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Item 9A. Controls and Procedures

2024-03-14 compared with 2023-04-14 · 34 added, 35 removed, 192 unchanged (26% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Interim Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Interim Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2022.

Based upon that evaluation, the Company’s Interim Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2022, to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act, and that such information is accumulated and communicated to management, including our Interim Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2023.

Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2023, to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

4 unchanged sentences

Effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

The Company had previously identified and reported material weaknesses in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

A material weakness is a control deficiency, or a combination of control deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In September 2020, the Company settled the investigations by the SEC and USAO into the Company’s past revenue recognition practices.

2 unchanged sentences

In April 2022, the SEC granted a further extension of time until March 31, 2023 to fully comply 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 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 with respect to the administrative order is required.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 based on the criteria established by the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).

As a result of management’s review of the Company’s financial and accounting records and the other work completed by the management team and its advisers, management concluded that, as of December 31, 2022, the Company had remediated the material weaknesses relating to certain internal controls and that the Company’s internal control over financial reporting was operating effectively.

As a result of management’s review of the Company’s financial and accounting records and the other work completed by the management team and its advisers, management concluded that, as of December 31, 2023, that the Company’s internal control over financial reporting was effective.

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

1 unchanged sentence

Changes in Internal Control over Financial Reporting

As previously disclosed under “Item 9A – Controls and Procedures” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, management concluded that its internal control over financial reporting was not effective based on the material weaknesses identified.

As of December 31, 2022, the Company has completed remediation of the following previously reported material weaknesses:

(i) IT Skillset and Competency, (ii) Information Technology, and (iii) Warranty Reserves:

IT Skillset and Competency:

The Company determined the level of technical skills and control-related training in its information technology (“IT”) function was adequate to support the design and implementation of IT general controls (“ITGCs”).

The IT function was reorganized under the leadership of a Chief Information Officer who reports to the Interim Chief Executive Officer.

The Company has continued to experience turnover in its IT functions.

As a result, the Company is continuing to build out the organizational structure and will continue to use contractors until full time employees are in place.

Information Technology:

• The Company has reconstructed its ITGC framework to focus on controls that mitigate key financial reporting risks.

• The Company has designed and implemented controls over access, change management and IT operations to ensure that access rights are restricted to appropriate individuals, and that data integrity is maintained via effective change management controls over system updates and over the transfer of data between systems.

• The Company enhanced procedures to validate the information produced by the entity and end user computing.

• The Company continues to adjust its Enterprise Resource Planning (“ERP”) System to work towards further improvement and automation of ITGC’s as well as other business process application controls.

Warranty Reserves:

To reduce the risk of untimely warranty claims processing, the Company implemented improvements to centrally receive and monitor incoming claims including transitioning many customers to the use of the warranty claims submission portal.

The Company also implemented additional controls during the year to provide additional assurance around completeness and accuracy of the warranty data used in the calculation of the warranty reserve.

The Company believes the measures described above have remediated the control deficiencies that led to the previously-identified material weaknesses and have strengthened its internal control over financial reporting.

While the Company has remediated its material weaknesses, it remains committed to maintaining its internal control processes and will continue to monitor and review its financial reporting controls and procedures.

Other than the remediation of the material weaknesses and the remediation efforts described above, there have been no further changes in the Company’s internal control over financial reporting during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

There has been no change in the internal control over financial reporting during the fourth quarter of 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Other Information.

During the three months ended December 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

22 unchanged sentences

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

115 unchanged sentences

8-K 10.1 12/02/2022 001-35944

10.37 Third Amended and Restated Uncommitted Revolving Credit Agreement, dated as of March 24, 2023, among the Company, certain subsidiaries of the Company party thereto, the lenders party thereto and Standard Chartered Bank, as administrative agent.

8-K 10.1 03/30/2023 001-35944

10.38 Third Amended and Restated Shareholder’s Loan Agreement, dated as of March 24, 2023, between the Company and Weichai America Corp.

8-K 10.2 03/30/2023 001-35944

10.39 First Amended and Restated Shareholder’s Loan Agreement, dated as of March 24, 2023, between the Company and Weichai America Corp.

8-K 10.3 03/30/2023 001-35944

10.40 Second Amendment to Strategic Collaboration Agreement, dated as of March 22, 2023, by and between the Company and Weichai Power.

8-K 10.1 03/27/2023 001-35944

10.41 Employment Agreement, dated as of April 24, 2023, between the Company and Constantine Xykis.

8-K 10.1 04/25/2023 001-35944

10.42 Second Amended and Restated Shareholder’s Loan Agreement, dated as of May 12, 2023, between the Company and Weichai America Corp.

8-K 10.1 05/17/2023 001-35944

10.43 Addendum # 12, dated as of June 8, 2023 to Supply Agreement, dated as of December 11, 2007, by and between Power Solutions International, Inc.

and Doosan Infracore Co., Ltd., as amended.

8-K 10.1 06/13/2023 001-35944

10.44 Second Amended and Restated Shareholder’s Loan Agreement, dated as of November 29, 2023, between the Company and Weichai America Corp.

8-K 10.1 12/06/2023 001-35944

21.1 * Subsidiaries of Power Solutions International, Inc.

23.1 * Consent of BDO USA, LLP

31.1 * Certification of Interim Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

23.1 * Consent of BDO USA, P.C.

31.1 * Certification of Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 * Certification of Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 ** Certification of Interim Chief Executive Officer, pursuant to 18 U.S.C.

32.1 ** Certification of Chief Executive Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

16 unchanged sentences

Form 10-K Summary.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 14th day of April, 2023.

POWER SOLUTIONS INTERNATIONAL, INC.

Chief Financial Officer (Principal Financial Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 14th day of April, 2023 .

Signature Title

/s/ Dino Xykis Interim Chief Executive Officer

/s/ Dino Xykis Chief Executive Officer

Dino Xykis (Principal Executive Officer)

3 unchanged sentences

/s/ Shaojun Sun Director

/s/ Lei Lei Director

/s/ Fuzhang Yu Director

/s/ Gengsheng Zhang Director

5 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures