What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-24 compared with 2024-03-14 · 288 added, 200 removed, 822 unchanged (37% of the section changed)

7 unchanged sentences

Consolidated Statements of Income for 2024 and 2023 38

Consolidated Statements of Stockholders’ Deficit for 2023 and 2022 40

Consolidated Statements of Stockholders’ Equity (Deficit) for 2024 and 2023 39

Consolidated Statements of Cash Flows for 2024 and 2023 40

6 unchanged sentences

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

(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”).

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, 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, 2024 and 2023, 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.

1 unchanged sentence

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, 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.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company will not have sufficient cash and cash equivalents to repay amounts owed under its existing debt arrangements as they become due in 2025 without additional financing and uncertainties exist about the Company’s ability to refinance, amend or extend these debt arrangements.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

16 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 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.

(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 the 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

9 unchanged sentences

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

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.

Evaluating 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.

15 unchanged sentences

Inventories, net 93,872 84,947

Prepaid expenses and other current assets 26,312 16,364

Prepaid expenses 6,396 8,518

Contract assets 21,462 15,554

Other current assets 4,170 2,240

Total current assets 254,335 205,382

5 unchanged sentences

TOTAL ASSETS $ 328,182 $ 284,303

LIABILITIES AND STOCKHOLDERS’ DEFICIT

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

11 unchanged sentences

Deferred income taxes 1,568 1,478

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

Long-term debt, net of current maturities 38 90

Finance lease liability, long-term 16 94

4 unchanged sentences

Commitments and Contingencies (Note 10)

STOCKHOLDERS’ DEFICIT

Preferred stock – $ 0.001 par value.

Shares authorized:

No shares issued and outstanding at all dates.

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock – $ 0.001 par value;

6 unchanged sentences

( 823 ) ( 920 )

TOTAL STOCKHOLDERS’ DEFICIT ( 3,917 ) ( 30,372 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $ 284,303 $ 319,913

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) 65,250 ( 3,917 )

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 328,182 $ 284,303

See Notes to Consolidated Financial Statements

16 unchanged sentences

11,443 17,069

27,206 11,574

Income before income taxes 70,201 27,206

Income tax expense 922 900

8 unchanged sentences

POWER SOLUTIONS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

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

Balance at December 31, 2022 $ 23 $ 157,673 $ ( 187,096 ) $ ( 972 ) $ ( 30,372 )

2 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 )

Net income — — 69,279 — 69,279

Stock Appreciation Rights (“SAR”) issued — ( 187 ) — 187 —

Stock-based compensation expense — 89 — — 89

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

Tax benefit from exercise of stock based compensation — — — ( 201 ) ( 201 )

Restricted Stock Awards — ( 111 ) — 111 —

4 unchanged sentences

(in thousands) For the Year Ended December 31,

Cash provided by (used in) operating activities

CASH FLOWS FROM OPERATING ACTIVITIES

Net income $ 69,279 $ 26,306

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

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

Amortization of intangible assets 1,459 1,746

Depreciation 3,740 3,854

Noncash lease expense 5,009 4,185

Stock-based compensation expense 89 151

1 unchanged sentence

Deferred income taxes 90 200

Provision for losses in accounts receivable 1,668 888

Increase in allowance for inventory obsolescence 1,826 533

(Credit) Provision for losses in accounts receivable ( 4,086 ) 1,668

Increase in allowance for inventory obsolescence, net 2,405 1,826

Other adjustments, net 40 229

1 unchanged sentence

Accounts receivable 2,117 21,248

Inventory 33,787 21,098

Prepaid expenses, right-of-use assets and other assets ( 7,043 ) ( 4,251 )

Inventories ( 10,557 ) 33,787

Prepaid expenses 2,241 3,530

Contract assets ( 5,908 ) ( 11,934 )

Other assets ( 1,631 ) ( 2,824 )

Accounts payable ( 8,856 ) ( 9,237 )

2 unchanged sentences

Other noncurrent liabilities ( 5,121 ) ( 3,254 )

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

Cash (used in) provided by investing activities

Net cash provided by operating activities 62,390 70,512

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures ( 4,559 ) ( 5,036 )

1 unchanged sentence

Net cash used in investing activities ( 4,559 ) ( 5,020 )

Cash (used in) provided by financing activities

Repayment of debt ( 80,000 ) —

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of long-term debt and lease liabilities ( 204 ) ( 215 )

1 unchanged sentence

Repayment of short-term financings ( 124,820 ) ( 80,594 )

Repurchases to settle tax withholding obligations for stock-based compensation awards ( 201 ) —

Payments of deferred financing costs ( 709 ) ( 987 )

Other financing activities, net — ( 2 )

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

Net cash used in financing activities ( 25,934 ) ( 66,798 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 31,897 ( 1,306 )

Cash, cash equivalents, and restricted cash at beginning of the year 26,594 27,900

11 unchanged sentences

Power Solutions International, Inc.

(“Power Solutions,” “PSI” or the “Company”), a Delaware corporation, is a global producer and distributor of a broad range of high-performance, certified, low-emission power systems, including alternative-fueled power systems for original equipment manufacturers (“OEMs”) of off-highway industrial equipment and certain on-road vehicles and large custom-engineered integrated electrical power generation systems.

(“Power Solutions,” “PSI” or the “Company”), a Delaware corporation, is a global producer and distributor of a broad range of high-performance, certified, low-emission power systems, including alternative-fueled power systems for original equipment manufacturers (“OEMs”) of off-highway industrial equipment and large custom-engineered integrated electrical power generation systems.

The Company’s customers include large, industry-leading and multinational organizations.

The Company’s products and services are sold predominantly to customers throughout North America as well as to customers located throughout the Pacific Rim and Europe.

The Company’s power systems are highly engineered, comprehensive systems which, through the Company’s technologically sophisticated development and manufacturing processes, including its in-house design, prototyping, testing and engineering capabilities and its analysis and determination of the specific components to be integrated into a given power system (driven in large part by emission standards and cost considerations), allow the Company to provide its customers with power systems customized to meet specific OEM application requirements, other technical customers’ specifications and requirements imposed by environmental regulatory bodies.

The Company’s power systems are highly engineered, comprehensive systems which, through the Company’s technologically sophisticated development and manufacturing processes, including its in-house design, prototyping, testing and engineering capabilities and its analysis and determination of the specific components to be integrated into a given power system (driven in large part by emission standards and cost considerations), allow the Company to provide its customers with power systems customized to meet specific OEM application requirements, other customers’ technical specifications and requirements imposed by environmental regulatory bodies.

The Company’s power system configurations range from a basic engine integrated with appropriate fuel system components to completely packaged power systems that include any combination of cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes and other assembled componentry.

8 unchanged sentences

(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.

As a result, Weichai is able to exercise control over matters requiring stockholders’ approval, including the election of directors, amendment of the Company’s Certificate of Incorporation (the “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 share purchase agreement (the “SPA”).

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

Weichai has entered into an Investor Rights Agreement (the “Rights Agreement”).

The Rights Agreement provides Weichai with representation on the Company’s Board of Directors (the “Board”) and management representation rights.

Weichai currently has four representatives on the Board, which constitutes the majority of the directors serving on the Board.

According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the NASDAQ Stock Market (“NASDAQ”) Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the NASDAQ Listing Rules of Rules 5605(b), (d) and (e).

According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the Nasdaq Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the Nasdaq Listing Rules from Rules 5605(b), (d) and (e) to the extent applicable.

Going Concern Considerations

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, 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.

For the year ended December 31, 2024 , the Company reported net income of $ 69.3 million and generated $ 62.4 million in cash flow from operating activities.

In August 2024, the Company refinanced its debt through a new Revolving Credit Agreement with three banks.

Additionally, the Company entered into a new Shareholder’s Loan Agreement (the “SLA”) with Weichai to replace all existing Shareholder Loan Agreements.

The new Revolving Credit Agreement and the SLA mature on August 30, 2025 and August 31, 2025, respectively, and have borrowing capacity of $ 120.0 million and $ 105.0 million, respectively.

As of December 31, 2024, t he Company held $ 55.3 million in cash and cash equivalents and its short-term debt obligations under the new Revolving Credit Agreement and SLA totaled $ 95.0 million and $ 25.0 million, respectively.

While the Company has achieved profitability and generated positive cash flows from operating activities in 2024, uncertainties exist about the Company’s ability to refinance, amend or extend its outstanding indebtedness .

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

Due to these uncertainties, the Company’s management has concluded that, 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 extending and amending, refinancing or repaying the indebtedness outstanding under the Company’s existing debt arrangements.

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.

2 unchanged sentences

These consolidated financial statements do not include any adjustments that might result from the outcome of the Company’s efforts to address these issues.

Furthermore, if the Company cannot raise capital on acceptable terms, it may not, among other things, be able to do the following:

• continue to expand the Company’s research and product investments and sales and marketing organization;

• continue to fund and expand operations both organically and through acquisitions;

• respond to competitive pressures or unanticipated working capital requirements.

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, 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 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 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

4 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The Company operates as one business and geographic operating segment.

Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker (“CODM”).

The Company’s CODM is its principal executive officer, who decides how to allocate resources and assess performance.

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

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 %

Customer B 11 % **

Customer C 11 % **

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

2 unchanged sentences

Customer B ** 13 %

Customer D 15 % — %

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

2 unchanged sentences

Supplier B 16 % 14 %

Supplier C ** 10 %

** Less than 10% of the total

2 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, income tax valuation allowances and determination of useful lives of long-lived assets.

impairment, income tax valuation allowances and determination of useful lives of long-lived assets.

Actual results could materially differ from those estimates.

15 unchanged sentences

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.

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

10 unchanged sentences

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

Engines are valued at the lower of cost plus estimated freight-in or net realizable value.

Parts are valued at the lower of cost or net realizable value.

Engines are valued at the lower of cost including estimated freight-in or net realizable value.

Parts are valued at the lower of cost or net realizable value, except for integral parts provided by customers for installation on custom ordered engines.

Such parts are accounted for as noncash consideration which is valued at fair value.

Net realizable value approximates replacement cost.

1 unchanged sentence

It is the Company’s policy to review inventories on a continuing basis for obsolete, excess and slow-moving items and to record valuation adjustments for such items in order to eliminate non-recoverable costs from inventory.

Valuation adjustments are recorded in an inventory reserve account and reduce the cost basis of the inventory in the period in which the reduced valuation is determined.

Valuation adjustments are recorded in an inventory reserve account and reduce

the cost basis of the inventory in the period in which the reduced valuation is determined.

Inventory reserves are established based on quantities on hand, usage and sales history, customer orders, projected demand and utilization within a current or future power system.

16 unchanged sentences

Balance at end of period $ 8,135 $ 5,730

As of December 31, 2024, the Company’s inventory include d $ 0.8 million of raw materials provided by its customers for installation in the fulfillment of its performance obligations to these customers and recorded an associated contract liability.

Revenue for further information regarding contract assets and contract liabilities.

Property, Plant and Equipment

14 unchanged sentences

The Company assesses potential impairments to its long-lived assets or asset groups, excluding goodwill which is separately tested for impairment, whenever events indicate that the carrying amount of such assets may not be recoverable.

Long-lived assets are evaluated for impairment by comparing the carrying value of the asset or asset group with the estimated future net undiscounted cash flows expected to result from the use of the asset or asset group, including cash flows from disposition.

Long-lived assets are assessed for impairment by comparing the carrying value of the asset or asset group with the estimated future net undiscounted cash flows expected to result from the use of the asset or asset group, including cash flows from disposition.

If the future net undiscounted cash flows are less than the carrying value, an impairment loss is calculated.

3 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.

No impairment losses were recorded during the years ended December 31, 2024 and 2023.

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

12 unchanged sentences

The market approach, also called the Guideline Public Company Approach, compares the value of an entity to similar publicly traded companies.

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 .

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

The Company used the income and market approaches when determining its estimated fair value as of October 1, 2024 a nd 2023 .

During the years ended December 31, 2024 and 2023, the Company performed a quantitative assessment and determined that the estimated fair value of the reporting unit exceeded the carrying value;

5 unchanged sentences

Accrued product warranty $ 10,233 $ 11,290

Litigation reserves *

Accrued litigation 1

Contract liabilities 10,184 2,741

1 unchanged sentence

Accrued interest expense 1,237 1,913

Stock appreciation rights liability 2

Non-interest bearing note payable 693 —

Other 6,007 3,616

Total $ 44,726 $ 31,999

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

1 As of December 31, 2024 and 2023 , accrued litigation includes accruals related to various ongoing legal matters including associated legal fees.

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

2 The Company has an incentive compensation plan, which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”) , deferred stock and performance units to its executive officers, employees, consultants and Directors.

T he SAR awards granted for the year ended December 31, 2024 and December 31, 2023 were all liability classified awards and remained outstanding.

Stock-Based Compensation for additional information on the SARs and RSAs.

Warranty Costs

18 unchanged sentences

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.

As of December 31, 2024 and 2023, reimbursed warranty costs due from a significant supplier included in accounts receivable are approximately $ 0.2 million and $ 1.3 million , respectively.

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

12 unchanged sentences

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

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.

For the year December 31, 2024 , the Company recorded a cost for changes in estimates of preexisting warranties of $ 1.2 million, or $ 0.05 per diluted share, and costs of $ 7.6 million, or $ 0.33 per diluted share, for the year ended December 31, 2023.

Revenue Recognition

2 unchanged sentences

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

The standard replaces the incurred loss impairment methodology under current U.S.

The standard replaced the incurred loss impairment methodology under current U.S.

GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments.

The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

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 new standard was 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 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) .

2 unchanged sentences

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.

The Company adopted this guidance for the year ending December 31, 2024 and subsequent interim periods.

Segment Reporting for the new disclosures required by the standard.

Recently Issued Accounting Pronouncements – Not Yet Adopted

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.

The amendments to this standard enhances 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 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 annual periods beginning after December 15, 2024, although early adoption is permitted.

The Company currently plans to adopt this guidance effective January 1, 2025.

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

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income:

Expense Disaggregation Disclosures (Subtopic 220-40).

This update requires entities to provide more detailed disclosures about the components of significant expense categories, enhancing the transparency and decision usefulness of financial statements.

The amendments in this update are intended to provide investors with additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods.

The updated standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods thereafter, although early adoption is permitted.

While we anticipate that the adoption of this standard will require additional disclosures, the Company is currently assessing the impact of the amendment to this standard on its consolidated financial statements.

Revenue Recognition

7 unchanged sentences

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.

Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer.

The Company may receive integral parts provided by customers for installation on custom ordered engines.

Such parts are accounted for as noncash consideration since the Company obtains control of the contributed parts and is included in the transaction price at fair value.

The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

22 unchanged sentences

agent considerations.

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.

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.

31 unchanged sentences

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.

Contract assets include amounts related to the contractual right to consideration for completed performance when the right to consideration is conditional.

The Company records contract liabilities when cash payments are received or due in advance of performance.

The fair value of noncash consideration of parts provided by customers is recorded in contract liabilities.

Contract assets and contract liabilities are recognized at the contract level.

1 unchanged sentence

2024 2023 2022

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

Short-term contract assets (included in Contract assets )

$ 21,462 $ 15,554 $ 3,620

5 unchanged sentences

During the years ended December 31, 2024 and 2023, the Company recognized $ 1.7 million and $ 1.4 million of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of December 31, 2023 and 2022, respectively.

D uring the three months ended December 31, 2024 and 2023, the Company recognized $ 0.2 million and $ 0.3 million, respectively, of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balan ce as of September 30, 2024 and 2023 , respectively.

Remaining Performance Obligations

1 unchanged sentence

For performance obligations that extend beyond one year, the Company had $ 2.6 million of remaining performance obligations as of December 31, 2024 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.

The Company expects to recognize revenue related to these remaining performance obligations of approximately $ 0.7 million in 2025, $ 0.2 million in 2026, $ 1.5 million in 2027, $ 0.2 million in 2028, and none in 2029 and beyond.

Weichai Transactions

Weichai Shareholder’s Loan Agreements

The Company is party to four shareholder’s loan agreements with Weichai, including the $ 130.0 million first Amended Shareholder’s Loan Agreement, the $ 25.0 million second Amended Shareholder’s Loan Agreement, the $ 50.0 million third Amended Shareholder’s Loan Agreement, and the $ 30.0 million fourth Amended Shareholder’s Loan Agreement.

The Company is party to a $ 105.0 million SLA with Weichai.

See additional discussion of these debt agreements in Note 6.

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The Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) on March 20, 2017, in order to achieve their respective strategic objectives and enhance the strategic cooperation alliance to share experiences, expertise and resources .

The Collaboration Agreement was extended for three years in March 2020 and was set to expire in March 2023.

On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years .

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

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

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

Subsequent Events for information regarding the purchase agreement with Shandong Weichai Import & Export Corporation, an affiliate of Weichai (“SWIEC”), and manufacture of record (“MOR”) agreement with Weichai.

Property, Plant and Equipment

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Short-term financing:

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

Revolving Credit Agreement 1

$ 95,000 6.52 % $ — — % August 30, 2025

Credit Agreement 2

— — % 50,000 8.71 % March 21, 2025

Shareholder’s Loan Agreement 25,000 8.49 % — — % August 31, 2025

$25 Million Loan Agreement — — % 25,000 9.44 % May 20, 2025

$50 Million Loan Agreement — — % 50,000 9.44 % November 30, 2024

$30 Million Loan Agreement — — % 19,820 9.41 % March 31, 2025

Total short-term debt $ 120,000 $ 144,820

Long-term debt:

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

Finance leases and other debt 184 ** 399 ** Various

2 unchanged sentences

Long-term debt $ 54 $ 184

* 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 Unamortized financing costs and deferred fees on the new Revolving Credit Agreement 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 $ 0.4 million at December 31, 2024.

2 As of December 31, 2023, unamortized financing costs and deferred fees on the Credit Agreement were 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 as of December 31, 2023.

3 Includes the weighted average interest rate.

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

The Company paid $ 12.6 million and $ 19.9 million in cash for interest in 2024 and 2023, respectively.

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 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.

The maturity of the first Amended Shareholder’s Loan Agreement was extended t o April 24, 2024 and the maturity of the fourth Amended Shareholder’s Loan Agreement was extended to March 31, 2024 .

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.

Revolving Credit Agreement and Shareholder’s Loan Agreement

On August 30, 2024, the Company closed on its new Uncommitted Revolving Credit Agreement (the “Revolving Credit Agreement”), with Standard Chartered Bank (“ Standard Chartered ”) and two other lenders.

The Revolving Credit Agreement allows the Company to borrow up to $ 120.0 million and has a maturity date of August 30, 2025 .

The Revolving Credit Agreement is subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the third and fourth quarters of 2024 and the first and second quarters of 2025.

Borrowings under the Revolving Credit Agreement will incur interest at the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00 % per annum.

The obligations under the Revolving Credit Agreement are unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect subsidiaries of the Company, subject to customary exceptions.

The obligations under the Revolving Credit Agreement are secured by substantially all assets of the Company and the Company’s wholly-owned subsidiaries.

In addition, the Company paid fees of $ 0.6 million related to the Revolving Credit Agreement which are deferred and amortized over the term of the Revolving Credit Agreement .

As part of the closing of the Revolving Credit Agreement , the Company made an initial draw in the amount of $ 100.0 million.

The Company utilized the amount drawn under the Revolving Credit Agreement (i) to repay the outstanding balance of approximately $ 40.0 million under the Company’s Fourth Amended and Restated Uncommitted Revolving Credit Agreement, dated March 22, 2024, by and among the Company and Standard Chartered;

and (ii) to prepay approximately $ 60.0 million under the various shareholder loan agreements between PSI and Weichai.

As of December 31, 2024, the Company had $ 95.0 million outstanding under the Revolving Credit Agreement.

See further discussion below.

In connection with the Revolving Credit Agreement , on August 30, 2024, the Company also entered into a new Shareholder’s Loan Agreement (the “SLA”) with Weichai, which allows the Company to borrow up to $ 105.0 million and expires August 31, 2025 .

Borrowings under the SLA will incur interest at the applicable SOFR, plus 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

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.

The borrowing requests made under the SLA are subject to Weichai’s discretionary approval.

The payment of the borrowings under the SLA is subordinated in all respects to the Revolving Credit Agreement with the exception that the Company is allowed to make a single payment of $ 10.0 million to Weichai.

The $ 60.0 million portion of the initial advance under the Revolving Credit Agreement was applied to pay all principal, interest, and other amounts outstanding under the $30 Million Loan Agreement , the $25 Million Loan Agreement , and the $50 Million Loan Agreement (each as discussed below) , except for $ 25.0 million which is the outstanding principal balance under the SLA as of December 31, 2024.

On March 22, 2024, the Company amended and restated its $ 130.0 million Third Amended and Restated Uncommitted Revolving Credit Agreement with Standard Chartered.

The Fourth Amended and Restated Uncommitted Revolving Credit Agreement (the "Credit Agreement") reduced the borrowing capacity to $ 50.0 million and extended the maturity date of loans outstanding under its previous credit facility to the earlier of March 21, 2025 or the demand of Standard Chartered.

The Credit Agreement was 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 2024.

Borrowings under the Credit Agreement incurred interest at either the alternate base rate or the SOFR plus applicable rate of 3.45 % per annum.

In addition, the Company paid fees of $ 0.1 million related to the Credit Agreement which were deferred and amortized over the term of the Credit Agreement.

The Credit Agreement was secured by substantially all of the Company’s assets and provided 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 repaid the outstanding balance of $ 40.0 million and extinguished the Credit Agreement on August 30, 2024.

On March 22, 2024, the Company amended one of the four previous shareholder’s loan agreements with Weichai, to among other things, extend the maturity thereof.

The $30 Million Loan Agreement provided the Company with a $ 30.0 million subordinated loan at the discretion of Weichai and was amended to extend the maturity date to March 31, 2025 .

Borrowings under the $30 Million Loan Agreement bear interest at an annual rate equal to SOFR plus 4.05 % per annum.

Further, if the applicable SOFR rate was negative, the interest rate per annum should have been deemed as 4.05 % per annum.

If the interest rate for any loan was lower than Weichai’s borrowing cost, the interest rate for such loan would have been equal to Weichai’s borrowing cost plus 1.0 % .

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

The Company was also previously party to a $ 130.0 million first Amended Shareholder’s Loan Agreement with Weichai, which was amended and restated in March 2023.

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

This first Amended Shareholder’s Loan Agreement wa s replaced by the new SLA .

The Company was also previously party to a $50 Million Loan Agreement with Weichai, which was amended and restated in November 2023.

The $50 Million Loan Agreement provided the Company with a $ 50.0 million uncommitted facility that was subordinated to the Third Amended and Restated Uncommitted Revolving Credit Agreement and any borrowing requests made under the $50 Million Loan Agreement were subject to Weichai’s discretionary approval.

Borrowings under the $50 Million Loan Agreement incurred interest at the applicable SOFR , plus 4.65 % per annum and could have been used for general corporate purposes, except for certain legal expenditures which required additional approval from Weichai.

Further, if the applicable term SOFR was negative, the interest rate per annum should have been deemed as 4.65 % per annum.

If the interest rate for any loan was lower than Weichai’s borrowing cost, the interest rate for such loan would have been equal to Weichai’s borrowing cost plus 1.0 %.

This $50 Million Loan Agreement was replaced by the new SLA.

The Company was also previously pa rty to a $25 Million Loan Agreement with Weichai, which was amended and restated in May 2024.

The $25 Million Loan Agreement provided the Company with a $ 25.0 million subordinated loan.

Borrowings under the $25 Million Loan Agreement incurred interest at the applicable SOFR rate, plus 4.05 % per annum.

Further, if the applicable term SOFR was negative, the interest rate per annum should have been deemed as 4.05 % per annum.

If the interest rate for any loan under the $25 Million Loan Agreement was l ower than Weichai’s borrowing cost, the interest rate for such loan would have been equal to Weichai’s borrowing cost plus 1.0 %.

This $25 Million Loan Agreement was replaced by the new SLA.

As of December 31, 2024, the Company’s total outstanding debt obligations under the Revolving Credit Agreement , the SLA , and for finance leases and other debt were $ 120.2 million in the aggregate, and its cash and cash equivalents were $ 55.3 million .

The Company's total accrued interest for the Revolving Credit Agreement and the SLA was $ 1.2 million as of December 31, 2024 .

The Company’s total accrued interest for its Credit Agreement and all shareholder loans was $ 1.9 million as of December 31, 2023 .

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

See Item 8., Note 1.

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Year Ending December 31, Maturities of Long-Term Debt

Other Non-Current Liabilities

On June 14, 2024, the Company executed a non-interest bearing note payable of $ 4.5 million upon settlement of a legal matter.

The note payable is due May 2028 and is discounted based on an imputed interest rate of 6.66 % .

The note payable includes an option for the Company to extend maturity of the note to September 2029 upon written notice before the thirty-seventh payment and, if such option is exercised, the maximum payment amount of the note increases to $ 4.8 million.

The current portion of the note of $ 0.7 million is included in other accrued liabilities in the Company’s Consolidated Balance Sheets.

(in thousands) As of December 31, 2024

Note payable $ 3,502

Unamortized discount ( 473 )

Total $ 3,029

The following table presents remaining maturities for the note payable as of December 31, 2024 :

(in thousands) Maturities Discount Amortization

Year ending December 31, 2025 $ 693 $ 207

Year ending December 31, 2026 740 160

Year ending December 31, 2027 1,328 97

Year ending December 31, 2028 741 9

Total note payable $ 3,502 $ 473

The Company recorded $ 0.1 million discount amortization as interest expense as of December 31, 2024 .

Lease Policies

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

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

These leases have original lease periods expiring between September 2025 and July 2034.

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

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As of December 31, 2024 and 2023, t he weighted-average remaining lease term was 5.3 years and 6.2 years for operating leases and 1.2 years and 2.2 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.

As of December 31, 2024 and 2023, the weighted-average discount rate was 7.5 % and 7.6 % for operating leases, respectively, and 6.5 % for finance le ases as of both periods.

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

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2026 5,946 16

2026 5,931 17

Thereafter 3,532 —

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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:

The Company measured its material debt obligations and notes payable at original carrying value.

The fair value of the Revolving Credit Agreement and other short-term financing approximated carrying value, as it consisted primarily of short-term variable rate loans.

The Company measured its non-interest bearing note payable using a rate which the Company could obtain financing of similar nature from other sources at the date of the transaction.

The unamortized discount is reported in the Consolidated Balance Sheets as a deduction from the face amount of the note payable.

The Company measured its material debt obligations and note payable using Level 2 inputs as follows:

(in thousands) As of December 31, 2024

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Level 1 Level 2 Level 3

Revolving credit facility $ 50,000 $ — $ 50,000 $ —

Revolving Credit Agreement $ 95,000 $ — $ 95,000 $ —

Note payable 3,502 3,502

Other financing 25,000 — 25,000

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Level 1 Level 2 Level 3

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

Credit Agreement $ 50,000 $ — $ 50,000 $ —

Other financing 94,820 — 94,820

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 (Level 1) 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, accounts payable, and certain accrued expenses are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.

Defined Contribution Plans

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However, the Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on the Company’s results of operations in the period in which the amounts are accrued and/or liquidity in the period in which the amounts are paid.

Securities and Exchange Commission and United States Attorney’s Office for the Northern District of Illinois Investigations

In September 2020, the Company entered into agreements with the SEC and the USAO to resolve the investigations into the Company’s past revenue recognition practices.

Under the settled administrative order with the SEC, the Company committed to remediate the deficiencies in its internal control over financial reporting that constituted material weaknesses identified in its 2017 Form 10-K filed in May 2019 by April 30, 2021 unless an extension was provided by the SEC.

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 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.

In October 2018, a putative class-action complaint was filed against the Company and NOVAtime Technology, Inc.

(“NOVAtime”) in the Circuit Court of Cook County, Illinois.

In October 2018, a punitive class-action complaint was filed against the Company and NOVAtime Technology, Inc.

(“NOVAtime” or “Plaintiff”) in the Circuit Court of Cook County, Illinois.

In December 2018, NOVAtime removed the case to the U.S.

District Court for the Northern District of Illinois, Eastern Division under the Class Action Fairness Act.

Plaintiff has since voluntarily dismissed NOVAtime from the lawsuit without prejudice and filed an amended complaint in April 2019.

District Court for the Northern District of Illinois, Eastern Division (the “Court”) under the Class Action Fairness Act.

Plaintiff has since voluntarily dismissed NOVAtime from the lawsuit without prejudice and filed an amended complaint in

The operative, amended complaint asserts violations of the Illinois Biometric Information Privacy Act (“BIPA”) in connection with employees’ use of the time clock to clock in and clock out using a finger scan and seeks statutory damages, attorneys’ fees, and injunctive and equitable relief.

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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.

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.

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

Plaintiff and PSI have since reached a preliminary settlement of the case, and Plaintiff filed an Unopposed Motion for Preliminary Approval of Class Action Settlement on February 23, 2024.

On February 5, 2025 Plaintiff filed an Unopposed Motion for Final Approval of the Class Settlement, which the Court granted on February 7, 2025.

As of both December 31, 2024 and 2023, the Company had recorded an estimated liabili ty of $ 2.4 million , recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter.

Mast Powertrain v.

In February 2020, the Company received a demand for arbitration from Mast Powertrain, LLC (“Mast”) pursuant to a development agreement entered into in November 2011 (the “Development Agreement”).

Mast claimed that it is owed more than $ 9.0 million in past royalties and other damages for products sold by the Company pursuant to the Development Agreement.

Mast claimed that it was owed more than $ 9.0 million in past royalties and other damages for products sold by the Company pursuant to the Development Agreement.

The Company disputed Mast’s damages, denied that any royalties are owed to Mast, denied any liability, and counterclaimed for overpayment on invoices paid to Mast.

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 Statements of Income for the year-ended December 31, 2020 .

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 Consolidated Statement of Income for the year-ended December 31, 2020 .

The Company fully paid the settlement and had no recognized liability as of both December 31, 2024 and 2023.

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.

Upon court order, the Company participated in separate mediations in May 2024 and December 2024, and no settlement was reached.

The Company has filed a motion to stay the lawsuit and compel it to arbitration, and the Court granted that motion on January 31, 2025.

As of both December 31, 2024 and 2023, the Company had recorded an estimated liabili ty of $ 0.9 million , recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter.

Gary Winemaster Litigation v.

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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 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 (“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 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.

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

In June 2024, the Company reached a settlement with Travelers for $ 4.5 million, resulting in a $ 4.3 million gain that was recorded within Selling, General and Administrative expenses on the Consolidated Statements of Income.

As of December 31, 2024, the Company recorded the aforementioned settlement liability within Other noncurrent liabilities with the current portion within Other accrued liabilities on the Consolidated Balance Sheets.

Refer to Note 7.

Other Non-Current Liabilities for additional information related to this settlement.

Indemnification Agreements

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.

The Company holds a directors’ and officers’ liability insurance policy, which is renewed annually and currently expires in July 2025.

The insurance policy includes standard exclusions including for any previously pending litigation.

Other Commitments

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Summary of Significant Accounting Policies and Other Information , the Company had restricted cash of $ 3.2 million at December 31, 2024 related to these letters of credit and cash held in escrow due to a customer agreement.

The Company had arrangements with Doosan that required the Company to purchase minimum volumes or be subject to monetary penalties.

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 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 was as follows:

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Total current tax expense $ 832 $ 700

Deferred tax expense

Deferred tax expense (benefit)

Federal $ 229 $ 64

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Total tax expense $ 922 $ 900

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.

The Com pany made net cash payments for income taxes of $ 1.6 million and $ 0.6 million in 2024 and 2023, respectively.

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

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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 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.

The income tax expense for both 2024 and 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:

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Depreciation on property, plant and equipment ( 2,008 ) ( 2,400 )

Other $ ( 439 ) $ —

Total deferred tax liabilities $ ( 10,120 ) $ ( 10,680 )

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The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset.

The Company evaluated the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income.

Appropriate consideration is given to all available evidence, both positive and negative, in assessi ng the need for a valuation allowance.

As a result of this evaluation, the Company concluded that the negative evidence outweighed the positive evidence and that a full valuation allowance should be maintained against its net deferred tax assets as of December 31, 2023 and 2022.

The Company’s net deferred tax liability of $ 1.5 million and $ 1.3 million as of December 31, 2023 and 2022, respectively, represents the deferred tax liability related to indefinite-lived assets which cannot serve as a source of income for the realization of deferred tax assets that are not indefinite-lived .

The Company has assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income.

Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.

In assessing the realizability of the Company’s deferred tax assets, the Company considered whether it is more likely than not that some or all of the deferred tax assets will be realized through the generation of future taxable income.

In making this determination, the Company assessed all of the evidence available at the time, including recent earnings, forecasted income projections, historical performance, and that substantial doubt exists about the Company’s ability to continue as a going concern.

The Company determined that the negative evidence outweighed the objectively verifiable positive evidence and continues to maintain a valuation allowance against deferred tax assets .

The Company’s valuation allowance is $ 38.5 million and $ 54.3 million as of December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, the Company has, on a tax-effected basis, $ 8.0 million in R&D and state tax credit carryforwards which begin to expire in 2025.

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 Company has $ 0.6 million and $ 6.9 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 .

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The Company reflects the liability for unrecognized tax benefits as Other noncurrent liabilities in its Consolidated Balance Sheets.

The amounts included in “reductions for tax positions of prior years” represent decreases in the unrecognized tax benefits relating to expiration of the statutes during each year shown.

The amounts included in “reductions for tax positions of prior years” represent decreases in the unrecognized tax benefits relating to expiration of the statutes during each year shown, as well as settlements with Illinois tax authorities.

As of December 31, 2024, the Company believes the liability for unrecognized tax benefits, excluding interest and penalties, could decrease by an immaterial amount in 2025 due to lapses in the statute of limitations.

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States 2015 to 2023

Canada 2019 to 2020

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

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

Stockholders’ Deficit

Stockholders’ Equity

Common and Treasury Stock

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Stock-Based Compensation

The Company has an incentive compensation plan (the “2012 Plan”), which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors.

(“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors.

The 2012 Plan is administered by the Compensation Committee of the Board.

Under the 2012 Plan, 830,925 shares were initially made available for awards, with 700,000 additional shares added to the 2012 Plan in 2013.

Forfeited shares are added back to the pool of shares available for future awards.

Shares that were not delivered pursuant to forfeited awards are added back to the pool of shares available for future awards.

As of December 31, 2024, the Company had 379,516 shares available for issuance of future awards.

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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.

Cash settled awards are recognized in the Consolidated Balance Sheets 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.

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Income tax benefit $ — $ —

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 Company did not grant any SAR awards in 2024, and grante d 101,663 SAR awards in 2023.

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

As of December 31, 2024, the weighted-average remaining contractual term for the awards granted in 2023 was 8.32 years, the aggregate intrinsic value was zero and the unrecognized compensation expense was $ 1.0 million.

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

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Exercisable at December 31, 2024 60,295 $ 8.10 3.38 1

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

The total fair value of SARs that vested during 2024 and 2023 w as less than $ 0.1 million and $ 0.1 million, respectively.

The total aggregate intrinsic value of SARs that vested during both 2024 and 2023 w as $ 0.1 million.

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Shares Weighted-Average Grant Date Fair Value

December 31, 2021 33,246 $ 12.96

( 26,623 ) 8.83

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

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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.

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.

( 15,400 ) 3.91

Balance as of December 31, 2024 15,000 $ 23.44

The total grant date fair value of restricted stock that vested during both 2024 and 2023 was $ 0.1 million.

The total aggregate fair value of restricted stock that vested during 2024 and 2023 was $ 0.2 million and less than $ 0.1 million, respectively.

Unrecognized compensation expense related to RSAs as of December 31, 2024 and 2023 was $ 0.3 million and less than $ 0.1 million, respectively.

As of December 31, 2024, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately 0.52 years .

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Earnings per share of common stock – diluted $ 3.01 $ 1.15

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.

The aggregate number of shares excluded from the diluted earnings per share calculations because they would have been anti-dilutive were less than 0.1 million and 0.1 million shares 2024 and 2023, respectively.

For the twelve months ended December 31, 2024 and 2023, 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.

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Weichai Transactions

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

Weichai Transactions for information regarding the SLA with Weichai and Collaboration Agreement .

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 for information regarding the purchase agreement with SWIEC, and the MOR agreement with Weichai.

Segment Reporting

Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is reviewed on a regular basis by the chief operating decision maker (“CODM”).

The Company operates as one business and geographic operating and reportable segment.

Chief Operating Decision Maker

The Company’s CODM is its Chief Executive Officer (“CEO”).

The CEO oversees the strategic planning and direction of the Company, and the CEO has final approval in assessing the Company’s performance and allocating its resources.

Identification of Reportable Segment

The Company’s single reportable segment derives revenues primarily in North America from customers by designing, engineering, manufacturing, marketing and selling a broad range of advanced, emission-certified engines and power systems that are powered by a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets.

Revenue is attributed to geographic areas based on the country of sale.

The sources of external revenue by end market and geographic area are previously disclosed in Note 2.

The Company evaluated the basis for the CODM's decisions about the allocation of Company resources as well as the basis for the CODM's assessments of the evaluation of the Company's (segment) performance.

Specifically, the Company evaluated the financial information that is generally provided and / or is available to the CODM.

The Company’s CODM reviews consolidated statements of income to make decisions, allocate resources and assess performance.

The CODM assesses performance and decides how to allocate resources primarily using consolidated revenue by end market and consolidated net income (loss).

The CODM uses consolidated net income (loss) to monitor budget and forecast information to actual results.

The CODM reviews cash, accounts receivable, inventory, accounts payable, and total debt;

however other long-lived asset information is not reviewed by the CODM.

The accounting policies of the Company’s single reportable segment are the same as those described in the Note 1.

Summary of Significant Accounting Policies and Other Information .

The measure of segment assets is consolidated total assets presented in the Company’s Consolidated Balance Sheets.

Note 1 Concentrations discloses customers individually accounting for more than 10% of the Company’s consolidated net sales.

Significant Expenses

Significant segment expenses are presented in the Consolidated Statement of Operations .

Subsequent Events

In January 2025, the Company entered into a five-year purchase agreement with SWIEC, for the exclusive purchase and distribution of certain engine and engine components for the fulfillment of a contract with a customer in North America.

The supply agreement includes annual minimum requirements of products ordered during the initial term.

If all minimum targets are

met within the first three-year periods, the contract may be negotiated to extend beyond the five-year initial term.

The annual minimum requirements are as follows:

(in thousands)

Year Ending December 31,

2025 $ 19,023

Total $ 309,131

In February 2025, the Company entered into the MOR agreement with Weichai.

The MOR agreement requires the Company to pay Weichai a fee of 1.75 % of gross revenues generated by the sale of certain engines manufactured by Weichai.

Fees are due on a quarterly basis.

The MOR agreement further requires the 1.75 % fee to be paid for applicable 2024 sales of these engines.

The 2024 fee is less than $ 0.1 million.

The MOR agreement expires in December 2029.

In February 2025, the Company made additional payments totaling $ 10.0 million related to the SLA.

The outstanding balance under the SLA is $ 15.0 million as of March 24, 2025.

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