 2.1 million .

At December 31, 2023, the Company had four outstanding letters of credit totaling $ 1.9 million .

The letters of credit primarily serve as collateral for the Company for certain facility leases and insurance policies.

3 unchanged sentences

On July 7, 2022, the Company entered into a revised supply agreement with Doosan, which among other things, removed the Company’s exclusivity to purchase and distribute specified engines within the territory of the United States, Canada and Mexico, and removed the minimum product purchase commitments and related performance penalties imposed on the Company.

The liability was fully settled in 2022.

The Company was also party to a supply agreement with SAME through December 31, 2022 for the exclusive purchase and distribution of engines around the world, with the exception of China (including Hong Kong, Macao and Taiwan), within the forklift and marine markets.

The Company was also party to a supply agreement with SAME which expired effective December 31, 2022, for the exclusive purchase and distribution of engines around the world, with the exception of China (including Hong Kong, Macao and Taiwan), within the forklift market.

The agreement included minimum purchase commitments which has no financial impact or monetary penalties for not meeting minimum purchases.

Income tax expense (benefit) was as follows:

Income tax expense was as follows:

(in thousands) For the Year Ended December 31,

Current tax expense (benefit)

Current tax expense

Federal $ 61 $ 204

State 639 ( 89 )

Total current tax expense (benefit) $ 115 $ ( 435 )

Total current tax expense $ 700 $ 115

Deferred tax expense

2 unchanged sentences

Total deferred tax expense 200 189

Total tax expense (benefit) $ 304 $ ( 406 )

The Company received net cash refunds for income taxes of $ 3.0 million in 2022 and $ 0.1 million in 2021.

A reconciliation between the Company’s effective tax rate on income (loss) before income taxes and the statutory tax rate is as follows:

Total tax expense $ 900 $ 304

The Com pany made net cash payments for income taxes of $ 0.6 million in 2023, while it received net cash refunds for income taxes of $ 3.0 million in 2022.

A reconciliation between the Company’s effective tax ra te on income before income taxes and the statutory tax rate is as follows:

(in thousands) For the Year Ended December 31,

Amount Percent Amount Percent

Income tax expense (benefit) at federal statutory rate $ 2,430 21.0 % $ ( 10,264 ) 21.0 %

Income tax expense at federal statutory rate $ 5,713 21.0 % $ 2,430 21.0 %

State income tax, net of federal benefit 1,486 5.5 % 140 1.2 %

Other permanent differences

22 0.1 % 88 0.7 %

Research and development tax credits

8 unchanged sentences

( 673 ) ( 2.5 ) % ( 1,147 ) ( 9.9 ) %

Stock-based compensation

( 116 ) ( 0.5 ) % 216 1.9 %

216 1.9 % ( 12 ) — %

Income tax expense (benefit) $ 304 2.6 % $ ( 406 ) 0.8 %

For the year ended December 31, 2022, the Company recognized pretax income of $ 11.6 million.

For the year ended December 31, 2021, the Company recognized a pretax loss of $ 48.9 million.

Income tax expense $ 900 3.3 % $ 304 2.6 %

For the years ended December 31, 2023 and 2022, the Company recognized pretax income of $ 27.2 million and $ 11.6 million, respectively.

The Company generates R&D tax credits as a result of its R&D activities, which reduce the Company’s effective income tax rate.

In general, these credits are general business credits and may be carried forward up to 20 years to be offset against future taxable income.

The income tax expense for 2022 is primarily related to the R&D, state credit and valuation allowance against the deferred tax assets.

The income tax expense for 2023 primarily related to federal and state income taxes offset by R&D credits and a reduction in the valuation allowance against deferred tax assets.

Significant components of deferred income tax assets and liabilities consisted of the following:

13 unchanged sentences

163(j) disallowed interest 2,868 1,343

Intangible amortization — 668

Contract liabilities 698 1,057

8 unchanged sentences

Intangible amortization ( 1,006 ) ( 110 )

Tax depreciation in excess of book depreciation on property, plant and equipment ( 2,291 ) ( 2,579 )

Depreciation on property, plant and equipment ( 2,400 ) ( 2,291 )

Total deferred tax liabilities $ ( 10,680 ) $ ( 5,013 )

9 unchanged sentences

As of December 31, 2023, the Company has, on a tax-effected basis, $ 8.4 million in R&D and state tax credit carryforwards which begin to expire in 2024.

The Company has $ 17.5 million and $ 8.1 million of federal and state (tax effected, net of federal tax benefit) net operating loss carryforwards that are available to offset taxable income in the future.

The federal and state net operating loss carryforwards begin to expire in 2037 and 2026, respectively.

The Company has $ 10.3 million and $ 7.6 million of federal and state (tax effected, net of federal tax benefit) net operating loss carryforwards, respectively, that are available to offset taxable income in the future.

The state net operating loss carryforwards begin to expir e in 2026 .

The federal net operating loss carryforwards do not expire.

The change in unrecognized tax benefits excluding interest and penalties were as follows:

21 unchanged sentences

The Company is currently under Illinois income tax audit for tax years 2013, 2014, 2015 and 2016.

Inflation Reduction Act

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law.

The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022.

While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.

Stockholders’ Equity (Deficit)

Stockholders’ Deficit

Common and Treasury Stock

18 unchanged sentences

To date, the Company’s granted awards have generally been either RSAs or SARs.

SAR awards entitle the recipients to receive, upon exercise, a number of shares of Common Stock equal to (i) the number of shares for which the SAR is being exercised multiplied by the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement), less (ii) the number of shares for which the SAR is being exercised multiplied by the applicable exercise price, divided by (iii) the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement).

SAR awards are typically share settled except for certain executives which are settled in cash.

Share settlement entitles the recipients to receive, upon exercise, a number of shares of Common Stock equal to (i) the number of shares for which the SAR is being exercised multiplied by the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement), less (ii) the number of shares for which the SAR is being exercised multiplied by the applicable exercise price, divided by (iii) the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement).

The exercised SAR is to be settled only in whole shares of Common Stock, and the value of any fractional share of Common Stock is forfeited.

Cash settled awards are recognized in the Consolidated Statement of Financial Position as a liability and adjusted each reporting period for changes in share value until the settlement of the award.

RSA grants represent Common Stock issued subject to forfeiture or other restrictions that will lapse upon satisfaction of specified conditions.

3 unchanged sentences

The Company accounts for forfeitures as they occur rather than apply an estimated forfeiture rate.

Stock-based compensation expense is primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Stock-based compensation expense is primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Income.

RSAs are valued based on the fair value of the common stock at grant date.

7 unchanged sentences

Income tax benefit $ — $ 87

The Company granted 159,217 SAR awards in 2022, and did not grant SAR awards in 2021.

The Company granted 101,663 SAR awards in 2023, and granted 159,217 SAR awards in 2022.

T he SAR awards granted for the year ended December 31, 2023 were all liability classified awards and remained outstanding.

As of December 31, 2023, the weighted-average remaining contractual term for these awards was 9.32 years, the aggregate intrinsic value was zero and the unrecognized compensation expense was $ 0.1 million .

The assumptions used for determining the fair value of the SARs included the following:

5 unchanged sentences

Range of volatilities 88.5 % - 89.4 %

84.6 % - 89.0 %

Expected term 5.00 years 5.00 years

1 unchanged sentence

Weighted-average grant date fair value $ 1.33 $ 1.40

SAR activity consisted of the following:

SAR activity for awards classified in equity consisted of the following:

Number of Shares under SARs Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands)

13 unchanged sentences

The total fair value of SARs that vested during 2023 and 2022 w as $ 0.1 million and $ 0.2 million, respectively.

Unrecognized compensation expense related to SARs as of December 31, 2022 and 2021 was $ 0.1 million and $ 0.1 million, respectively.

The total aggregate intrinsic value of SARs that vested during both 2023 and 2022 w as $ 0.1 million.

Unrecognized compensation expense related to SARs as of both December 31, 2023 and 2022 was $ 0.1 million.

As of December 31, 2023, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately 2.17 years.

4 unchanged sentences

( 26,623 ) 8.83

( 40,886 ) 9.70

Balance as of December 31, 2022 26,623 $ 8.70

( 7,834 ) 3.63

( 18,389 ) 9.63

Balance as of December 31, 2023 15,400 $ 3.91

The total grant date fair value of restricted stock that vested during 2023 and 2022 was $ 0.1 million and $ 0.2 million, respectively.

Unrecognized compensation expense related to RSAs as of December 31, 2022 and 2021 was $ 0.1 million and $ 0.3 million, respectively.

The total aggregate intrinsic value of restricted stock that vested during both 2023 and 2022 was less than $ 0.1 million.

Unrecognized compensation expense related to RSAs as of December 31, 2023 and 2022 was less than $ 0.1 million and $ 0.1 million, respectively.

As of December 31, 2023, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately 0.53 years .

Earnings (Loss) Per Share

The Company computes basic earnings (loss) per share by dividing net income (loss) by the weighted-average common shares outstanding during the year.

Diluted earnings (loss) per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year.

Earnings Per Share

The Company computes basic earnings per share by dividing net income by the weighted-average common shares outstanding during the year.

Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year.

Weighted-average diluted common shares outstanding primarily reflect the additional shares that would be issued upon the assumed exercise of stock options and the assumed vesting of unvested share awards.

The treasury stock method has been used to compute diluted earnings (loss) per share for 2022 and 2021.

The computations of basic and diluted earnings (loss) per share are as follows:

The treasury stock method has been used to compute diluted earnings per share for 2023 and 2022.

The computations of basic and diluted earnings per share are as follows:

(in thousands, except per share basis) For the Year Ended December 31,

Net income (loss) – basic and diluted $ 11,270 $ ( 48,472 )

Shares used in computing net income (loss) per share

Net income – basic and diluted $ 26,306 $ 11,270

Shares used in computing net income per share

Weighted-average common shares outstanding - basic

3 unchanged sentences

22,973 22,948

Earnings (Loss) per common share

Earnings (Loss) per share of common stock – basic $ 0.49 $ ( 2.12 )

Earnings (Loss) per share of common stock – diluted $ 0.49 $ ( 2.12 )

The aggregate number of shares excluded from the diluted earnings (loss) per share calculations because they would have been anti-dilutive were 0.1 million and 0.2 million shares in 2022 and 2021, respectively.

For the twelve months ended December 31, 2022 and 2021, SARs and RSAs were not included in the diluted earnings (loss) per share calculations as they would have been anti-dilutive (1) due to the losses reported in the Consolidated Statements of Operations or (2) the Company’s average stock price was less than the exercise price of the SARs or the grant price of the RSAs.

Earnings per common share

Earnings per share of common stock – basic $ 1.15 $ 0.49

Earnings per share of common stock – diluted $ 1.15 $ 0.49

The aggregate number of shares excluded from the diluted earnings per share calculations because they would have been anti-dilutive were 0.1 million shares in both 2023 and 2022.

For the twelve months ended December 31, 2023 and 2022, SARs and RSAs were not included in the diluted earnings per share calculations as they would have been anti-dilutive because the Company’s average stock price was less than or equal to the exercise price of the SARs or the grant price of the RSAs.

Related Party Transactions

1 unchanged sentence

Weichai Transactions for information regarding the Weichai SPA, Shareholder’s Loan Agreements and Collaboration Agreement .

Transactions with Joint Ventures

MAT-PSI Holdings, LLC

In December 2012, the Company and MAT Holdings, Inc.

(“MAT”) entered into an agreement to create MAT-PSI Holdings, LLC (“MAT-PSI”), which was intended to be a holding company of its 100 % Chinese wholly-owned foreign entity, referred to as Green Power.

The Company invested $ 0.9 million for its 50 % share of MAT-PSI, which was formed to manufacture, assemble and supply natural gas, gas and alternative-fueled power systems to Chinese and Asian forklift customers.

The venture established a production facility in Dalian and also sourced base engines from a local Chinese factory.

As MAT-PSI was not profitable, the venture was closed in 2017;

however, the Company had previously been in dispute with Green Power related to the wind up of the joint venture and outstanding receivables.

On March 29, 2021, the Company executed a settlement agreement with MAT and Green Power which resolved the dispute.

The final settlement agreement did not have a material impact on the Company’s consolidated financial statements.

Doosan-PSI, LLC

In 2015, the Company and Doosan entered into an agreement to form Doosan-PSI, LLC.

The Company invested $ 1.0 million to acquire 50 % of the venture, which was formed to operate in the field of developing, designing, testing, manufacturing, assembling, branding, marketing, selling, distributing and providing support for industrial gas engines and all components and materials required for assembly of the gas engines to the global power generation market outside of North America and South Korea.

In the fourth quarter of 2019, Doosan and the Company agreed to wind down and dissolve the joint venture.

In the second quarter of 2021, the Company received a cash distribution from the joint venture of $ 2.2 million as a result of the final wind down and dissolution of the joint venture.

Joint Venture Operating Results

The Company’s investments in joint ventures are accounted for under the equity method of accounting.

The Company had no income or expense from the investment for the twelve months December 31, 2022 as a result of the liquidation of the Joint venture in 2021 and an expense of less than $ 0.1 million for the twelve months ended December 31, 2021.

The joint venture operating results are presented in Other income, net in the Company’s Consolidated Statements of Operations.

Other Related Party Transactions

Commitments and Contingencies for information regarding the Company’s indemnification obligations related to certain former directors and officers of the Company.

Subsequent Events

In March 2023, the Company amended its uncommitted senior secured revolving credit agreement with Standard Chartered and two Shareholder’s Loan agreements with Weichai which extends maturity dates to 2024.

An amendment also changed approximately $ 4.8 million short-term classification to long-term classification which has been reflected in the consolidated balance sheet for the year ended December 31, 2022.

In addition, the Company amended the Weichai Collaboration Arrangement which extends the maturity date to March 2026.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

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 8. Financial Statements and Supplementary Data