{"url_path":"/sec/mpaa/10-k/2026/item-16","section_key":"item-16","section_title":"Item 16 Form 10-K Summary","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-08","source_url":"https://www.sec.gov/Archives/edgar/data/918251/0001140361-26-024463-index.html","accession_number":"0001140361-26-024463","cik":"0000918251","ticker":"MPAA","issuer_name":"MOTORCAR PARTS OF AMERICA INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/918251/0001140361-26-024463-index.html","primary_entity_key":"0000918251","primary_entity_name":"MOTORCAR PARTS OF AMERICA INC"},"word_count":23197,"has_tables":true,"body_markdown":"Item 16.\n\nForm 10-K Summary\n\n \n\nNone.\n\n \n\n60\n\n[Table of Contents](#tableOfContents0)\n\nSIGNATURES\n\n \n\nPursuant to the requirements of Section 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.\n\n \n\n \n \n \n \n\n \n\nMOTORCAR PARTS OF AMERICA, INC.\n\n \n\n \n \n \n \n\nDated: June 8, 2026\n\nBy:\n\n/s/ David Lee\n\n \n\n \n \nDavid Lee\n \n\n \n \nChief Financial Officer\n \n\n \n \n \n \n\nDated: June 8, 2026\n\nBy:\n\n/s/ Kamlesh Shah\n\n \n\n \n \nKamlesh Shah\n \n\n \n \nChief Accounting Officer\n \n\n \n\nPursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated:\n\n \n\n    \n\n/s/ Selwyn Joffe\n\n \n\nChief Executive Officer and Director\n(Principal Executive Officer)\n\nJune 8, 2026\n\nSelwyn Joffe\n\n \n\n \n\n \n\n \n\n \n\n/s/ David Lee\n\n \n\nChief Financial Officer\n\n(Principal Financial Officer)\n\nJune 8, 2026\n\nDavid Lee\n\n \n\n \n\n \n\n \n\n \n\n/s/ Kamlesh Shah\n\n \n\nChief Accounting Officer\n\n(Principal Accounting Officer)\n\nJune 8, 2026\n\nKamlesh Shah\n\n \n\n \n\n \n\n \n\n \n\n/s/ David Bryan\n\n \n\nDirector\n\nJune 8, 2026\n\nDavid Bryan\n\n \n\n \n\n \n\n \n\n \n\n/s/ Joseph Ferguson\n\n \n\nDirector\n\nJune 8, 2026\n\nJoseph Ferguson\n\n \n\n \n\n \n\n \n\n \n\n/s/ Philip Gay\n\n \n\nDirector\n\nJune 8, 2026\n\nPhilip Gay\n\n \n\n \n\n \n\n \n\n \n\n/s/ Jeffrey Mirvis\n\n \n\nDirector\n\nJune 8, 2026\n\nJeffrey Mirvis\n\n \n\n \n\n \n\n \n\n \n\n/s/ Anil Shrivastava\n\n \n\nDirector\n\nJune 8, 2026\n\nAnil Shrivastava\n\n \n\n \n\n \n\n \n\n \n\n/s/ Douglas Trussler\n\n \n\nDirector\n\nJune 8, 2026\n\nDouglas Trussler\n\n \n\n \n\n \n\n \n\n \n\n/s/ Barbara Whittaker\n\n \n\nDirector\n\nJune 8, 2026\n\nBarbara Whittaker\n\n \n\n \n\n61\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC.\n\nAND SUBSIDIARIES\n\n \n\nCONTENTS\n\n \n\n  \n\n \n\nPage\n\n[Reports of Independent Registered Public Accounting Firm](#REPORT_OF_INDEPENDENT_REGISTER)\n\n63\n\n[Consolidated Balance Sheets](#Consolidated_Balance_Sheets)\n\nF-1\n\n[Consolidated Statements of Operations](#Consolidated_Statements_of_Operations)\n\nF-2\n\n[Consolidated Statements of Comprehensive Income (Loss)](#Statements_of_Comprehensive_Income_Loss)\n\nF-3\n\n[Consolidated Statements of Shareholders’ Equity](#Statements_of_Shareholders_Equity)\n\nF-4\n\n[Consolidated Statements of Cash Flows](#Statements_of_Cash_Flows)\n\nF-5\n\n[Notes to Consolidated Financial Statements](#Notes_to_Consolidated_Financial_Statements)\n\nF-6\n\n[Schedule II — Valuation and Qualifying Accounts](#Schedule_II__Valu)\n\nS-1\n\n \n\n62\n\n[Table of Contents](#tableOfContents0)\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\n \n\nTo the Shareholders and the Board of Directors of Motorcar Parts of America, Inc.\n\n \n\nOpinion on Internal Control Over Financial Reporting\n\n \n\nWe have audited Motorcar Parts of America, Inc. and subsidiaries’ internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Motorcar Parts of America, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2026, based on the COSO criteria.\n\n \n\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2026 and 2025, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes and financial statement schedule listed in the Index at Item 15a.(2) and our report dated June 8, 2026 expressed an unqualified opinion thereon.\n\n \n\nBasis for Opinion\n\n \n\nThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.\n\n \n\nOur audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.\n\n \n\nDefinition and Limitations of Internal Control Over Financial Reporting\n\n \n\nA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.\n\n \n\nBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.\n\n \n\n/s/ Ernst & Young LLP\n\n \n\nLos Angeles, California\n\nJune 8, 2026\n\n \n\n63\n\n[Table of Contents](#tableOfContents0)\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\n \n\nTo the Shareholders and the Board of Directors of Motorcar Parts of America, Inc.\n\n \n\nOpinion on the Financial Statements\n\n \n\nWe have audited the accompanying consolidated balance sheets of Motorcar Parts of America, Inc. and subsidiaries (the Company) as of March 31, 2026 and 2025, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended March 31, 2026, and the related notes and financial statement schedule listed in the Index at Item 15a.(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2026 and 2025, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2026, in conformity with U.S. generally accepted accounting principles.\n\n \n\nWe also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated June 8, 2026 expressed an unqualified opinion thereon.\n\n \n\nBasis for Opinion\n\n \n\nThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n \n\nCritical Audit Matter\n\n \n\nThe critical audit matter communicated below is a matter arising from the current period audit of the 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 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.\n\n \n\n \n\nMarketing Allowances\n\n \n\n \n\nDescription of the Matter\n\nAs more fully described in Note 2 and Note 15 to the consolidated financial statements, revenue is recognized net of applicable marketing allowances. These marketing allowances vary by contract and can include (i) the issuance of specified credits against receivables, (ii) support for research or marketing efforts, (iii) discounts granted in connection with each individual shipment of product, and (iv) other marketing, research, store expansion or product development support. At March 31, 2026, marketing allowances recorded on the Company’s consolidated balance sheet were $19,616,000, which is presented within contract liabilities.\n\n \n\nAuditing the completeness of marketing allowances was complex due to the high volume of transactions processed by the Company and the variability of marketing allowances by contract.\n\n \n\n64\n\n[Table of Contents](#tableOfContents0)\n\nHow We Addressed the Matter in Our Audit\n\nWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the marketing allowances processes, including management’s review of contracts with customers containing marketing allowances, management’s review of the completeness and accuracy of data used in the marketing allowance accrual analysis at period end, and management’s review of credits issued to customers subsequent to the balance sheet date.\n\n \n\nOur audit procedures to test the completeness of marketing allowances included, among others, reviewing significant contracts with customers, obtaining confirmations of contractual terms and conditions from a sample of the Company’s customers, and testing credits issued or payments made to customers subsequent to year-end. We tested the completeness and accuracy of data used in the calculation of the marketing allowance accrual by agreeing contractual terms to the underlying agreements. In addition, we evaluated the relationship between revenue and marketing allowances and assessed subsequent events to determine whether there was any new information that would require adjustments to the amounts recorded.\n\n \n\n/s/ Ernst & Young LLP\n\n \n\nWe have served as the Company’s auditor since 2007.\n\n \n\nLos Angeles, California\n\nJune 8, 2026\n\n \n\n65\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nConsolidated Balance Sheets\n\n \n\n \n  \n\nMarch 31, 2026\n\n \n  \n\nMarch 31, 2025\n\n \n\nASSETS\n\n    \n    \n\nCurrent assets:\n\n    \n    \n\nCash and cash equivalents\n\n $14,650,000 \n $9,429,000 \n\nShort-term investments\n\n  2,028,000 \n  1,881,000 \n\nAccounts receivable — net\n\n  112,614,000 \n  91,064,000 \n\nInventory — net\n\n  380,603,000 \n  341,209,000 \n\nInventory unreturned\n\n  16,438,000 \n  18,460,000 \n\nContract assets\n\n  34,552,000 \n  29,606,000 \n\nIncome tax receivable\n\n  5,241,000 \n  4,208,000 \n\nPrepaid expenses and other current assets\n\n  17,856,000 \n  15,614,000 \n\nTotal current assets\n\n  583,982,000 \n  511,471,000 \n\nPlant and equipment — net\n\n  30,739,000 \n  31,990,000 \n\nOperating lease assets\n\n  63,103,000 \n  66,603,000 \n\nDeferred income taxes\n\n  4,039,000 \n  4,569,000 \n\nLong-term contract assets\n\n  331,221,000 \n  336,268,000 \n\nGoodwill\n\n  3,205,000 \n  3,205,000 \n\nIntangible assets — net\n\n  235,000 \n  552,000 \n\nOther assets\n\n  2,913,000 \n  2,978,000 \n\nTOTAL ASSETS\n\n $1,019,437,000 \n $957,636,000 \n\nLIABILITIES AND SHAREHOLDERS'  EQUITY\n\n    \n    \n\nCurrent liabilities:\n\n    \n    \n\nAccounts payable\n\n $167,229,000 \n $141,906,000 \n\nAccrued liabilities\n\n  33,270,000 \n  30,211,000 \n\nCustomer finished goods returns accrual\n\n  29,923,000 \n  34,411,000 \n\nContract liabilities\n\n  61,201,000 \n  38,158,000 \n\nRevolving loan\n\n  94,668,000 \n  90,787,000 \n\nOther current liabilities\n\n  4,348,000 \n  5,570,000 \n\nOperating lease liabilities\n\n  8,957,000 \n  9,982,000 \n\nTotal current liabilities\n\n  399,596,000 \n  351,025,000 \n\nConvertible notes, related party\n\n  \n38,993,000\n \n  \n35,207,000\n \n\nContract liabilities, less current portion\n\n  249,108,000 \n  241,404,000 \n\nDeferred income taxes\n\n  425,000 \n  362,000 \n\nOperating lease liabilities, less current portion\n\n  56,969,000 \n  65,308,000 \n\nOther liabilities\n\n  8,336,000 \n  6,631,000 \n\nTotal liabilities\n\n  753,427,000 \n  699,937,000 \n\nCommitments and contingencies\n\n  \n \n \n  \n \n \n\nShareholders' equity:\n\n    \n    \n\nPreferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued\n\n   -  \n   -  \n\nCommon stock; par value $.01 per share, 50,000,000\nshares authorized; 18,924,818 and 19,435,706 shares issued and outstanding\nat March 31, 2026 and 2025, respectively\n\n  \n\n189,000\n\n \n  \n\n194,000\n\n \n\nAdditional paid-in capital\n\n  226,709,000 \n  234,413,000 \n\nRetained earnings\n\n  32,427,000 \n  20,033,000 \n\nAccumulated other comprehensive income\n\n  6,685,000 \n  3,059,000 \n\nTotal shareholders' equity\n\n  266,010,000 \n  257,699,000 \n\nTOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY\n\n $1,019,437,000 \n $957,636,000 \n\n \n\nThe accompanying notes to consolidated financial statements are an integral part hereof.\n\n \n\nF-1\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nConsolidated Statements of Operations\n\n \n\n \n\n Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\n \n\n    \n\n    \n\n    \n\nNet sales\n\n $789,806,000 \n\n $757,354,000 \n\n $717,684,000 \n\nCost of goods sold\n\n  629,905,000 \n\n  603,526,000 \n\n  585,133,000 \n\nGross profit\n\n  159,901,000 \n\n  153,828,000 \n\n  132,551,000 \n\nOperating expenses:\n\n    \n\n    \n\n    \n\nGeneral and administrative\n\n  63,303,000 \n\n  64,047,000 \n\n  57,769,000 \n\nSales and marketing\n\n  25,491,000 \n\n  22,561,000 \n\n  22,481,000 \n\nResearch and development\n\n  14,196,000 \n\n  11,405,000 \n\n  9,995,000 \n\nForeign exchange impact of lease liabilities and forward contracts\n\n  (8,924,000) \n\n  15,892,000 \n\n  (3,814,000) \n\nTotal operating expenses\n\n  94,066,000 \n\n  113,905,000 \n\n  86,431,000 \n\nOperating income\n\n  65,835,000 \n\n  39,923,000 \n\n  46,120,000 \n\nOther expenses:\n\n    \n\n    \n\n    \n\nInterest expense, net\n\n  46,696,000 \n\n  55,550,000 \n\n  60,040,000 \n\nChange in fair value of compound net derivative liability\n\n  (1,130,000) \n\n  60,000 \n\n  (1,020,000) \n\nLoss on extinguishment of debt\n\n   -  \n\n   -  \n\n  168,000 \n\nTotal other expenses\n\n  45,566,000 \n\n  55,610,000 \n\n  59,188,000 \n\nIncome (loss) before income tax expense\n\n  20,269,000 \n\n  (15,687,000) \n\n  (13,068,000) \n\nIncome tax expense\n\n  7,875,000 \n\n  3,783,000 \n\n  36,176,000 \n\nNet income (loss)\n\n $12,394,000 \n\n $(19,470,000) \n\n $(49,244,000) \n\nBasic net income (loss) per share\n\n $0.64 \n\n $(0.99) \n\n $(2.51) \n\nDiluted net income (loss) per share\n\n $0.62 \n\n $(0.99) \n\n $(2.51) \n\nWeighted average number of shares outstanding:\n\n    \n\n    \n\n    \n\nBasic\n\n  19,304,105 \n\n  19,685,322 \n\n  19,601,204 \n\nDiluted\n\n  19,979,070 \n\n  19,685,322 \n\n  19,601,204 \n\n \n\nThe accompanying notes to consolidated financial statements are an integral part hereof.\n\n \n\nF-2\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nConsolidated Statements of Comprehensive Income (Loss)\n\n \n\n \n\n Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\n \n\n    \n\n    \n\n    \n\nNet income (loss)\n\n $12,394,000 \n\n $(19,470,000) \n\n $(49,244,000) \n\nOther comprehensive income (loss), net of tax:\n\n    \n\n    \n\n    \n\nForeign currency translation income (loss)\n\n  3,626,000 \n\n  (6,096,000) \n\n  9,458,000 \n\nTotal other comprehensive income (loss), net of tax\n\n  3,626,000 \n\n  (6,096,000) \n\n  9,458,000 \n\nComprehensive income (loss)\n\n $16,020,000 \n\n $(25,566,000) \n\n $(39,786,000) \n\n \n\nThe accompanying notes to consolidated financial statements are an integral part hereof.\n\n \n\nF-3\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nConsolidated Statements of Shareholders’ Equity\n\n \n\n                         \n\n \n  Common Stock\n \n    \n    \n    \n    \n\n \n  \n\nShares\n\n \n  \n\nAmount\n\n \n  \n\nAdditional Paid-in\nCapital Common\nStock\n\n \n  \n\nRetained Earnings\n\n \n  \n\nAccumulated\nOther\nComprehensive\n(Loss) Income\n\n \n  \n\nTotal\n\n \n\n \n    \n    \n    \n    \n    \n    \n\n \n    \n    \n    \n    \n    \n    \n\nBalance at March 31, 2023\n\n  19,494,615 \n $195,000 \n $231,836,000 \n $88,747,000 \n $(303,000) \n $320,475,000 \n\nCompensation recognized under employee stock plans\n\n  -  \n  -  \n  4,700,000 \n   -  \n   -  \n  4,700,000 \n\nIssuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes\n\n  167,765 \n  2,000 \n  (281,000) \n   -  \n  - \n  (279,000) \n\nForeign currency translation\n\n   -  \n  -  \n   -  \n   -  \n  9,458,000 \n  9,458,000 \n\nNet income (loss)\n\n   -  \n  -  \n   -  \n  (49,244,000) \n   -  \n  (49,244,000) \n\nBalance at March 31, 2024\n\n  19,662,380 \n $197,000 \n $236,255,000 \n $39,503,000 \n $9,155,000 \n $285,110,000 \n\nCompensation recognized under employee stock plans\n\n   -  \n  -  \n  3,877,000 \n   -  \n  -  \n  3,877,000 \n\nIssuance of common stock upon vesting of RSUs and PSUs, net of shares withheld for employee taxes\n\n  315,460 \n  2,000 \n  (892,000) \n   -  \n  -  \n  (890,000) \n\nRepurchase and cancellation of common stock, including fees\n\n  (542,134) \n  (5,000) \n  (4,827,000) \n   -  \n  -  \n  (4,832,000) \n\nForeign currency translation\n\n   -  \n  -  \n   -  \n   -  \n  (6,096,000) \n  (6,096,000) \n\nNet income (loss)\n\n   -  \n  -  \n   -  \n  (19,470,000) \n  - \n  (19,470,000) \n\nBalance at March 31, 2025\n\n  19,435,706 \n $194,000 \n $234,413,000 \n $20,033,000 \n $3,059,000 \n $257,699,000 \n\nCompensation recognized under employee stock plans\n\n   -  \n  -  \n  5,635,000 \n   -  \n   -  \n  5,635,000 \n\nExercise of stock options, net of shares withheld for employee taxes and net share settlement of exercise price\n\n  6,466 \n  -  \n  101,000 \n   -  \n   -  \n  101,000 \n\nIssuance of common stock upon vesting of RSUs and PSUs, net of shares withheld for employee taxes\n\n  438,254 \n  4,000 \n  (2,098,000) \n   -  \n  - \n  (2,094,000) \n\nRepurchase and cancellation of common stock, including fees\n\n  (955,608) \n  (9,000) \n  (11,342,000) \n   -  \n  - \n  (11,351,000) \n\nForeign currency translation\n\n   -  \n  -  \n   -  \n   -  \n  3,626,000 \n  3,626,000 \n\nNet income (loss)\n\n   -  \n  -  \n   -  \n  12,394,000 \n  -  \n  12,394,000 \n\nBalance at March 31, 2026\n\n  18,924,818 \n $189,000 \n $226,709,000 \n $32,427,000 \n $6,685,000 \n $266,010,000 \n\n \n\nThe accompanying notes to consolidated financial statements are an integral part hereof.\n\n \n\nF-4\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nConsolidated Statements of Cash Flows\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\n Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nCash flows from operating activities:\n\n    \n\n    \n\n    \n\nNet income (loss)\n\n $12,394,000 \n\n $(19,470,000) \n\n $(49,244,000) \n\nAdjustments to reconcile net income (loss) to net cash provided by operating activities:\n\n    \n\n    \n\n    \n\nDepreciation and amortization\n\n  9,453,000 \n\n  9,923,000 \n\n  10,544,000 \n\nAmortization of intangible assets\n\n  335,000 \n\n  477,000 \n\n  1,075,000 \n\nAmortization of debt issuance costs\n\n  2,452,000 \n\n  2,222,000 \n\n  2,165,000 \n\nAmortization of interest on contract liabilities, net\n\n  749,000 \n\n  749,000 \n\n  933,000 \n\nAccrued interest on convertible notes, related party\n\n  3,873,000 \n\n  3,521,000 \n\n  3,200,000 \n\nLoss on extinguishment of debt\n\n   -  \n\n   -  \n\n  168,000 \n\nAmortization of core premiums paid to customers\n\n  10,797,000 \n\n  9,826,000 \n\n  10,181,000 \n\nAmortization of finished goods premiums paid to customers\n\n  1,104,000 \n\n  912,000 \n\n  782,000 \n\nNon-cash lease expense\n\n  10,325,000 \n\n  9,540,000 \n\n  10,255,000 \n\nForeign exchange impact of lease liabilities and forward contracts\n\n  (8,924,000) \n\n  15,892,000 \n\n  (3,814,000) \n\nForeign currency remeasurement\n\n  (949,000) \n\n  2,262,000 \n\n  65,000 \n\nChange in fair value of compound net derivative liability\n\n  (1,130,000) \n\n  60,000 \n\n  (1,020,000) \n\nGain on short-term investments\n\n  (252,000) \n\n  (105,000) \n\n  (347,000) \n\nNet provision for inventory reserves\n\n  9,891,000 \n\n  15,009,000 \n\n  16,233,000 \n\nNet provision for customer payment discrepancies\n\n  570,000 \n\n  1,507,000 \n\n  1,452,000 \n\nNet provision for (recovery of) doubtful accounts\n\n  94,000 \n\n  42,000 \n\n  (133,000) \n\nDeferred income taxes\n\n  548,000 \n\n  (1,805,000) \n\n  29,564,000 \n\nShare-based compensation expense\n\n  5,635,000 \n\n  3,877,000 \n\n  4,700,000 \n\nLoss on disposal of plant and equipment\n\n  43,000 \n\n  5,000 \n\n  9,000 \n\nChange in operating assets and liabilities:\n\n    \n\n    \n\n    \n\nAccounts receivable\n\n  (21,625,000) \n\n  2,407,000 \n\n  22,687,000 \n\nInventory\n\n  (48,596,000) \n\n  19,615,000 \n\n  (53,585,000) \n\nInventory unreturned\n\n  2,099,000 \n\n  1,723,000 \n\n  (3,666,000) \n\nIncome tax receivable\n\n  (974,000) \n\n  1,450,000 \n\n  (3,501,000) \n\nPrepaid expenses and other current assets\n\n  (1,377,000) \n\n  (2,259,000) \n\n  3,100,000 \n\nOther assets\n\n  327,000 \n\n  (1,509,000) \n\n  (601,000) \n\nAccounts payable and accrued liabilities\n\n  27,426,000 \n\n  (13,280,000) \n\n  47,264,000 \n\nCustomer finished goods returns accrual\n\n  (4,596,000) \n\n  (3,676,000) \n\n  222,000 \n\nContract assets, net\n\n  (11,277,000) \n\n  (29,981,000) \n\n  (14,221,000) \n\nContract liabilities, net\n\n  29,746,000 \n\n  29,381,000 \n\n  14,664,000 \n\nOperating lease liabilities\n\n  (10,195,000) \n\n  (9,088,000) \n\n  (8,702,000) \n\nOther liabilities\n\n  1,192,000 \n\n  (3,750,000) \n\n  (1,257,000) \n\nNet cash provided by operating activities\n\n  19,158,000 \n\n  45,477,000 \n\n  39,172,000 \n\nCash flows from investing activities:\n\n    \n\n    \n\n    \n\nPurchase of plant and equipment\n\n  (3,696,000) \n\n  (4,578,000) \n\n  (1,000,000) \n\nProceeds from sales of plant and equipment\n\n   -  \n\n  49,000 \n\n   -  \n\nRedemptions of short term investments\n\n  106,000 \n\n  60,000 \n\n  521,000 \n\nNet cash used in investing activities\n\n  (3,590,000) \n\n  (4,469,000) \n\n  (479,000) \n\nCash flows from financing activities:\n\n    \n\n    \n\n    \n\nBorrowings under revolving loan\n\n  730,776,000 \n\n  541,423,000 \n\n  82,005,000 \n\nRepayments under revolving loan\n\n  (726,895,000) \n\n  (578,636,000) \n\n  (99,205,000) \n\nRepayments of term loan\n\n   -  \n\n   -  \n\n  (13,125,000) \n\nPayments for debt issuance costs\n\n   -  \n\n  (15,000) \n\n  (3,973,000) \n\nPayments on finance lease obligations\n\n  (1,517,000) \n\n  (1,705,000) \n\n  (1,862,000) \n\nExercise of stock options\n\n  101,000 \n\n   -  \n\n   -  \n\nCash used to net share settle equity awards\n\n  (2,094,000) \n\n  (890,000) \n\n  (279,000) \n\nRepurchase of common stock, including fees\n\n  (11,351,000) \n\n  (4,832,000) \n\n   -  \n\nNet cash used in financing activities\n\n  (10,980,000) \n\n  (44,655,000) \n\n  (36,439,000) \n\nEffect of exchange rate changes on cash and cash equivalents\n\n  633,000 \n\n  (898,000) \n\n  124,000 \n\nNet increase (decrease) in cash and cash equivalents\n\n  5,221,000 \n\n  (4,545,000) \n\n  2,378,000 \n\nCash and cash equivalents — Beginning of year\n\n  9,429,000 \n\n  13,974,000 \n\n  11,596,000 \n\nCash and cash equivalents — End of year\n\n $14,650,000 \n\n $9,429,000 \n\n $13,974,000 \n\nSupplemental disclosures of cash flow information:\n\n    \n\n    \n\n    \n\nCash paid for interest, net\n\n $39,807,000 \n\n $48,724,000 \n\n $53,797,000 \n\nCash paid for income taxes, net of refunds\n\n  8,080,000 \n\n  5,858,000 \n\n  9,558,000 \n\nCash paid for operating leases\n\n  14,363,000 \n\n  13,356,000 \n\n  13,358,000 \n\nCash paid for finance leases\n\n  1,814,000 \n\n  1,896,000 \n\n  2,081,000 \n\nPlant and equipment acquired under finance lease\n\n  2,821,000 \n\n  1,412,000 \n\n  745,000 \n\nAssets acquired under operating leases\n\n  550,000 \n\n  3,972,000 \n\n  1,603,000 \n\nNon-cash capital expenditures\n\n  477,000 \n\n  80,000 \n\n  16,000 \n\n \n\nThe accompanying notes to consolidated financial statements are an integral part hereof.\n\n \n\nF-5\n\n[Table of Contents](#tableOfContents0)\n\nMOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES\n\nNotes to Consolidated Financial Statements\n\n \n\n1. Company Background and Organization\n\n \n\nMotorcar Parts of America, Inc. and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts, and test solutions and diagnostic equipment. These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”). The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain testing market. The Company’s products include (i) light duty and heavy duty rotating electrical products such as alternators and starters, (ii) brake-related products, which include brake calipers, brake boosters, brake rotors, brake pads, brake master cylinders, and wheel hub assemblies and bearings, and (iii) other products, which include test solutions and diagnostic equipment including: (a) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (b) equipment for the pre- and post-production of electric vehicles, and (c) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations).\n\n \n\nThe Company primarily ships its products from its facilities and various third-party warehouse distribution centers in North America, including the Company’s 410,000 square foot distribution center in Mexico and its warehouse and distribution center in Malaysia that supports its direct shipment programs.\n\n \n\n2. Summary of Significant Accounting Policies\n\n \n\nRecently Adopted Accounting Pronouncements\n\n \n\nImprovements to Income Tax Disclosures\n\n \n\nIn December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Improvements to Income Tax Disclosures (Topic 740). This standard requires the Company to provide further disaggregated income tax disclosures for specific categories on the effective tax rate reconciliation, as well as additional information about federal, state/local and foreign income taxes. The standard also requires the Company to annually disclose its income taxes paid (net of refunds received), disaggregated by jurisdiction. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is to be applied on a prospective basis, although optional retrospective application is permitted. The Company adopted this standard on a prospective basis as of March 31, 2026, which expanded the Company’s income tax disclosures (see Note 17).\n\n \n\nAccounting Pronouncements Not Yet Adopted\n\n \n\nDisclosure Improvements\n\n \n\nIn October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This standard was issued in response to the SEC’s disclosure update and simplification initiative, which affects a variety of topics within the Accounting Standards Codification. The amendments apply to all reporting entities within the scope of the affected topics unless otherwise indicated. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.\n\n \n\nF-6\n\n[Table of Contents](#tableOfContents0)\n\nDisaggregation of Income Statement Expenses\n\n \n\nIn November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”) (Subtopic 220-40). This standard requires the Company to disclose, in the footnotes at each interim and annual reporting period, information about expenses by the nature of the expense in addition to certain disclosures about selling expenses. Entities are required to include the following relevant expense captions: (i) purchase of inventory, (ii) employee compensation, (iii) depreciation, (iv) intangible asset amortization, and (v) depreciation, depletion and amortization recognized as part of oil and gas producing activities. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) Clarifying the Effective Date, which is intended to clarify the effective date of ASU No. 2024-03. As clarified in ASU 2025-01, the new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.\n\n \n\nDebt with Conversion and Other Options\n\n \n\nIn November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which seeks to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. This guidance is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statement disclosures.\n\n \n\nMeasurement of Credit Losses\n\n \n\nIn July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. This guidance is effective for annual periods beginning after December 15, 2025, including interim reporting periods within those fiscal years, with early adoption permitted. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.\n\n \n\nInternal-Use Software\n\n \n\nIn September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends the recognition and disclosure guidance for internal-use software costs, removing the previous software development stage model with a probable-to-complete recognition threshold. This guidance is effective for annual periods beginning after December 15, 2027, including interim reporting periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.\n\n \n\nInterim Reporting\n\n \n\nIn December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements, which improves the navigability of the guidance in ASC 270, Interim Reporting, and clarifies when it applies. Under this guidance, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. This guidance is effective for annual periods beginning after December 15, 2027, including interim reporting periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.\n\n \n\nF-7\n\n[Table of Contents](#tableOfContents0)\n\nCodification Improvements\n\n \n\nIn December 2025, the FASB issued ASU 2025-12, Codification Improvements, which addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to GAAP. The update represents changes to the Accounting Standards Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. This guidance is effective for annual periods beginning after December 15, 2026, including interim reporting periods within those fiscal years, with early adoption permitted. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and disclosures.\n\n \n\nPrinciples of Consolidation\n\n \n\nThe accompanying consolidated financial statements include the accounts of Motorcar Parts of America, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.\n\n \n\nSegment Reporting\n\n \n\nThe Company’s three operating segments are as follows:\n\n \n\n●\n\nHard Parts, which include (i) light duty rotating electric products such as alternators and starters and (ii) brake-related products, which includes brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and wheel hub assemblies and bearings,\n\n \n\n●\n\nTest Solutions and Diagnostic Equipment, which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and\n\n \n\n●\n\nHeavy Duty, which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications.\n\n \n\nThe Company’s Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported. See Note 20 for more information.\n\n \n\nCash and Cash Equivalents\n\n \n\nCash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds. The Company considers all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.\n\n \n\nF-8\n\n[Table of Contents](#tableOfContents0)\n\nAccounts Receivable\n\n \n\nThe Company’s accounts receivable are recorded at amortized cost less an allowance for credit losses that are not expected to be recovered. The net amount of accounts receivable and corresponding allowance for credit losses are presented in the consolidated balance sheets. The Company maintains allowances for credit losses resulting from the expected failure or inability of its customers to make required payments. The Company does not require collateral for accounts receivable. The Company believes its credit risk with respect to trade accounts receivable is limited due to its credit evaluation process and the long-term nature of its relationships with its largest customers. The Company utilizes a historical loss rate method, adjusted for any changes in economic conditions or risk characteristics, to estimate its expected credit losses each period. When developing an estimate of expected credit losses, the Company considers all available relevant information regarding the collectability of cash flows, including historical information, current conditions, and reasonable and supportable forecasts of future economic conditions over the contractual life of the receivable. The historical loss rate method considers past write-offs of trade accounts receivable over a period commensurate with the initial term of the Company’s contracts with its customers. The Company recognizes the allowance for credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability. The Company’s accounts receivable are short-term in nature and written off only when all collection attempts have failed.\n\n \n\nThe Company has accounts receivable discount programs that have been established with certain major customers and their respective banks. Under these programs, the Company has the option to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. Once the customer chooses which outstanding invoices are going to be made available for discounting, the Company can accept or decline the bundle of invoices provided. The accounts receivable discount programs are non-recourse, and funds cannot be reclaimed by the customer or its bank after the related invoices have been discounted.\n\n \n\nInventory\n\n \n\nInventory is comprised of: (i) Used Core and component raw materials, (ii) work-in-process, (iii) remanufactured finished goods and purchased finished goods.\n\n \n\nUsed Core, component raw materials, and purchased finished goods are stated at the lower of average cost or net realizable value.\n\n \n\nWork-in-process is in various stages of production and is valued at the average cost of Used Cores and component raw materials issued to work orders still open, including allocations of labor and overhead costs. Historically, work-in-process inventory has not been material compared to the total inventory balance.\n\n \n\nRemanufactured finished goods include: (i) the Used Core cost and (ii) the cost of component raw materials, and allocations of labor and variable and fixed overhead costs (the “Unit Cost”). The allocations of labor and variable and fixed overhead costs are based on the actual use of the production facilities over the prior 12 months which approximates normal capacity. This method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production. In addition, the Company excludes certain unallocated overhead such as severance costs, duplicative facility overhead costs, start-up costs, training, and spoilage from the calculation and expenses these unallocated overhead costs as period costs. Purchased finished goods also include an allocation of fixed overhead costs.\n\n \n\nThe estimate of net realizable value is subjective and based on management’s judgment and knowledge of current industry demand and management’s projections of industry demand. The estimates may, therefore, be revised if there are changes in the overall market for the Company’s products or market changes that in management’s judgment impact its ability to sell or liquidate potentially excess or obsolete inventory. Net realizable value is determined at least quarterly as follows:\n\n \n\n●\n\nNet realizable value for finished goods by customer, by product line are determined based on the agreed upon selling price with the customer for a product in the trailing 12 months. The Company compares the average selling price, including any discounts and allowances, to the finished goods cost of on-hand inventory, less any reserve for excess and obsolete inventory. Any reduction of value is recorded as cost of goods sold in the period in which the revaluation is identified.\n\n \n\n●\n\nNet realizable value for Used Cores are determined based on current core purchase prices from core brokers to the extent that core purchases in the trailing 12 months are significant. Remanufacturing consumes, on average, more than one Used Core for each remanufactured unit produced since not all Used Cores are reusable. The yield rates depend upon both the product and consumer specifications. The Company purchases Used Cores from core brokers to supplement its yield rates and Used Cores not returned under the core exchange programs. The Company also considers the net selling price its customers have agreed to pay for Used Cores that are not returned under its core exchange programs to assess whether Used Core cost exceeds Used Core net realizable value on a by customer, by product line basis. Any reduction of core cost is recorded as cost of goods sold in the period in which the revaluation is identified.\n\n \n\nF-9\n\n[Table of Contents](#tableOfContents0)\n\n●\n\nThe Company records an allowance for potentially excess and obsolete inventory based upon recent sales history, the quantity of inventory on-hand, and a forecast of potential use of the inventory. The Company periodically reviews inventory to identify excess quantities and part numbers that are experiencing a reduction in demand. Any part numbers with quantities identified during this process are reserved for at rates based upon management’s judgment, historical rates, and consideration of possible scrap and liquidation values which may be as high as 100% of cost if no liquidation market exists for the part. As a result of this process, the Company recorded reserves for excess and obsolete inventory of $19,002,000 and $18,964,000 at March 31, 2026 and 2025, respectively.\n\n \n\nThe Company records vendor discounts as a reduction of inventories and are recognized as a reduction to cost of goods sold as the inventories are sold.\n\n \n\nInventory Unreturned\n\n \n\nInventory unreturned represents the Company’s estimate, based on historical data and prospective information provided directly by the customer, of finished goods shipped to customers that the Company expects to be returned under its general right of return policy, after the balance sheet date. Inventory unreturned includes only the Unit Cost of a finished good. The return rate is calculated based on expected returns within the normal operating cycle, which is generally one year. As such, the related amounts are classified as current assets. Inventory unreturned is valued in the same manner as the Company’s finished goods inventory.\n\n \n\nContract Assets\n\n \n\nContract assets consists of: (i) the core portion of the finished goods shipped to customers, (ii) upfront payments to customers in connection with customer contracts, (iii) core premiums paid to customers, and (iv) finished goods premiums paid to customers.\n\n \n\nRemanufactured Cores held at customers’ locations as a part of the finished goods sold to the customer are classified as long-term contract assets. These assets are valued at the lower of cost or net realizable value of Used Cores on hand (see Inventory above). For these Remanufactured Cores, the Company expects the finished good containing the Remanufactured Core to be returned under the Company’s general right of return policy or a similar Used Core to be returned to the Company by the customer, under the Company’s core exchange programs, in each case for credit. The Remanufactured Cores and Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as “Cores expected to be returned by customers”, which are included in short-term contract assets until the Company physically receives them during its normal operating cycle, which is generally one year.\n\n \n\nUpfront payments to customers represent marketing allowances, such as sign-on bonuses, slotting fees, and promotional allowances provided by the Company to its customers. These allowances are recognized as an asset and amortized over the appropriate period of time as a reduction of revenue if the Company expects to generate future revenues associated with the upfront payment. If the Company does not expect to generate additional revenue, then the upfront payment is recognized in the consolidated statements of operations when payment occurs as a reduction of revenue. Upfront payments expected to be amortized during the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.\n\n \n\nCore premiums paid to customers represent the difference between the Remanufactured Core acquisition price paid to customers, generally in connection with new business, and the related Used Core cost. The core premiums are treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered. The Company considers, among other things, the length of its largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums. These core premiums are amortized over a period typically ranging from six to eight years, adjusted for specific circumstances associated with the arrangement. Core premiums are recorded as long-term contract assets. Core premiums expected to be amortized within the Company’s normal operating cycle, which is generally one year, are classified as short-term contract assets.\n\n \n\nF-10\n\n[Table of Contents](#tableOfContents0)\n\nFinished goods premiums paid to customers represent the difference between the finished good acquisition price paid to customers, generally in connection with new business, and the related finished good cost, which is treated as an asset and recognized as a reduction of revenue through the later of the date at which related revenue is recognized or the date at which the sales incentive is offered. The Company considers, among other things, the length of its largest ongoing customer relationships, duration of customer contracts, and the average life of vehicles on the road in determining the appropriate period of time over which to amortize these premiums. Finished goods premiums are amortized over a period of up to eight years, adjusted for specific circumstances associated with the arrangement. Finished goods premiums are recorded as long-term contract assets. Finished goods premiums expected to be amortized within our normal operating cycle, which is generally one year, are classified as short-term contract assets.\n\n \n\nIncome Taxes\n\n \n\nThe Company accounts for income taxes using the liability method, which measures deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The resulting asset or liability is adjusted to reflect changes in the tax laws as they occur. A valuation allowance is provided to reduce deferred tax assets when it is more likely than not that a portion of the deferred tax asset will not be realized.\n\n \n\nThe primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) change in realizable deferred tax items, (iv) foreign income taxed at rates that are different from the federal statutory rate, and (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m).\n\n \n\nRealization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. The Company makes these estimates and judgments about its future taxable income based on assumptions that are consistent with the Company’s future plans. A valuation allowance is established when the Company believes it is not more likely than not all or some deferred tax assets will be realized. In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, past financial performance, and tax planning strategies. At March 31, 2026 and 2025, the Company had a valuation allowance on deferred tax assets that is considered not more likely than not to be realized under U.S. GAAP. Should the actual amount differ from the Company’s estimate, the amount of the valuation allowance could be impacted.\n\n \n\nThe Company has made an accounting policy election to recognize the U.S. tax effects of global intangible low-taxed income as a component of income tax expense in the period the tax arises.\n\n \n\nPlant and Equipment\n\n \n\nPlant and equipment are stated at cost, less accumulated depreciation. The cost of additions and improvements are capitalized, while maintenance and repairs are charged to expense when incurred. Depreciation is provided on a straight-line basis in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Machinery and equipment are depreciated over a range from five to ten years. Office equipment and fixtures are depreciated over a range from three to ten years. Leasehold improvements are depreciated over the lives of the respective leases or the service lives of the leasehold improvements, whichever is shorter. Depreciation of assets recorded under finance leases is included in depreciation expense. The Company evaluates plant and equipment, including leasehold improvements, equipment, construction in progress, and right-of-use assets for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. There was no impairment recorded during the years ended March 31, 2026, 2025, or 2024.\n\n \n\nF-11\n\n[Table of Contents](#tableOfContents0)\n\nLeases\n\n \n\nThe Company determines if an arrangement contains a lease at inception. Lease assets and lease liabilities are recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease. Certain of the Company’s leases include options to extend the leases for up to five years. When the Company has the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that it will exercise the option, the option is considered in determining the classification and measurement of the lease. The lease assets are recorded net of any lease incentives received. The Company exempts leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combines non-lease components with lease components. Lease assets are tested for impairment in the same manner as long-lived assets used in operations.\n\n \n\nThe Company uses its incremental borrowing rate for each of its leases in determining the present value of its expected lease payments based on the information available at the lease commencement date as the rate implicit for each of its leases is not readily detainable. The Company’s incremental borrowing rate is determined by analyzing and combining (i) an applicable risk-free rate, (ii) a financial spread adjustment, and (iii) any lease specific adjustment. Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services, which are expensed as incurred and not included in the determination of lease assets and lease liabilities. These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees, and other factors. The Company records rent expense for operating leases, some of which have escalating rent payments, on a straight-line basis over the lease term.\n\n \n\nThe Company has material non-functional currency leases. As required for other monetary liabilities, lessees shall remeasure a foreign currency-denominated lease liability using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates, which are not affected by subsequent changes in the exchange rates. The Company recorded a gain of $6,409,000, a loss of $11,713,000, and a gain of $5,187,000 during the years ended March 31, 2026, 2025 and 2024, respectively, which are included in foreign exchange impact of lease liabilities and forward contracts in the consolidated statements of operations. See Note 10 for additional information regarding the Company’s leases.\n\n \n\nGoodwill\n\n \n\nThe Company evaluates goodwill for impairment at least annually during the fourth quarter of each fiscal year or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level, which represents the Company’s operating segments. In testing for goodwill impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company’s qualitative assessment indicates that goodwill impairment is more likely than not, it will proceed with performing the quantitative assessment. If the fair value of the reporting unit exceeds its carrying value, goodwill is not considered impaired. If the carrying value of the reporting unit exceeds its fair value an impairment loss will be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. The Company completes the required annual testing of goodwill impairment for each of the reporting units during the fourth quarter of the year. No impairment was recorded during the years ended March 31, 2026, 2025, or 2024.\n\n \n\nIntangible Assets\n\n \n\nThe Company’s intangible assets other than goodwill are finite–lived and amortized on a straight-line basis over their respective useful lives. The Company analyzes its finite-lived intangible assets for impairment when and if indicators of impairment exist. No impairment was recorded during the years ended March 31, 2026, 2025 or 2024.\n\n \n\nF-12\n\n[Table of Contents](#tableOfContents0)\n\nDebt Issuance Costs\n\n \n\nDebt issuance costs include fees and costs incurred to obtain financing. Debt issuance costs related to the Company’s convertible notes are presented in the balance sheet as a direct deduction from the carrying amounts of the convertible notes. Debt issuance costs related to the Company’s revolving loan are presented in prepaid expenses and other current assets in the accompanying consolidated balance sheets, regardless of whether or not there are any outstanding borrowings under the revolving loan. Debt issuance costs related to the Company’s convertible notes are amortized using the effective interest method and debt issuance costs related to the Company’s revolving loans are amortized using the straight-line method, which approximates the effective interest method. Debt issuance costs are amortized over the term of the related loans and included in interest expense in the Company’s consolidated statements of operations.\n\n \n\nForeign Currency Translation\n\n \n\nFor financial reporting purposes, the functional currency of the foreign subsidiaries is the local currency. The assets and liabilities of foreign operations for which the local currency is the functional currency are translated into the U.S. dollar at the exchange rate in effect at the balance sheet date, while revenues and expenses are translated at average exchange rates during the year. The accumulated foreign currency translation adjustment is presented as a component of comprehensive income or loss in the consolidated statements of shareholders’ equity. Aggregate foreign currency transactions recorded in general and administrative expenses were a gain of $494,000, a loss of $2,987,000, and a gain of $515,000 for the years ended March 31, 2026, 2025, and 2024, respectively.\n\n \n\nRevenue Recognition\n\n \n\nRevenue is recognized when performance obligations under the terms of a contract with the Company’s customers are satisfied; generally, this occurs with the transfer of control of its products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Revenue is recognized net of all anticipated returns, marketing allowances, volume discounts, and other forms of variable consideration. Revenue is recognized either when products are shipped or when delivered, depending on the applicable contract terms.\n\n \n\nThe price of a finished remanufactured product sold to customers is generally comprised of separately invoiced amounts for the Remanufactured Core included in the product (“Remanufactured Core value”) and the unit portion included in the product (“Unit Value”), for which revenue is recorded based on the Company’s then current price list, net of applicable discounts and allowances. The Remanufactured Core value is recorded as revenue based upon the estimate of Used Cores that will not be returned by the customer for credit. These estimates are subjective and based on management’s judgment and knowledge of historical, current, and projected return rates. As reconciliations are completed with the customers the actual rates at which Used Cores are not being returned may differ from the current estimates. This may result in periodic adjustments of the estimated contract asset and liability amounts recorded and may impact the projected revenue recognition rates used to record the estimated future revenue. These estimates may also be revised if there are changes in contractual arrangements with customers, or changes in business practices. A significant portion of the remanufactured automotive parts sold to customers are replaced by similar Used Cores sent back for credit by customers under the core exchange programs (as described in further detail below). The number of Used Cores sent back under the core exchange programs is generally limited to the number of similar Remanufactured Cores previously shipped to each customer.\n\n \n\nRevenue Recognition — Core Exchange Programs\n\n \n\nFull price Remanufactured Cores: When remanufactured products are shipped, certain customers are invoiced for the Remanufactured Core value of the product at the full Remanufactured Core sales price. For these Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs. The remainder of the full price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.\n\n \n\nF-13\n\n[Table of Contents](#tableOfContents0)\n\nNominal price Remanufactured Cores: Certain other customers are invoiced for the Remanufactured Core value of the product shipped at a nominal (generally $0.01 or less) Remanufactured Core price. For these nominal Remanufactured Cores, revenue is only recognized based upon an estimate of the rate at which these customers will pay cash for Remanufactured Cores in lieu of sending back similar Used Cores for credits under the core exchange programs. Revenue amounts are calculated based on contractually agreed upon pricing for these Remanufactured Cores for which the customers are not returning similar Used Cores. The remainder of the nominal price Remanufactured Core value invoiced to these customers is established as a long-term contract liability rather than being recognized as revenue in the period the products are shipped as the Company expects these Remanufactured Cores to be returned for credit under its core exchange programs.\n\n \n\nRevenue Recognition; General Right of Return\n\n \n\nCustomers are allowed to return goods that their end-user customers have returned to them, whether or not the returned item is defective (warranty returns). In addition, under the terms of certain agreements and industry practice, customers from time to time are allowed stock adjustments when their inventory of certain product lines exceeds the anticipated sales to end-user customers (stock adjustment returns). Customers have various contractual rights for stock adjustment returns, which are typically less than 5% of units sold. In some instances, a higher level of returns is allowed in connection with significant restocking orders. The aggregate returns are generally limited to less than 20% of unit sales.\n\n \n\nThe allowance for warranty returns is established based on a historical analysis of the level of this type of return as a percentage of total unit sales. The allowance for stock adjustment returns is based on specific customer inventory levels, inventory movements, and information on the estimated timing of stock adjustment returns provided by customers. Stock adjustment returns do not occur at any specific time during the year. The return rate for stock adjustments is calculated based on expected returns within the normal operating cycle, which is generally one year.\n\n \n\nThe Unit Value of the warranty and stock adjustment returns are treated as reductions of revenue based on the estimations made at the time of the sale. The Remanufactured Core value of warranty and stock adjustment returns are provided for as indicated in the paragraph “Revenue Recognition – Core Exchange Programs”.\n\n \n\nAs is standard in the industry, the Company only accepts returns from on-going customers. If a customer ceases doing business with the Company, it has no further obligation to accept additional product returns from that customer. Similarly, the Company accepts product returns and grants appropriate credits to new customers from the time the new customer relationship is established.\n\n \n\nShipping Costs\n\n \n\nThe Company includes shipping and handling charges in the gross invoice price to customers and classifies the total amount as revenue. All shipping and handling costs are expensed as cost of sales as inventory is sold.\n\n \n\nContract Liability\n\n \n\nContract liability consists of: (i) customer allowances earned, (ii) accrued core payments, (iii) customer core returns accruals, (iv) core bank liability, (v) finished goods liabilities, and (vi) customer deposits.\n\n \n\nCustomer allowances earned includes all marketing allowances provided to customers. Such allowances include sales incentives and concessions. Voluntary marketing allowances related to a single exchange of product are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered. Other marketing allowances, which may only be applied against future purchases, are recorded as a reduction to revenues in accordance with a schedule set forth in the relevant contract. Sales incentive amounts are recorded based on the value of the incentive provided. See Note 15 for a description of all marketing allowances. Customer allowances to be provided to customers within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.\n\n \n\nAccrued core payments represent the agreed upon price of Remanufactured Cores purchased from customers, generally in connection with new business, which are held by these customers and remain on their premises. The sales price of these Remanufactured Cores will be realized when the Company’s relationship with a customer ends, a possibility that the Company considers remote based on existing long-term customer agreements and historical experience. The payments to be made to customers for purchases of Remanufactured Cores within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.\n\n \n\nF-14\n\n[Table of Contents](#tableOfContents0)\n\nCustomer core returns accruals represent the full and nominally priced Remanufactured Cores shipped to the Company’s customers. When the Company ships the product, it recognizes an obligation to accept a similar Used Core sent back under the core exchange programs based upon the Remanufactured Core price agreed upon by the Company and its customer. The Contract liability related to Used Cores returned by consumers to the Company’s customers but not yet returned to the Company are classified as short-term contract liabilities until the Company physically receives these Used Cores as they are expected to be returned during the Company’s normal operating cycle, which is generally one year and the remainder are recorded as long-term contract liabilities.\n\n \n\nThe core bank liability represents the full Remanufactured Core sales price paid for cores returned under the core exchange programs. The payment for these cores are made over a contractual repayment period pursuant to the Company’s agreement with this customer. Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.\n\n \n\nFinished goods liabilities represents the agreed upon price of finished goods purchased from customers, generally in connection with new business. The payment for these finished goods are made over a contractual repayment period pursuant to the Company’s agreement with the customer. Payments to be made within the Company’s normal operating cycle, which is generally one year, are considered short-term contract liabilities and the remainder are recorded as long-term contract liabilities.\n\n \n\nCustomer deposits represent the receipt of prepayments from customers for the obligation to transfer goods or services in the future. The Company classifies these customer deposits as short-term contract liabilities as the Company expects to satisfy these obligations within its normal operating cycle, which is generally one year.\n\n \n\nCustomer Finished Goods Returns Accrual\n\n \n\nThe customer finished goods returns accrual represents the Company’s estimate of its exposure to customer returns, including (i) warranty returns, under its general right of return policy to allow customers to return items that their end user customers have returned to them and (ii) from time to time, stock adjustment returns when the customers’ inventory of certain product lines exceeds the anticipated sales to end-user customers. The customer finished goods returns accrual represents the Unit Value of the estimated returns and is classified as a current liability due to the expectation that these returns will occur within the normal operating cycle of one year.\n\n \n\nAdvertising Costs\n\n \n\nThe Company expenses all advertising costs as incurred. Advertising expenses for the years ended March 31, 2026, 2025 and 2024 were $1,041,000, $435,000, and $614,000, respectively.\n\n \n\nNet Income (Loss) Per Share\n\n \n\nBasic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, warrants, and Convertible Notes (as defined in Note 8), which would result in the issuance of incremental shares of common stock to the extent such impact is not anti-dilutive. Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net income (loss) per share.\n\n \n\nF-15\n\n[Table of Contents](#tableOfContents0)\n\nThe following presents a reconciliation of basic and diluted net income (loss) per share:\n\n \n\n             \n\n \n\n Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nNet income (loss)\n\n $12,394,000 \n\n $(19,470,000) \n\n $(49,244,000) \n\n \n\n    \n\n    \n\n    \n\nBasic shares\n\n  19,304,105 \n\n  19,685,322 \n\n  19,601,204 \n\nDilutive effect of share-based awards\n\n  674,965 \n\n   -  \n\n   -  \n\nDiluted shares\n\n  19,979,070 \n\n  19,685,322 \n\n  19,601,204 \n\nNet income (loss) per share:\n\n    \n\n    \n\n    \n\nBasic net income (loss) per share\n\n $0.64 \n\n $(0.99) \n\n $(2.51) \n\nDiluted net income (loss) per share\n\n $0.62 \n\n $(0.99) \n\n $(2.51) \n\n \n\n    \n\n    \n\n    \n\nAnti-dilutive shares (excluded from per-share calculations):\n\n    \n\n    \n\n    \n\nOutstanding share-based awards\n\n  982,116 \n\n  2,323,321 \n\n  2,122,863 \n\nDilutive effect of Convertible Notes under the \"if-converted\" method\n\n  2,743,359 \n\n  2,493,963 \n\n  1,693,778 \n\n \n\nThe potential common shares related to the Warrants (as defined below) issued in connection with the Convertible Notes (see Note 8) are anti-dilutive until they become exercisable and as of March 31, 2026, the Warrants were not exercisable.\n\n \n\nUse of Estimates\n\n \n\nThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. On an on-going basis, the Company evaluates its estimates, including allowances for credit losses, valuation of inventory and Used Cores, valuation of long-lived assets, goodwill and intangible assets, useful lives of long-lived assets, litigation matters, valuation of deferred tax assets, share-based compensation, sales returns and other customer marketing allowances, the incremental borrowing rate used in determining the present value of lease liabilities, and valuation of the embedded derivatives in connection with the Convertible Notes (as defined in Note 8). Although the Company does not believe that there is a reasonable likelihood that there will be a material change in the future estimate or in the assumptions used in calculating the estimate, unforeseen changes in the industry, or business could materially impact the estimate and may have a material adverse effect on its business, financial condition and results of operations.\n\n \n\nFinancial Instruments\n\n \n\nThe carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments. The carrying amount of short-term investments approximates their fair value as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis. The carrying amounts of the revolving loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics. See Note 14 for information concerning the fair value of the Company’s Convertible Notes (as defined in Note 8).\n\n \n\nF-16\n\n[Table of Contents](#tableOfContents0)\n\nShare-Based Payments\n\n \n\nThe Company has share-based compensation plans and recognizes compensation expense over the requisite service period for its share-based plans based on the fair value of the awards on the date of the grant and accounts for forfeitures as they occur. Share-based plans include stock option awards, restricted stock units, restricted stock awards, and performance stock units issued under the Company’s incentive plans. The cost is measured at the grant date, based on (i) the estimated fair value of the award using the Black-Scholes option pricing model for stock options, (ii) the closing share price of the Company’s stock on the grant date for restricted stock units and restricted stock awards, (iii) the closing share price of the Company’s stock on the grant date for performance stock units subject to performance conditions, and (iv) the estimated fair value of the award using the Monte Carlo valuation model for performance stock units subject to market conditions. See Note 19 for further information concerning the Company’s share-based payments.\n\n \n\nThe Black-Scholes option-pricing model and Monte Carlo valuation model require the input of assumptions including the expected volatility of the underlying stock and the expected holding period of the option. These assumptions are based on both historical and other information. Changes in the values assumed and used in the model can materially affect the estimate of fair value.\n\n \n\nCredit Risk\n\n \n\nThe Company regularly reviews its accounts receivable and allowance for credit losses by considering factors such as historical experience, credit quality and age of the accounts receivable, and the current economic conditions that may affect a customer’s ability to pay. The majority of the Company’s sales are to leading automotive aftermarket parts suppliers. The Company participates in trade accounts receivable discount programs with its major customers. If the creditworthiness of any of its customers was downgraded, the Company could be adversely affected, in that it may be subjected to higher interest rates on the use of these discount programs or it could be forced to wait longer for payment. In certain cases, the Company has experienced higher interest rates due to changes in customer credit profiles, which has impacted the overall cost of these financing arrangements. Should the Company’s customers experience significant cash flow problems, its financial position and results of operations could be materially and adversely affected, and the maximum amount of loss that would be incurred would be the outstanding receivable balance, Used Cores expected to be returned by customers, and the value of the Remanufactured Cores held at customers’ locations. The Company maintains an allowance for credit losses that, in its opinion, provides for an adequate reserve to cover losses that may be incurred.\n\n \n\nDeferred Compensation Plan\n\n \n\nThe Company has a deferred compensation plan for certain members of management. The plan allows participants to defer salary and bonuses. The assets of the plan, which are held in a trust and are subject to the claims of the Company’s general creditors under federal and state laws in the event of insolvency, are recorded as short-term investments in the consolidated balance sheets. Consequently, the trust qualifies as a Rabbi trust for income tax purposes. The plan’s assets consist primarily of mutual funds and are recorded at market value with any unrealized gain or loss recorded as general and administrative expense. The carrying value of plan assets were $2,028,000 and $1,881,000, and the deferred compensation liability, which is included in other current liabilities in the accompanying consolidated balance sheets, was $2,028,000 and $1,881,000 at March 31, 2026 and 2025, respectively. During the years ended March 31, 2026, 2025, and 2024, the Company made contributions of $80,000, $36,000 and $6,000, respectively. During the year ended March 31, 2024, the Company’s matching contributions under its deferred compensation plan were temporarily halted through February 2024 when they were reinstated.\n\n \n\nDuring the years ended March 31, 2026, 2025, and 2024, employee contributions of $115,000, $46,000, and $82,000, respectively, were made to the deferred compensation plan. During the years ended March 31, 2026, 2025, and 2024, the Company redeemed $301,000, $151,000, and $603,000, respectively, of its short-term investments for the payment of deferred compensation liabilities.\n\n \n\nThe following summarizes the gain on the Company’s equity investments:\n\n \n\n \n\n Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nNet gain recognized on equity securities\n\n $252,000 \n\n $105,000 \n\n $347,000 \n\nLess: net gain recognized on equity securities sold\n\n  27,000 \n\n  8,000 \n\n  74,000 \n\nUnrealized gain recognized on equity securities still held\n\n $225,000 \n\n $97,000 \n\n $273,000 \n\n \n\nF-17\n\n[Table of Contents](#tableOfContents0)\n\nComprehensive Income or Loss\n\n \n\nComprehensive income or loss is defined as the change in equity during a period resulting from transactions and other events and circumstances from non-owner sources. The Company’s total comprehensive income or loss consists of net unrealized income or loss from foreign currency translation adjustments.\n\n \n\nRestructuring Costs\n\n \n\nThe Company periodically implements restructuring programs to enhance operating efficiencies. Restructuring costs, including severance and other employee termination benefits, facility exit costs, transition expenses, and other incremental costs directly associated with an approved restructuring plan, are recognized when management has approved the restructuring plan, the plan has been communicated to affected employees, and the amounts can be reasonably estimated. Restructuring costs are recorded within each respective line item in the consolidated statements of operations based on the nature of the costs and the functions of the affected employees and activities. Restructuring costs, including relocation costs, associated with future activities are expensed as incurred.\n\n \n\n3. Goodwill and Intangible Assets\n\n \n\nGoodwill\n\n \n\nThe Company had goodwill of $3,205,000 at March 31, 2026 and 2025, which was comprised of $2,551,000 for the Hard Parts segment and $654,000 for all others, respectively.\n\n \n\nIntangible Assets\n\n \n\nThe following is a summary of acquired intangible assets subject to amortization:\n\n \n\n       March 31, 2026    March 31, 2025  \n\n    Weighted\nAverage\nAmortization\nPeriod    Gross Carrying\nValue      Accumulated\nAmortization      Gross Carrying\nValue      Accumulated\nAmortization  \n\nIntangible assets subject to amortization\n                       \n\nTrademarks\n  10 years  $ -    $ -    $520,000   $513,000 \n\nCustomer relationships\n  8 years   2,601,000    2,366,000    2,532,000    1,987,000 \n\n**Total intangible assets subject to amortization**\n  8 years  $2,601,000   $2,366,000   $3,052,000   $2,500,000 \n\n \n\nDuring the years ended March 31, 2026 and 2025, the Company retired $520,000 and $6,085,000, respectively, of fully amortized intangible assets.\n\n \n\nAmortization expense for acquired intangible assets is as follows:\n\n \n\n \n\n \n\n  Years Ended March 31,\n\n \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\n \n\n    \n\n    \n\n    \n\nAmortization expense\n\n $335,000 \n\n $477,000 \n\n $1,075,000 \n\n \n\nThe estimated future amortization expense for acquired intangible assets subject to amortization is as follows:\n\n \n\nYear Ending March 31,\n\n    \n\n2027\n\n $235,000 \n\nTotal\n\n $235,000 \n\n \n\n4. Accounts Receivable — Net\n\n \n\nThe Company has trade accounts receivable that result from the sale of goods and services. Accounts receivable — net includes offset accounts related to customer payment discrepancies, returned goods authorizations (“RGAs”) issued for in-transit unit returns, and allowances for credit losses.\n\n \n\nF-18\n\n[Table of Contents](#tableOfContents0)\n\nAccounts receivable — net is comprised of the following:\n\n \n\n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nAccounts receivable - net\n\n    \n\n    \n\nAccounts receivable — trade\n\n $138,909,000 \n\n $113,807,000 \n\nAllowance for credit losses\n\n  (291,000) \n\n  (207,000) \n\nCustomer payment discrepancies\n\n  (1,632,000) \n\n  (1,765,000) \n\nCustomer returns RGA issued\n\n  (24,372,000) \n\n  (20,771,000) \n\nLess: total accounts receivable offset accounts\n\n  (26,295,000) \n\n  (22,743,000) \n\nTotal accounts receivable — net\n\n $112,614,000 \n\n $91,064,000 \n\n \n\n5. Inventory\n\n \n\nInventory is comprised of the following:\n\n \n\n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nInventory - net\n\n    \n\n    \n\nRaw materials\n\n $145,832,000 \n\n $150,274,000 \n\nWork in process\n\n  9,930,000 \n\n  7,821,000 \n\nFinished goods\n\n  243,843,000 \n\n  202,078,000 \n\n \n\n  399,605,000 \n\n  360,173,000 \n\nLess allowance for excess and obsolete inventory\n\n  (19,002,000) \n\n  (18,964,000) \n\nTotal inventory - net\n\n $380,603,000 \n\n $341,209,000 \n\nInventory unreturned\n\n $16,438,000 \n\n $18,460,000 \n\n \n\n6. Contract Assets\n\n \n\nDuring the years ended March 31, 2026, 2025, and 2024, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $3,590,000, $2,805,000, and $5,353,000, respectively.\n\n \n\nIn addition, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations and long-term core inventory deposits by $27,524,000 during the year ended March 31, 2026, in connection with the realignment of inventory at certain customers’ distribution centers. The Company did not reduce the carrying value of Remanufactured Cores held at customers’ locations in connection with the realignment of inventory at certain customers’ distribution centers during the years ended March 31, 2025 and 2024.\n\n \n\nF-19\n\n[Table of Contents](#tableOfContents0)\n\nContract assets are comprised of the following:\n\n \n\n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nShort-term contract assets\n\n    \n\n    \n\nCores expected to be returned by customers\n\n $21,294,000 \n\n $17,732,000 \n\nCore premiums paid to customers\n\n  11,187,000 \n\n  9,669,000 \n\nFinished goods premiums paid to customers\n\n  1,429,000 \n\n  805,000 \n\nUpfront payments to customers\n\n  642,000 \n\n  1,400,000 \n\nTotal short-term contract assets\n\n $34,552,000 \n\n $29,606,000 \n\n \n\n    \n\n    \n\nLong-term contract assets\n\n    \n\n    \n\nRemanufactured cores held at customers' locations\n\n $297,592,000 \n\n $301,388,000 \n\nCore premiums paid to customers\n\n  28,198,000 \n\n  24,714,000 \n\nFinished goods premiums paid to customers\n\n  3,700,000 \n\n  2,483,000 \n\nUpfront payments to customers\n\n  1,731,000 \n\n  2,114,000 \n\nLong-term core inventory deposits\n\n   -  \n\n  5,569,000 \n\nTotal long-term contract assets\n\n $331,221,000 \n\n $336,268,000 \n\n \n\n7. Plant and Equipment\n\n \n\nPlant and equipment is comprised of the following:\n\n \n\n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nPlant and equipment\n\n    \n\n    \n\nMachinery and equipment\n\n $66,393,000 \n\n $62,330,000 \n\nOffice equipment and fixtures\n\n  37,621,000 \n\n  34,250,000 \n\nLeasehold improvements\n\n  15,463,000 \n\n  13,485,000 \n\n \n\n  119,477,000 \n\n  110,065,000 \n\nLess: accumulated depreciation\n\n  (88,738,000) \n\n  (78,075,000) \n\n \n\n    \n\n    \n\nTotal plant and equipment\n\n $30,739,000 \n\n $31,990,000 \n\n \n\nPlant and equipment located in the foreign countries where the Company has facilities, net of accumulated depreciation, totaled $27,321,000 and $27,760,000, of which $24,126,000 and $25,001,000 is located in Mexico, at March 31, 2026 and 2025, respectively.\n\n \n\n8.\n\nDebt\n\n \n\nThe Company has $268,620,000 in senior secured financing, (as amended from time to time, the “Credit Facility”) consisting of a $238,620,000 revolving loan facility (the “Revolving Facility”), subject to certain restrictions, and a $30,000,000 term loan facility (the “Term Loans”). The Term Loans were repaid during the year ended March 31, 2024. The Credit Facility matures on December 12, 2028. The lenders have a security interest in substantially all of the assets of the Company.\n\n \n\nThe Company had $94,668,000 and $90,787,000 outstanding under the Revolving Facility at March 31, 2026 and 2025, respectively. In addition, $15,470,000 was outstanding for letters of credit at March 31, 2026. At March 31, 2026, after certain contractual adjustments, $119,048,000 was available under the Revolving Facility. The interest rate on the Company’s Revolving Facility was 6.79% and 7.46% at March 31, 2026 and 2025, respectively.\n\n \n\nF-20\n\n[Table of Contents](#tableOfContents0)\n\n \n\nThe Credit Facility requires the Company to maintain a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and a specified minimum undrawn availability. During the year ended March 31, 2026, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested.\n\n \n\nConvertible Notes, Related Party\n\n \n\nOn March 31, 2023, the Company entered into a note purchase agreement, as amended, (the “Note Purchase Agreement”) with Bison Capital Partners VI, L.P. and Bison Capital Partners VI-A, L.P. (collectively, the “Purchasers”) and Bison Capital Partners VI, L.P., as the purchaser representative (the “Purchaser Representative”) for the issuance and sale of $32,000,000 in aggregate principal amount of convertible notes due in 2029 (the “Convertible Notes”), which was used for general corporate purposes. The Convertible Notes will bear interest at a rate of 10.0% per annum, compounded annually, and payable (i) in kind or (ii) in cash, annually in arrears on April 1 of each year. In April 2025, non-cash accrued interest for the Convertible Notes of $3,521,000 was paid in-kind and is included in the principal amount of Convertible Notes at March 31, 2026. In April 2024, non-cash accrued interest on the Convertible Notes of $3,209,000 was paid in-kind and is included in the principal amount of Convertible Notes at March 31, 2025.\n\n \n\nThe Company’s Convertible Notes are comprised of the following:\n\n \n\n         \n\n \n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nConvertible Notes, related party\n\n    \n\n    \n\nPrincipal amount of Convertible Notes\n\n $38,730,000 \n\n $35,209,000 \n\nLess: unamortized debt discount attributed to Compound Net Derivative Liability\n\n  (5,332,000) \n\n  (6,556,000) \n\nLess: unamortized debt discount attributed to debt issuance costs\n\n  (745,000) \n\n  (916,000) \n\nCarrying amount of the Convertible Notes\n\n  32,653,000 \n\n  27,737,000 \n\nPlus: Compound Net Derivative Liability\n\n  6,340,000 \n\n  7,470,000 \n\nNet carrying amount of Convertible Notes, related party\n\n $38,993,000 \n\n $35,207,000 \n\n \n\nThe aggregate proceeds from the offering were approximately $31,280,000, net of initial purchasers’ fees and other related expenses. The initial conversion rate is 66.6667 shares of the Company’s common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $15.00 per share of common stock). At March 31, 2026, the Company had 28,680,086 shares of its common stock available to be issued if the Convertible Notes were converted.\n\n \n\nIn connection with the Note Purchase Agreement, the Company entered into common stock warrants (the “Warrants”) with the Purchasers, which mature on March 30, 2029. The Warrants do not become exercisable unless a Company Redemption (as defined below) occurs and the volume weighted average price of the Company’s common stock for 20 consecutive days prior to the redemption is less than $15.00. The fair value of the Warrants, using Level 3 inputs and the Monte Carlo simulation model, was zero at March 31, 2026 and 2025. The Company estimates the fair value of the Warrants at each balance sheet date. Any subsequent changes from the initial recognition in the fair value of the Warrants will be recorded in current period earnings in the consolidated statements of operations.\n\n \n\nThe Convertible Notes may be converted, subject to certain conditions, at an initial conversion price of $15.00, subject to adjustment as provide in the Convertible Notes (the “Conversion Option”). The Convertible Notes also include a provision for a return of interest (“Return of Interest”), which requires the Purchasers to return 15.0% of the interest paid to the Company in certain circumstances, subject to reduction of the Return of Interest amount in the event that the Return of Interest amount would result in total payments to the Purchasers of less than two times the original principal amount. The Return of Interest provision is accounted for as part of the Conversion Option and if the Conversion Option is exercised in the future, the Return of Interest provision will remain outstanding until the Purchaser sells all of the underlying stock received upon conversion. Upon conversion, any value associated with the Return of Interest provision will be reflected as a derivative asset upon conversion, with changes in fair value being recorded in earnings in the consolidated statements of operations until settlement in connection with the sale of the underlying stock by the Purchaser. Unless and until the Company delivers a redemption notice, the Purchasers of the Convertible Notes may convert their Convertible Notes at any time at their option. Upon conversion, the Convertible Notes will be settled in shares of the Company’s common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events. The Convertible Notes have a stated maturity of March 30, 2029, subject to earlier conversion or redemption in accordance with their terms.\n\n \n\n \n\nF-21\n\n[Table of Contents](#tableOfContents0)\n\n \n\nIf there is a Fundamental Transaction, as defined in the Form of Convertible Promissory Note, the Company may redeem all or part of the Convertible Notes. Except in the case of the occurrence of a Fundamental Transaction, the Company may not redeem the Convertible Notes prior to March 31, 2026. After March 31, 2026, the Company may redeem all or part of the Convertible Notes for a cash purchase (the “Company Redemption”) price equal to the Redemption Price (as defined below) plus $5,000,000, but only if (i) it is listed on a national exchange, (ii) there is no “Event of Default” occurring and continuing, and (iii) Adjusted EBITDA for the prior four quarters is greater than $80,000,000. The “Redemption Price” shall mean a cash amount equal to the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest. However, if the volume weighted average price of the Company’s common stock for 20 consecutive days prior to the notice of the Company Redemption is less than $15, the Purchasers may exercise the warrants and the Company will pay the Redemption Price plus $2,000,000.\n\n \n\nThe Conversion Option and the Company Redemption both met the criteria for bifurcation from the Convertible Notes as derivatives and have been combined as a compound net derivative liability (the “Compound Net Derivative Liability”). The Compound Net Derivative Liability has been recorded within convertible note, related party in the consolidated balance sheets. The fair value of the Conversion Option and the Company Redemption option using Level 3 inputs and the Monte Carlo simulation model was a liability of $16,900,000 and $9,000,000, and an asset of $10,560,000 and $1,530,000 at March 31, 2026 and 2025, respectively. The Company estimates the fair value of the Compound Net Derivative Liability at each balance sheet date. Any subsequent changes from the initial recognition in the fair value of the Compound Net Derivative Liability are recorded in current period earnings in the consolidated statements of operations. During the years ended March 31, 2026, 2025, and 2024, the Company recorded a gain of $1,130,000, a loss of $60,000, and a gain of $1,020,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the consolidated statements of operations and consolidated statements of cash flows.\n\n \n\nThe Convertible Notes also contain additional features, such as, default interest and options related to a Fundamental Transaction, requiring bifurcation which were not separately accounted for as the value of such features were not material at March 31, 2026 and 2025. Any subsequent changes from the initial recognition in the fair value of those features are recorded in current period earnings in the consolidated statements of operations.\n\n \n\nThe Convertible Notes include customary provisions relating to the occurrence of Events of Default, which include the following: (i) certain payment defaults on the Convertible Notes; (ii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its subsidiaries; (iii) the entering of one or more final judgments or orders against the Company or any of its subsidiaries for an aggregate payment exceeding $25,000,000; (iv) the acceleration of senior debt or any other debt greater than $25,000,000; (v) certain failures of the Company to comply with certain provisions of the Note Purchase Agreement or material breaches of the Note Purchase Agreement by the Company or any of its subsidiaries; (vi) any material provision of the Note Purchase Agreement, the Convertible Notes, the guarantee, the subordination agreement, the Warrants or the registration rights agreement, for any reason, ceases to be valid and binding on the Company or any subsidiary, or any subsidiary shall so claim in writing to challenge the validity of or the Company’s liability under the Note Purchase Agreement, the Convertible Notes, or the registration rights agreement; or (vii) the Company fails to maintain the listing of its capital stock on a national securities exchange. Events of Default will be subject to a 30-day cure period except for those related to clause (ii) and (iv) of the preceding sentence.\n\n \n\nIf an Event of Default occurs and is continuing, then, the Company shall deliver written notice to the Purchasers within 5 business days of first learning of such Event of Default. If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to its significant subsidiary) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Convertible Notes then outstanding will immediately become due and payable without any further action.\n\n \n\nUnamortized debt issuance costs of $745,000 and $916,000 are presented in the balance sheet as a direct deduction from the carrying amounts of the Convertible Notes at March 31, 2026 and 2025, respectively. Debt issuance costs are amortized using the effective interest method through the maturity of the Convertible Note and recorded in interest expense in the consolidated statements of operations. The effective interest rate was 18.3% as of March 31, 2026, 2025, and 2024, respectively.\n\n \n\nF-22\n\n[Table of Contents](#tableOfContents0)\n\nAdditionally, pursuant to the Note Purchase Agreement, subject to certain conditions, the Purchaser Representative shall have the right to nominate one director to serve (the “Investor Director”) on the Company’s Board of Directors (the “Board”). If an Investor Director is not currently serving on the Board, and subject to certain other conditions set forth in the Note Purchase Agreement, the Purchaser Representative shall have the right to designate one person to have observation rights with respect to all meetings of the Board. In connection with the Company’s entry into the Note Purchase Agreement, Douglas Trussler was appointed to serve on its Board.\n\n \n\nInterest expense related to the Convertible Notes is as follows:\n\n \n\n             \n\n \n\n    \n\n    \n\n    \n\n \n\n Years Ended March 31,  \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nInterest expense on Convertible Notes\n\n    \n\n    \n\n    \n\nContractual interest expense\n\n $3,873,000 \n\n $3,521,000 \n\n $3,200,000 \n\nAccretion of debt discount\n\n  1,224,000 \n\n  1,020,000 \n\n  853,000 \n\nAmortization of issuance costs\n\n  171,000 \n\n  142,000 \n\n  119,000 \n\nTotal interest expense\n\n $5,268,000 \n\n $4,683,000 \n\n $4,172,000 \n\n \n\nThere are no future payments required under the Convertible Notes prior to their maturity, therefore, the principal amount of the notes plus interest payable in kind, assuming no early redemption or conversion has occurred, of $56,704,000 would be paid on March 30, 2029.\n\n \n\n9. Contract Liabilities\n\n \n\nDuring the year ended March 31, 2026, the Company recognized remanufactured core revenue of $14,797,000 and reduced the customer core returns accruals in connection with the realignment of inventory at certain customer distribution centers. The Company did not have any remanufactured core revenue in connection with the realignment of inventory at certain customer distribution centers during the years ended March 31, 2025 and 2024.\n\n \n\nContract liabilities are comprised of the following:\n\n \n\n         \n\n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nShort-term contract liabilities\n\n    \n\n    \n\nCustomer allowances earned\n\n $19,616,000 \n\n $16,283,000 \n\nCustomer core returns accruals\n\n  18,394,000 \n\n  13,880,000 \n\nAccrued core payment\n\n  10,121,000 \n\n  3,196,000 \n\nCore bank liability\n\n  10,048,000 \n\n  1,795,000 \n\nCustomer deposits\n\n  2,185,000 \n\n  2,486,000 \n\nFinished goods liabilities\n\n  837,000 \n\n  518,000 \n\nTotal short-term contract liabilities\n\n $61,201,000 \n\n $38,158,000 \n\nLong-term contract liabilities\n\n    \n\n    \n\nCustomer core returns accruals\n\n $245,504,000 \n\n $227,588,000 \n\nAccrued core payment\n\n  3,604,000 \n\n  3,768,000 \n\nCore bank liability\n\n   -  \n\n  10,048,000 \n\nTotal long-term contract liabilities\n\n $249,108,000 \n\n $241,404,000 \n\n \n\nF-23\n\n[Table of Contents](#tableOfContents0)\n\n10. Leases\n\n \n\nThe Company leases various facilities in North America and Asia under operating leases expiring through August 2033. The Company also has finance leases for certain office and manufacturing equipment, which generally range from three to five years. The Company has material non-functional currency leases, which resulted in a remeasurement gain of $6,409,000, a remeasurement loss of $11,713,000 and a remeasurement gain of $5,187,000 during the years ended March 31, 2026, 2025, and 2024, respectively. These remeasurement gains and losses are included in foreign exchange impact of lease liabilities and forward contracts in the consolidated statements of operations.\n\n \n\nDuring the year ended March 31, 2025, the Company ceased manufacturing operations at its Torrance, California facility as a part of its on-going strategy to utilize its global footprint to enhance its operating efficiencies. This represented a significant change to the use of this right-of-use asset, which required a reassessment of the Company’s asset groups. The Company concluded that this right-of-use asset was no longer part of the Hard Parts asset group. The Company performed a test for recoverability (using Level 3 inputs) which resulted in no impairment at March 31, 2026 and 2025, respectively. Any future changes to the assumptions and estimates from those anticipated may affect the carrying value of right-of-use assets and could result in impairment charges.\n\n \n\nBalance sheet information for leases is comprised of the following:\n\n \n\n           \n\n \n \n \n\n  \n\nMarch 31, 2026\n \n\n  \n\nMarch 31, 2025\n \n\nLeases\n\n \n\nClassification\n\n    \n\n    \n\nAssets:\n\n \n \n\n    \n\n    \n\nOperating\n\n \n\nOperating lease assets\n\n $63,103,000 \n\n $66,603,000 \n\nFinance\n\n \n\nPlant and equipment\n\n  4,784,000 \n\n  4,296,000 \n\nTotal leased assets\n\n \n\n $67,887,000 \n\n $70,899,000 \n\n \n \n \n\n    \n\n    \n\nLiabilities:\n\n \n \n\n    \n\n    \n\nCurrent\n\n \n \n\n    \n\n    \n\nOperating\n\n \n\nOperating lease liabilities\n\n $8,957,000 \n\n $9,982,000 \n\nFinance\n\n \n\nOther current liabilities\n\n  1,289,000 \n\n  1,222,000 \n\nLong-term\n\n \n \n\n    \n\n    \n\nOperating\n\n \n\nLong-term operating lease liabilities\n\n  56,969,000 \n\n  65,308,000 \n\nFinance\n\n \n\nOther liabilities\n\n  3,202,000 \n\n  1,954,000 \n\nTotal lease liabilities\n\n \n\n $70,417,000 \n\n $78,466,000 \n\n \n\n \n\nF-24\n\n[Table of Contents](#tableOfContents0)\n\nLease cost recognized in the consolidated statements of operations is comprised of the following:\n\n \n\n             \n\n \n  \n\nYears Ended March 31,\n\n \n\n \n  \n\n2026\n\n \n  \n\n2025\n\n \n  \n\n2024\n\n \n\nLease cost\n\n    \n    \n    \n\nOperating lease cost\n\n $14,357,000 \n $14,057,000 \n $15,047,000 \n\nShort-term lease cost\n\n  999,000 \n  1,221,000 \n  1,263,000 \n\nVariable lease cost\n\n  592,000 \n  511,000 \n  667,000 \n\nFinance lease cost:\n\n    \n    \n    \n\nAmortization of finance lease assets\n\n  1,294,000 \n  1,234,000 \n  1,508,000 \n\nInterest on finance lease liabilities\n\n  297,000 \n  191,000 \n  219,000 \n\nTotal lease cost\n\n $17,539,000 \n $17,214,000 \n $18,704,000 \n\n \n\nMaturities of lease commitments were as follows:\n\n \n\n             \n\nMaturity of lease liabilities by year ended March 31,\n\n  \n\nOperating Leases\n\n \n  \n\nFinance Leases\n\n \n  \n\nTotal\n\n \n\n2027\n\n $12,454,000 \n $1,547,000 \n $14,001,000 \n\n2028\n\n  11,806,000 \n  1,292,000 \n  13,098,000 \n\n2029\n\n  11,285,000 \n  1,027,000 \n  12,312,000 \n\n2030\n\n  11,387,000 \n  950,000 \n  12,337,000 \n\n2031\n\n  11,623,000 \n  269,000 \n  11,892,000 \n\nThereafter\n\n  20,529,000 \n  -  \n  20,529,000 \n\nTotal lease payments\n\n  79,084,000 \n  5,085,000 \n  84,169,000 \n\nLess: amount representing interest\n\n  (13,158,000) \n  (594,000) \n  (13,752,000) \n\nPresent value of lease liabilities\n\n $65,926,000 \n $4,491,000 \n $70,417,000 \n\n \n\nOther information about leases is as follows:\n\n \n\n         \n\n    \nMarch 31, 2026\n    \nMarch 31, 2025\n \n\nLease term and discount rate\n         \n\nWeighted-average remaining lease term (years):\n         \n\nFinance leases\n  3.8    3.2 \n\nOperating leases\n  6.5    7.3 \n\nWeighted-average discount rate:\n         \n\nFinance leases\n  6.8%   7%\n\nOperating leases\n  5.7%   5.8%\n\n \n\n11. Accounts Receivable Discount Programs\n\n \n\nThe Company uses accounts receivable discount programs offered by certain customers and their respective banks. Under these accounts receivable discount programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These accounts receivable discount programs allow the Company to accelerate receipt of payment on customers’ receivables.\n\n \n\n \n\nF-25\n\n[Table of Contents](#tableOfContents0)\n\nThe following is a summary of the Company’s accounts receivable discount programs:\n\n \n\n         \n\n    \nYears Ended March 31,\n \n\n    \n2026\n    \n2025\n \n\n           \n\nReceivables discounted\n $620,561,000   $643,918,000 \n\nWeighted average days\n  346    343 \n\nWeighted average discount rate\n  5.4%   6.2%\n\nAmount of discount as interest expense\n $32,023,000   $38,021,000 \n\n \n\n12. Supplier Finance Programs\n\n \n\nThe Company utilizes a supplier finance program, which allows certain of the Company’s suppliers to sell their receivables due from the Company to participating financial institutions at the sole discretion of both the supplier and the financial institutions. The program is administered by a third party. Commitments from participating financial institutions that are available to suppliers under this program were $40,000,000 as of March 31, 2026. The Company has no economic interest in the sale of these receivables and no direct relationship with the financial institution. Payments to the third-party administrator are based on services rendered and are not related to the volume or number of financing agreements between suppliers, financial institution, and the third-party administrator. The Company is not a party to agreements negotiated between participating suppliers and the financial institution. The Company's obligations to its suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program. The Company does not provide guarantees and there are no assets pledged to the financial institution or the third-party administrator for the committed payment in connection with this program. At March 31, 2026 and 2025, the Company had $42,076,000 and $33,661,000, respectively, of outstanding supplier obligations confirmed as valid under this program, included in accounts payable in the consolidated balance sheets.\n\n \n\nThe following is a summary of the changes in outstanding supplier obligations confirmed as valid under this program:\n\n \n\n         \n\n         \n\n \n  \n\nYears Ended March 31,\n\n \n\n \n  \n\n2026\n\n \n  \n\n2025\n\n \n\n \n    \n    \n\nConfirmed obligations outstanding at beginning of year\n\n $33,661,000 \n $1,695,000 \n\nInvoices confirmed as valid during the year\n\n  128,236,000 \n  91,951,000 \n\nConfirmed invoices paid during the year\n\n  (119,821,000) \n  (59,985,000) \n\nConfirmed obligations outstanding at end of year\n\n $42,076,000 \n $33,661,000 \n\n \n\n13. Financial Risk Management and Derivatives\n\n \n\nPurchases and expenses denominated in currencies other than the U.S. dollar, which are primarily related to the Company’s facilities overseas, expose the Company to market risk from material movements in foreign exchange rates between the U.S. dollar and the foreign currencies. The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent, the Chinese yuan. To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S. dollars for these foreign currencies. The extent to which forward foreign currency exchange contracts are used is modified periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.\n\n \n\nThe Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in currency speculation. The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S. dollar and the foreign currencies. The Company does not hold or issue financial instruments for trading purposes. The forward foreign currency exchange contracts are designated for forecasted expenditure requirements to fund foreign operations.\n\n \n\nF-26\n\n[Table of Contents](#tableOfContents0)\n\nThe Company had forward foreign currency exchange contracts with a U.S. dollar equivalent notional value of $43,076,000 and $45,921,000 at March 31, 2026 and 2025, respectively. These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts. The counterparty to this derivative transaction is a major financial institution with investment grade credit rating; however, the Company is exposed to credit risk with this institution. The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted. Any changes in the fair values of forward foreign currency exchange contracts are included in foreign exchange impact of lease liabilities and forward contracts in the consolidated statements of operations.\n\n \n\nThe following shows the effect of the Company’s derivative instruments on its consolidated statements of operations:\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\nGain (Loss) Recognized as Foreign Exchange Impact of Lease Liabilities and Forward Contracts  \n\nDerivatives Not Designated as\n\nYears Ended March 31,\n\nHedging Instruments\n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nForward foreign currency exchange contracts\n\n $2,515,000 \n\n $(4,179,000) \n\n $(1,373,000) \n\n \n\nThe changes in the fair values of forward foreign currency exchange contracts are included in foreign exchange impact of lease liabilities and forward contracts in the consolidated statements of cash flows for the years ended March 31, 2026, 2025, and 2024. The fair value of the forward foreign currency exchange contracts of $852,000 is included in prepaid expenses and other current assets in the consolidated balance sheet at March 31, 2026. The fair value of the forward foreign currency exchange contracts of $1,663,000 is included in other current liabilities in the consolidated balance sheet at March 31, 2025.\n\n \n\n14. Fair Value Measurements\n\n \n\nThe Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a three-tier valuation hierarchy based upon observable and unobservable inputs:\n\n \n\n•\n\nLevel 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.\n\n \n\n•\n\nLevel 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.\n\n \n\n•\n\nLevel 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.\n\n \n\nThe fair value hierarchy requires the use of observable market data when available. In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.\n\n \n\nF-27\n\n[Table of Contents](#tableOfContents0)\n\nThe following sets forth by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis according to the valuation techniques the Company used to determine their fair values at:\n\n \n\n                                 \n\n                                 \n\n                                 \n\n                                 \n\n                                 \n\n \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n \n\n  March 31, 2026  \n\nMarch 31, 2025  \n\n \n\n    \n\n Fair Value Measurements\n\n \n\n    \n\n Fair Value Measurements\n\n \n\n \n\n    \n\n Using Inputs Considers as\n\n \n\n    \n\n Using Inputs Considered as\n\n \n\n \n\n  \n\nFair Value\n \n\n  \n\nLevel 1\n \n\n  \n\nLevel 2\n \n\n  \n\nLevel 3\n \n\n  \n\nFair Value\n \n\n  \n\nLevel 1\n \n\n  \n\nLevel 2\n \n\n  \n\nLevel 3\n \n\nAssets\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nShort-term investments\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nMutual funds\n\n $2,028,000 \n\n $2,028,000 \n\n $-  \n\n $-  \n\n $1,881,000 \n\n $1,881,000 \n\n $-  \n\n $-  \n\nPrepaid expenses and other current assets\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nForward foreign currency exchange contracts\n\n  852,000 \n\n  -  \n\n  852,000 \n\n  -  \n\n  -  \n\n  -  \n\n  -  \n\n  -  \n\n \n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nLiabilities\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nOther current liabilities\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nDeferred compensation\n\n  2,028,000 \n\n  2,028,000 \n\n  -  \n\n  -  \n\n  1,881,000 \n\n  1,881,000 \n\n  -  \n\n  -  \n\nForward foreign currency exchange contracts\n\n  -  \n\n  -  \n\n  -  \n\n  -  \n\n  1,663,000 \n\n  -  \n\n  1,663,000 \n\n  -  \n\nConvertible notes, related party\n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\n    \n\nCompound Net Derivative Liability\n\n  6,340,000 \n\n    \n\n  -  \n\n  6,340,000 \n\n  7,470,000 \n\n  -  \n\n  -  \n\n  7,470,000 \n\n \n\nShort-term Investments and Deferred Compensation\n\n \n\nThe Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds. These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.\n\n \n\nForward Foreign Currency Exchange Contracts\n\n \n\nThe forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 13).\n\n \n\nCompound Net Derivative Liability\n\n \n\nThe Company estimates the fair value of the Compound Net Derivative Liability (see Note 8) using Level 3 inputs and the Monte Carlo simulation model at the balance sheet date. The Monte Carlo simulation model requires the input of assumptions including the expected volatility of the underlying stock. These assumptions are based on both historical and other information. Changes in the values assumed and used in the model can materially affect the estimate of fair value. This amount is recorded within convertible notes, related party in the consolidated balance sheets at March 31, 2026 and 2025. Any changes in the fair value of the Compound Net Derivative Liability are recorded in change in fair value of compound net derivative liability in the consolidated statements of operations and in the consolidated statements of cash flows.\n\n \n\nThe following assumptions were used to determine the fair value of the Compound Net Derivative Liability:\n\n \n\n \n\n \n\nMarch 31, 2026\n \n\n \n\nMarch 31, 2025\n \n\nRisk free interest rate\n\n 3.81\n%\n\n 3.91\n%\n\nCost of equity \n\n  19.4\n%\n\n  21.3\n%\n\nWeighted average cost of capital \n\n  12.8\n%\n\n  14.9\n%\n\nExpected volatility of MPA common stock \n\n  70\n%\n\n  40\n%\n\nEBITDA volatility \n\n  40\n%\n\n  45\n%\n\n \n\nThe following summarizes the activity for Level 3 fair value measurements:\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\nYears Ended March 31,  \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nBeginning balance\n\n $7,470,000 \n\n $7,410,000 \n\n $8,430,000 \n\nChanges in the fair value of the Compound Net Derivative Liability included in earnings\n\n  (1,130,000) \n\n  60,000 \n\n  (1,020,000) \n\nEnding balance\n\n $6,340,000 \n\n $7,470,000 \n\n $7,410,000 \n\n \n\nF-28\n\n[Table of Contents](#tableOfContents0)\n\nDuring the years ended March 31, 2026 and 2025, the Company had no significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.\n\n \n\nThe carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the revolving loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics. At March 31, 2026 and 2025, the net carrying amount of the Convertible Notes was $38,993,000 and $35,207,000, respectively (see Note 8). The estimated fair value of the Company’s Convertible Notes was $50,363,000 and $42,398,000 using Level 3 inputs at March 31, 2026 and 2025, respectively.\n\n \n\n15. Commitments and Contingencies\n\n \n\nTariffs\n\n \n\nIn February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were not authorized by statute. Following the ruling, the U.S. Court of International Trade ordered U.S. Customs and Border Protection (“CBP”) to suspend collection of such tariffs and to establish a process to refund amounts previously collected. As a result of this ruling, the Company may be eligible to receive refunds of tariffs previously paid on qualifying imports. The timing and ultimate resolution of these refund claims, including the amount and timing of any cash receipts, are subject to administrative processing and remain uncertain as of the date the financial statements were issued. Accordingly, no amounts related to tariff refunds have been recognized in the accompanying consolidated financial statements. The Company will recognize any refunds when realization is considered probable and the amounts are reasonably estimable.\n\n \n\nWarranty Returns\n\n \n\nThe Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty returns”). The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of total unit sales. Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.\n\n \n\nThe following summarizes the changes in the warranty return accrual:\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\nYears Ended March 31,  \n\n \n\n  \n\n2026\n \n\n  \n\n2025\n \n\n  \n\n2024\n \n\nBalance at beginning of year\n\n $19,677,000 \n\n $19,326,000 \n\n $19,830,000 \n\nCharged to expense\n\n  157,877,000 \n\n  151,764,000 \n\n  142,240,000 \n\nAmounts processed\n\n  (158,366,000) \n\n  (151,413,000) \n\n  (142,744,000) \n\nBalance at end of year\n\n $19,188,000 \n\n $19,677,000 \n\n $19,326,000 \n\n \n\nAt March 31, 2026 and 2025, the Company’s total warranty return accrual was $19,188,000 and $19,677,000, respectively, of which $7,479,000 and $6,478,000, respectively, was included in the customer returns RGA issued within accounts receivable—net and $11,709,000 and $13,199,000, respectively, was included in the customer finished goods returns accrual in the consolidated balance sheets.\n\n \n\nCommitments to Provide Marketing Allowances under Long-Term Customer Contracts\n\n \n\nThe Company has or is renegotiating long-term agreements with many of its major customers. Under these agreements, which in most cases have initial terms of at least four years, the Company is designated as the exclusive or primary supplier for specified categories of the Company’s products. Because of the very competitive nature of the market and the limited number of customers for these products, the Company’s customers have sought and obtained price concessions, significant marketing allowances, and more favorable delivery and payment terms in consideration for the Company’s designation as a customer’s exclusive or primary supplier. These incentives differ from contract to contract and can include (i) the issuance of a specified amount of credits against receivables in accordance with a schedule set forth in the relevant contract, (ii) support for a particular customer’s research or marketing efforts provided on a scheduled basis, (iii) discounts granted in connection with each individual shipment of product, and (iv) other marketing, research, store expansion or product development support.\n\n \n\nF-29\n\n[Table of Contents](#tableOfContents0)\n\nThe marketing and other allowances the Company typically grants its customers in connection with its new or expanded customer relationships adversely impact the near-term revenues, profitability, and associated cash flows from these arrangements. Such allowances include sales incentives and concessions and typically consist of: (i) allowances which may only be applied against future purchases and are recorded as a reduction to revenues in accordance with a schedule set forth in the long-term contract, (ii) allowances related to a single exchange of product that are recorded as a reduction of revenues at the time the related revenues are recorded or when such incentives are offered, and (iii) amortization of core premiums paid to customers generally in connection with new business.\n\n \n\nThe following summarizes the breakout of marketing allowances discussed above, recorded as a reduction to revenues:\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\nYears Ended March 31,  \n\n \n\n \n\n2026\n \n\n \n\n2025\n \n\n \n\n2024\n \n\nMarketing Allowances\n\n    \n\n    \n\n    \n\nAllowances incurred under long-term customer contracts\n\n $8,905,000 \n\n $8,736,000 \n\n $10,128,000 \n\nAllowances related to a single exchange of product\n\n  121,642,000 \n\n  133,169,000 \n\n  130,918,000 \n\nAmortization of core premiums paid to customers\n\n  10,797,000 \n\n  9,826,000 \n\n  10,181,000 \n\nTotal marketing allowances recorded as a reduction to revenues\n\n $141,344,000 \n\n $151,731,000 \n\n $151,227,000 \n\n \n\nThe following presents the Company’s commitments related to allowances incurred under long-term customer contracts and amortization of core premiums paid to customers:\n\n \n\n             \n\n \n\n  \n\n**Allowances\nIncurred**\n\n \n\n  \n\n**Amortization\nof**\n\n \n\n    \n\n \n\n  \n\n**Under\nLong-Term**\n\n \n\n  \n\n**Core Premiums**\n\n \n\n    \n\n**Year Ending March 31,**\n\n  \n\n**Customer\nContracts**\n\n \n\n  \n\n**Paid to\nCustomers**\n\n \n\n  \n\n**Total**\n\n \n\n2027\n\n $5,982,000 \n\n $11,187,000 \n\n $17,169,000 \n\n2028\n\n  3,703,000 \n\n  10,120,000 \n\n  13,823,000 \n\n2029\n\n  2,589,000 \n\n  6,539,000 \n\n  9,128,000 \n\n2030\n\n  1,193,000 \n\n  3,481,000 \n\n  4,674,000 \n\n2031\n\n  656,000 \n\n  2,721,000 \n\n  3,377,000 \n\nThereafter\n\n  1,374,000 \n\n  5,337,000 \n\n  6,711,000 \n\n**Total**\n\n $15,497,000 \n\n $39,385,000 \n\n $54,882,000 \n\n \n\nContingencies\n\n \n\nThe Company is subject to various lawsuits and claims. In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business, and its compliance with law, code, and regulations related to matters including, but not limited to, environmental, information security, taxes, levies, tariffs. In the opinion of management, such litigation is not expected to have a material effect on the Company's financial condition, results of operations, and cash flows.\n\n \n\n16. Significant Customer and Other Information\n\n \n\nSignificant Customer Concentrations\n\n \n\nWhile the Company continually seeks to diversify its customer base, it currently derives, and has historically derived, a substantial portion of its sales from a small number of large customers. Any meaningful reduction in the level of sales to any of these customers, deterioration of the financial condition of any of these customers or the loss of any of these customers could have a materially adverse impact on the Company’s business, results of operations, and financial condition.\n\n \n\nF-30\n\n[Table of Contents](#tableOfContents0)\n\nThe Company’s largest customers accounted for the following total percentage of net sales:\n\n \n\n \n\n   \n \n\n   \n \n\n   \n \n\n \n\nYears Ended March 31,  \n\n \n\n2026 \n\n2025 \n\n2024 \n\nCustomer A\n\n  42\n%\n\n  39\n%\n\n  35\n%\n\nCustomer B\n\n  22\n%\n\n  21\n%\n\n  21\n%\n\nCustomer C\n\n  21\n%\n\n  26\n%\n\n  27\n%\n\n \n\nRevenues for these customers were derived from the Hard Parts segment and Test Solutions and Diagnostic Equipment segment. See Note 20 for a discussion of the Company’s segments.\n\n \n\nThe Company’s largest customers accounted for the following total percentage of accounts receivable — trade:\n\n \n\n         \n\n \n\n**March 31, 2026** \n\nMarch 31, 2025 \n\nCustomer A\n\n  52\n%\n\n  41\n%\n\nCustomer C\n\n  18\n%\n\n  7\n%\n\nCustomer B\n\n  12\n%\n\n  26\n%\n\n \n\nGeographic and Product Information\n\n \n\nThe Company’s products are predominantly sold in the U.S. and accounted for the following total percentage of net sales:\n\n \n\n \n\nYears Ended March 31,  \n \n\n \n\n2026 \n\n2025 \n\n2024 \n \n\nRotating electrical products\n\n  68\n%\n\n  67\n%\n\n  66\n%\n \n\nBrake-related products (1)\n\n  28\n%\n\n  29\n%\n\n  30\n%\n \n\nOther products\n\n  4\n%\n\n  4\n%\n\n  4\n%\n \n\n \n\n  100\n%\n\n  100\n%\n\n  100\n%\n \n\n \n\n(1)\n\nDuring the year ended March 31, 2026, the Company combined its wheel hub products into its brake-related products. Prior year amounts have been recast to conform to the current year presentation.\n\n \n\nSignificant Supplier Concentrations\n\n \n\nNo suppliers accounted for more than 10% of the Company’s inventory purchases for the years ended March 31, 2026, 2025, and 2024.\n\n \n\n17. Income Taxes\n\n \n\nDomestic and foreign components of income (loss) before income taxes are as follows:\n\n \n\nYears Ended March 31,  \n\n \n\n \n\n2026\n \n\n \n\n2025\n \n\n \n\n2024\n \n\nDomestic and foreign components of (loss) income\n\n    \n\n    \n\n    \n\nUnited States\n\n $(7,708,000) \n\n $(21,526,000) \n\n $(29,661,000) \n\nForeign\n\n  27,977,000 \n\n  5,839,000 \n\n  16,593,000 \n\nIncome (loss) before income taxes\n\n  20,269,000 \n\n  (15,687,000) \n\n  (13,068,000) \n\n \n\nF-31\n\n[Table of Contents](#tableOfContents0)\n\nThe income tax expense is as follows:\n\n \n\n \n\nYears Ended March 31,  \n\n \n\n \n\n2026\n \n\n \n\n2025\n \n\n \n\n2024\n \n\nCurrent tax (benefit) expense\n\n    \n\n    \n\n    \n\nFederal\n\n $(181,000) \n\n $1,177,000 \n\n $1,696,000 \n\nState\n\n  236,000 \n\n  631,000 \n\n  363,000 \n\nForeign\n\n  7,272,000 \n\n  3,780,000 \n\n  4,553,000 \n\nTotal current tax expense\n\n  7,327,000 \n\n  5,588,000 \n\n  6,612,000 \n\nDeferred tax (benefit) expense\n\n    \n\n    \n\n    \n\nFederal\n\n  (122,000) \n\n  (171,000) \n\n  25,320,000 \n\nState\n\n  173,000 \n\n  (28,000) \n\n  4,249,000 \n\nForeign\n\n  497,000 \n\n  (1,606,000) \n\n  (5,000) \n\nTotal deferred tax (benefit) expense\n\n  548,000 \n\n  (1,805,000) \n\n  29,564,000 \n\nTotal income tax expense\n\n $7,875,000 \n\n $3,783,000 \n\n $36,176,000 \n\n \n\nDeferred income taxes consist of the following:\n\n \n\n         \n\n \n\n \n\nMarch 31, 2026\n \n\n \n\nMarch 31, 2025\n \n\nAssets\n\n    \n\n    \n\nAllowance for bad debts\n\n $72,000 \n\n $48,000 \n\nCustomer allowances earned\n\n  4,310,000 \n\n  3,794,000 \n\nAllowance for stock adjustment returns\n\n  3,794,000 \n\n  3,344,000 \n\nInventory adjustments\n\n  7,925,000 \n\n  8,497,000 \n\nIntangibles, net\n\n  722,000 \n\n  729,000 \n\nStock options\n\n  2,352,000 \n\n  2,561,000 \n\nOperating lease liabilities\n\n  16,799,000 \n\n  19,333,000 \n\nEstimate for returns\n\n  34,262,000 \n\n  30,341,000 \n\nAccrued compensation\n\n  2,917,000 \n\n  2,585,000 \n\nNet operating losses\n\n  3,883,000 \n\n  3,426,000 \n\nTax credits\n\n  1,858,000 \n\n  2,857,000 \n\nCapitalized research credits\n\n  114,000 \n\n  1,147,000 \n\nPlant and equipment, net\n\n  2,085,000 \n\n  1,460,000 \n\nOther\n\n  5,996,000 \n\n  4,639,000 \n\nTotal deferred tax assets\n\n $87,089,000 \n\n $84,761,000 \n\nLiabilities\n\n    \n\n    \n\nContract assets\n\n  (10,706,000) \n\n  (9,020,000) \n\nOperating lease assets\n\n  (16,069,000) \n\n  (16,848,000) \n\nOther\n\n  (2,035,000) \n\n  (2,453,000) \n\nTotal deferred tax liabilities\n\n $(28,810,000) \n\n $(28,321,000) \n\nLess: valuation allowance\n\n $(54,665,000) \n\n $(52,233,000) \n\nTotal deferred taxes\n\n $3,614,000 \n\n $4,207,000 \n\n \n\nF-32\n\n[Table of Contents](#tableOfContents0)\n\nAs of March 31, 2026, before tax effect, the Company had federal, state, and foreign net operating loss carryforwards. These net operating loss (“NOL”) carryforwards were generated in various tax years and have different expiration periods depending on the applicable laws at the time they were generated. As of March 31, 2026, the Company’s NOL carryforwards are as follows (i) $337,000 in federal NOL carryforwards, with limited carryforward, that were generated before January 1, 2018 and will expire beginning in fiscal year 2034, (ii) $1,442,000 in federal NOL carryforwards, with unlimited carryforward, that were generated after December 31, 2017 and can be carried forward indefinitely, subject to an annual limitation of 80% of taxable income, (iii) $123,000 in state NOL carryforwards, with limited carryforward, that were generated from states with various carryforward periods and will expire beginning in fiscal year 2032 with amounts and expiration periods varying by state, (iv) $50,000 in state NOL carryforwards, with unlimited carryforward, that were generated from states with indefinite carryforward, subject to specific annual limitations on utilization varying by state, and (v) $13,305,000 in Canadian NOL carryforwards, with limited carryforward, that can be carried forward for up to 20 years and expire beginning in fiscal year 2038. As of March 31, 2026, the Company also had non-US tax credit carryforwards of $1,687,000, which will expire beginning in fiscal year 2034.\n\n \n\nRealization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans. A valuation allowance is established when the Company believes it is not more likely than not all or some deferred tax assets will be realized. In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, past financial performance, and tax planning strategies. The net increase in the valuation allowance was $2,432,000 during the year ended March 31, 2026. This net increase in the valuation allowance is primarily due to the increase in the Company’s U.S. federal and various state deferred tax assets and an increase in one of its Canadian subsidiary’s deferred tax assets resulting from current year activities. The Company will continue to monitor its position in future periods. Should the actual amount differ from the Company’s estimates, the amount of any valuation allowance could be impacted.\n\n \n\nFor the years ended March 31, 2026, 2025, and 2024, the primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) change in realizable deferred tax items, (iv) foreign income taxed at rates that are different from the federal statutory rate, (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m), and (vi) impact of an excess tax benefit from share-based compensation.\n\n \n\nF-33\n\n[Table of Contents](#tableOfContents0)\n\nThe difference between income tax expense at the federal statutory rate and the Company’s effective tax rate, as required under ASU 2023-09, is as follows:\n\n \n\n \n\n   \n \n   \n \n\n \n\nYear Ended March 31,  \n\n \n\n2026  \n\nStatutory federal income tax rate\n\n $4,256,000\n \n  21.0\n%\n\nState and local income taxes, net of federal income tax effect (1)\n\n  347,000\n \n  1.7\n%\n\nForeign tax effects\n\n   \n \n   \n \n\nMexico\n\n   \n \n   \n \n\nTax rate differential\n\n  1,505,000\n \n  7.4\n%\n\nChange in valuation allowance\n\n (696,000\n)\n  (3.4\n)%\n\nCanada\n\n   \n \n   \n \n\nTax rate differential\n\n (235,000\n)\n  (1.1\n)%\n\nChange in valuation allowance\n\n  1,315,000\n \n  6.5\n%\n\nOther\n\n  15,000\n \n  0.1\n%\n\nEffect of changes in tax laws or rates enacted in the current period\n\n  -\n \n  -\n%\n\nEffect of cross-border tax laws\n\n  609,000\n \n  3.0\n%\n\nTax credits\n\n   \n \n   \n \n\nResearch and development credit\n\n (256,000\n)\n  (1.3\n)%\n\nChange in valuation allowance\n\n  1,366,000\n \n  6.8\n%\n\nNontaxable or nondeductible items\n\n   \n \n   \n \n\nNon-deductible executive compensation\n\n  524,000\n \n  2.6\n%\n\nExcess tax benefit from share-based compensation\n\n (374,000\n)\n  (1.9\n)%\n\nOther\n\n  90,000\n \n  0.4\n%\n\nChange in unrecognized tax benefits\n\n (405,000\n)\n  (2.0\n)%\n\nOther adjustments\n\n (186,000\n)\n  (0.9\n)%\n\n \n\n   \n \n   \n \n\n \n\n $7,875,000\n \n  38.9\n%\n\n \n\n(1)\n\nState taxes in California, Illinois, and Pennsylvania made up the majority (greater than 50%) of the tax effect in this category\n\n \n\nThe difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate, prior to the adoption of ASU 2023-09, is as follows:\n\n \n\n \n\n   \n \n\n   \n \n\n \n\nYears Ended March 31,  \n\n \n\n2025 \n\n2024 \n\nStatutory federal income tax rate\n\n  21\n%\n\n  21\n%\n\nState income tax rate, net of federal benefit\n\n  1.5\n%\n\n  10.8\n%\n\nExcess tax benefit from share-based compensation\n\n  (1.3\n)%\n\n  (4.8\n)%\n\nForeign income taxed at different rates\n\n  (3.8\n)%\n\n  (9.8\n)%\n\nNon-deductible debt costs\n\n  (1.2\n)%\n\n  -\n%\n\nNon-deductible executive compensation\n\n  (2.5\n)%\n\n  (2.6\n)%\n\nChange in valuation allowance\n\n  (40.1\n)%\n\n  (289.1\n)%\n\nUncertain tax positions\n\n  2.6\n%\n\n  0.9\n%\n\nResearch and development credit\n\n  0.6\n%\n\n  0.7\n%\n\nOther\n\n  (0.9\n)%\n\n  (3.9\n)%\n\n \n\n  (24.1\n)%\n\n  (276.8\n)%\n\n \n\nF-34\n\n[Table of Contents](#tableOfContents0)\n\nCash paid for income taxes by jurisdiction, net of refunds received, as required under ASU 2023-09, is as follows:\n\n \n\n \n\n  \n\nYear Ended March 31,\n \n\n \n\n  \n\n2026\n \n\nCash paid for income taxes:\n\n    \n\nFederal\n\n$1,810,000 \n\nState\n\n  174,000 \n\nForeign\n\n    \n\nMexico\n\n  5,824,000 \n\nOther jurisdictions\n\n  272,000 \n\nTotal cash paid for income taxes\n\n $8,080,000 \n\n \n\nThe Company and its subsidiaries file income tax returns for the U.S. federal, various state, and foreign jurisdictions with varying statutes of limitations. At March 31, 2026, the Company remains subject to examination for fiscal years ended March 31, 2023 and forward. At March 31, 2026, the Company is under examination in the U.S. by the Internal Revenue Service for fiscal year 2024. The Company is not under examination in any another jurisdiction. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.\n\n \n\nA reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:\n\n \n\n \n\n    \n\n    \n\n    \n\n \n\nYears Ended March 31,  \n\n \n\n \n\n2026\n \n\n \n\n2025\n \n\n \n\n2024\n \n\nBalance at beginning of period\n\n $1,362,000 \n\n $1,784,000 \n\n $1,964,000 \n\nAdditions based on tax positions related to the current year\n\n  12,000 \n\n  53,000 \n\n  15,000 \n\nAdditions for tax positions of prior year\n\n  - \n\n  43,000 \n\n  15,000 \n\nReductions for tax positions of prior year\n\n  (461,000) \n\n  (518,000) \n\n  (210,000) \n\nBalance at end of period\n\n $913,000 \n\n $1,362,000 \n\n $1,784,000 \n\n \n\nAt March 31, 2026, 2025 and 2024, there are $725,000, $1,112,000, and $1,475,000, respectively, of unrecognized tax benefits that if recognized would affect the annual effective tax rate.\n\n \n\nThe Company recognizes interest and penalties related to unrecognized tax benefits as part of income tax expense. During the years ended March 31, 2026, 2025, and 2024, the Company recognized interest and penalties of approximately $44,000, $49,000, and $21,000, respectively. The Company had approximately $184,000 and $203,000 for the payment of interest and penalties accrued at March 31, 2026 and 2025, respectively.\n\n \n\nThe Company intends to indefinitely reinvest its undistributed earnings from foreign subsidiaries in foreign operations, with the exception of earnings from its Singapore subsidiary. No incremental U.S. federal tax or withholding taxes have been provided for these earnings.\n\n \n\n18. Defined Contribution Plans\n\n \n\nThe Company has a 401(k) retirement plan covering all employees who are 21 years of age with at least six months of service. The plan permits eligible employees to make contributions up to certain limitations, with the Company matching 50% of each participating employee’s contribution up to the first 6% of employee compensation. Employees are immediately vested in their voluntary employee contributions and vest in the Company’s matching contributions ratably over five years. The Company’s matching contribution to the 401(k) retirement plan was $648,000, $626,000, and $148,000 for the years ended March 31, 2026, 2025, and 2024, respectively. During the year ended March 31, 2024, the Company’s matching contributions under its 401(k) retirement plan were temporarily halted through February 2024 when they were reinstated.\n\n \n\nF-35\n\n[Table of Contents](#tableOfContents0)\n\n19. Share-based Payments\n\n \n\n2022 Incentive Award Plan (the “2022 Plan”)\n\n \n\nIn September 2022, the Company’s shareholders approved the 2022 Incentive Award Plan (the “2022 Plan”). Under the 2022 Plan, a total of 924,200 shares of the Company’s common stock were reserved for grants to its employees, non-employee directors, and consultants. In September 2024, the shareholders approved an amendment to the 2022 Plan that increased the number of shares of common stock reserved for grant under the 2022 Plan from 924,200 to 2,655,200. At March 31, 2026 and 2025, respectively, there were (i) 130,533 and 130,933 options to purchase shares of common stock outstanding, (ii) 684,720 and 452,531 shares of restricted stock units outstanding, and (iii) 744,542 and 644,679 shares of performance stock units outstanding under the 2022 Plan. There were 777,699 and 1,516,084 shares of common stock available for grant under the 2022 Plan at March 31, 2026 and 2025, respectively.\n\n \n\n2010 Incentive Award Plan\n\n \n\nAt March 31, 2026 and 2025, there were 835,301 and 922,628, respectively, options to purchase shares of common stock outstanding under the 2010 Incentive Award Plan. At March 31, 2026, there were no shares of restricted stock or performance stock units outstanding under the 2010 Incentive Award Plan. At March 31, 2025, there were 52,842 shares of restricted stock units outstanding and 119,708 shares of performance stock units outstanding under the 2010 Incentive Award Plan. No shares of common stock remain available for grant under this plan.\n\n \n\nStock Options\n\n \n\nThe Company did not grant any stock options during the years ended March 31, 2026 and 2025, and options to purchase 132,133 shares of common stock were granted during the year ended March 31, 2024. The following summarizes the Black-Scholes option-pricing model assumptions used to derive the weighted average fair value of the stock options granted during the year ended March 31, 2024.\n\n \n\n       \n\n \nYear Ended March 31, \n\n \n2024 \n\nWeighted average risk free interest rate\n  4.53 %\n\nWeighted average expected holding period (years)\n  6.57  \n\nWeighted average expected volatility\n  51.29 %\n\nWeighted average expected dividend yield\n  -  \n\nWeighted average fair value of options granted\n  3.75  \n\n \n\nThe following is a summary of stock option transactions:\n\n \n\n \n  \n  \n  \n  \n\n \n  \n\nNumber of\n \n\n Weighted Average \n\n \n  \n\nShares\n \n\n Exercise Price \n\nOutstanding at March 31, 2025\n\n  \n1,053,561 \n $\n20.20 \n\nExercised\n\n  \n(6,466) \n $\n15.59 \n\nForfeited/Cancelled\n\n  \n(13,061) \n $\n20.08 \n\nExpired\n\n  \n(68,200) \n $\n31.13 \n\nOutstanding at March 31, 2026\n\n  \n965,834 \n $\n19.47 \n\n \n\nAt March 31, 2026, options to purchase 43,245 shares of common stock were unvested at the weighted average exercise price of $9.32.\n\n \n\nThe pre-tax intrinsic value of options exercised during the year ended March 31, 2026 was $7,000 based on the market value of the Company’s common stock at March 31, 2026. No options were exercised during the years ended March 31, 2625 and 2024. The total fair value of stock options vested during the years ended March 31, 2026, 2025, and 2024 was $164,000, $164,000, and $324,000, respectively.\n\n \n\nF-36\n\n[Table of Contents](#tableOfContents0)\n\nThe following summarizes information about the options outstanding at March 31, 2026:\n\n                                 \n\n                                 \n\n    Options Outstanding         Options Exercisable    \n\n               Weighted                     Weighted       \n\n          Weighted      Average                Weighted      Average       \n\n          Average      Remaining      Aggregate           Average      Remaining      Aggregate  \n\nRange of\n        Exercise      Life      Intrinsic           Exercise      Life      Intrinsic  \n\nExercise price\n  Shares    Price    In Years    Value    Shares   \nPrice    In Years   \nValue \n\n                                         \n\n$9.32 to $17.38\n  322,923   $12.89    5.49   $227,000    279,678   $13.44    5.18   $152,000 \n\n$19.00 to $22.73\n  399,287    19.58    2.78         399,287    19.58    2.78      \n\n$25.21 to $27.40\n  124,500    27.33    1.22         124,500    27.33    1.22      \n\n$28.68 to $30.31\n  119,124    28.72    0.25         119,124    28.72    0.25      \n\n                                         \n\n    965,834   $19.47    3.17   $227,000    922,589   $19.95    2.97   $152,000 \n\n \n\nThe aggregate intrinsic values in the above table represent the pre-tax value of all in-the-money options if all such options had been exercised on March 31, 2026 based on the Company’s closing stock price of $11.06 as of that date.\n\n \n\nAt March 31, 2026, there was $77,000 of total unrecognized compensation expense from stock-based compensation granted under the plans, which is related to non-vested shares. The compensation expense is expected to be recognized over a weighted average vesting period of 0.5 years.\n\n \n\nRestricted Stock Units and Restricted Stock (collectively “RSUs”)\n\n \n\nDuring the years ended March 31, 2026, 2025, and 2024 the Company granted 487,597, 453,453, and 100,624, respectively, of time-based vesting restricted stock units, based on the closing market price on the grant date. The estimated grant date fair value of the RSUs of $5,047,000, $2,984,000, and $800,000, for the years ended March 31, 2026, 2025, and 2024, respectively, was based on the closing market price on the date of grant. The fair value related to these awards is recognized as compensation expense over the vesting period. These awards generally vest in three equal installments beginning each anniversary from the grant date, subject to continued employment. Upon vesting, these awards may be net share settled to cover the required withholding tax with the remaining amount converted into an equivalent number of shares of common stock. Total shares withheld during the years ended March 31, 2026, 2025, and 2024 were 51,387, 19,761, and 42,720, respectively, based on the value of these awards as determined by the Company’s closing stock price on the vesting date.\n\n \n\nThe following is a summary of non-vested RSUs:\n\n \n\n         \n\n \n \n\nNumber of\nShares\n \n \n\nWeighted Average\nGrant Date Fair\nValue\n \n\n \n    \n    \n\nOutstanding at March 31, 2025\n\n  505,373 \n $7.26 \n\nGranted\n\n  487,597 \n $10.35 \n\nVested\n\n  (289,872) \n $7.99 \n\nForfeited/Cancelled\n\n  (18,378) \n $11.62 \n\nOutstanding at March 31, 2026\n\n  684,720 \n $9.03 \n\n \n\nAs of March 31, 2026, there was $4,358,000 of unrecognized compensation expense related to these awards, which will be recognized over the remaining vesting period of approximately 2.0 years.\n\n \n\nF-37\n\n[Table of Contents](#tableOfContents0)\n\nPerformance Stock Units (“PSUs”)\n\n \n\nDuring the year ended March 31, 2026, the Company granted 353,778 PSUs (at target performance levels) based on the Company’s stock price or a total shareholder return (“TSR”) market conditions. During the year ended March 31, 2025, the Company granted 258,983 PSUs (at target performance levels), based on a TSR market condition. During the year ended March 31, 2024, the Company granted 585,583 PSUs based on the Company’s stock price market condition. All PSUs granted have a three-year performance period, subject to continued employment. The estimated grant date fair value of the PSUs of $3,738,000, $2,264,000, and $2,637,000, for the years ended March 31, 2026, 2025, and 2024, respectively, was based on the estimated fair value of the award using the Monte Carlo valuation model for performance stock units subject to market conditions.\n\n \n\nStock Price PSUs\n\n \n\nDuring the year ended March 31, 2026, the Company granted 176,893 PSUs (at target performance levels), which vest as follows: (i) if the stock price is greater than or equal to $15.00 per share, then 1/3 of the grant will vest, (ii) if the stock price is greater than or equal to $17.00 per share then the next 1/3 of the grant will vest, and (iii) if the stock price is greater than or equal to $20.00 per share then the final 1/3 of the grant will vest. Recipients are eligible to vest in between 50% and 150% of the third tranche by achieving a stock price between $18.00 and $22.00 per share (each stock price target must be met for thirty consecutive trading days). The Company calculated the fair value of these PSUs individually for each tranche using the Monte Carlo Simulation Model at the grant date. Compensation cost is recognized over the estimated derived service period. Compensation cost related to these awards will not be adjusted even if the market condition is not met.\n\n \n\nDuring the year ended March 31, 2025, the Company did not grant any PSUs based on the Company’s stock price.\n\n \n\nDuring the year ended March 31, 2024, the Company granted 585,583 PSUs, which vest as follows: (i) if the stock price is greater than or equal to $10.00 per share, then 1/3 of the grant will vest, (ii) if the stock price is greater than or equal to $15.00 per share then the next 1/3 of the grant will vest, and (iii) if the stock price is greater than or equal to $20.00 per share then the final 1/3 of the grant will vest. Recipients are eligible to vest in between 50% and 150% of the third tranche by achieving a stock price between $17.50 and $25.00 per share (each stock price target must be met for thirty consecutive trading days). The Company calculated the fair value of these PSUs individually for each tranche using the Monte Carlo Simulation Model at the grant date. Compensation cost is recognized over the estimated derived service period. Compensation cost related to these awards will not be adjusted even if the market condition is not met.\n\n \n\nTSR PSUs\n\n \n\nDuring the years ended March 31, 2026 and 2025, the Company granted 176,885 and 258,983 PSUs (at target performance levels), respectively, which cliff vest and the number of shares earned at the end of the three-year performance period will vary, based only on actual performance, from 0% to 150% of the target number of PSUs granted, depending on the Company’s TSR percentile rank relative to that of a peer group over the performance period. TSR is measured based on a comparison of the closing price on the first trading day of the performance period and the average closing price over the last 30 trading days of the performance period. TSR is considered a market condition because it measures the Company’s return against the performance of the Russell 3000, excluding companies classified as financials and real estate and companies with a market capitalization of more than $600 million, as of the start of the performance period. Compensation cost is determined at the grant date and recognized on a straight-line basis over the requisite service period to the extent the conditions are deemed probable. Compensation cost related to the TSR award will not be adjusted even if the market condition is not met.\n\n \n\nDuring the year ended March 31, 2024, the Company did not grant any PSUs based on a TSR market condition.\n\n \n\nF-38\n\n[Table of Contents](#tableOfContents0)\n\nThe fair value of PSUs subject to a market condition is determined using the Monte Carlo simulation model. The following table summarizes the assumptions used in determining the fair value of the awards subject to market conditions:\n\n \n\n             \n\n \n \n\nYear Ended March 31,\n\n \n\n \n \n\n2026\n\n \n \n\n2025\n\n \n \n\n2024\n\n \n\nRisk free interest rate\n\n  3.86%\n  \n4.21-4.45\n%\n  \n4.32-4.35 \n%\n\nExpected life in years\n\n  0.7-3.0 \n  3 \n  0.2-1.8 \n\nExpected volatility of MPA common stock\n\n  66.8%\n  \n59.8-62.8\n%\n  \n54.2-55.1\n%\n\nAverage correlation coefficient of peer companies\n\n  15.7%\n  \n16.5-17.4\n \n   -  \n\nExpected dividend yield\n\n   -  \n   -  \n   -  \n\nGrant date fair value\n\n $\n     7.33-12.68\n \n $\n     8.65-8.88\n \n $\n     3.57-8.37\n \n\n \n\nUpon vesting, these awards may be net share settled to cover the required withholding tax with the remaining amount converted into an equivalent number of shares of common stock. Total shares withheld during the years ended March 31, 2026 and 2025 were 94,771 and 75,491, respectively, based on the value of these awards as determined by the Company’s closing stock price on the vesting date. No shares were withheld during the year ended March 31, 2024 since no PSUs were vested during those years.\n\n \n\nThe following is a summary of non-vested PSUs:\n\n \n\n \n \n\nNumber of\nShares\n \n \n\nWeighted Average\nGrant Date Fair\nValue\n \n\nOutstanding at March 31, 2025\n\n  764,387 \n $7.42 \n\nGranted\n\n  353,778 \n $10.57 \n\nVested\n\n  (294,540) \n $6.77 \n\nForfeited/Cancelled\n\n  (79,083) \n $13.36 \n\nOutstanding at March 31, 2026\n\n  744,542 \n $8.54 \n\n \n\nAt March 31, 2026, there was $2,899,000 of unrecognized compensation expense related to these awards, which will be recognized over the weighted average remaining vesting period of approximately 1.7 years.\n\n \n\n20. Segment Information\n\n \n\nThe Company has identified its Chief Executive Officer as its chief operating decision maker (“CODM”). The Company has identified its operating segments based on the nature of the products the Company sells, the Company’s organizational and management reporting structure, and the operating results that are regularly reviewed by the Company’s CODM to make decisions about the resources to be allocated to the business units and to assess performance. The CODM primarily uses operating income to evaluate the performance of the Company’s operating segments and to allocate resources.\n\n \n\nThe Company’s three operating segments are:\n\n \n\n●\n\nHard Parts, which include (i) light duty rotating electric products such as alternators and starters and (ii) brake-related products, which includes brake calipers, brake boosters, brake rotors, brake pads and brake master cylinders, and wheel hub assemblies and bearings,\n\n●\n\nTest Solutions and Diagnostic Equipment, which includes (i) applications for combustion engine vehicles, including bench-top testers for alternators and starters, (ii) equipment for the pre- and post-production of electric vehicles, and (iii) software emulation of power system applications for the electrification of all forms of transportation (including automobiles, trucks, the emerging electrification of systems within the aerospace industry, and electric vehicle charging stations), and\n\n●\n\nHeavy Duty, which includes non-discretionary automotive aftermarket replacement hard parts for heavy-duty truck, industrial, marine, and agricultural applications.\n\n \n\nF-39\n\n[Table of Contents](#tableOfContents0)\n\nThe Company’s Hard Parts operating segment meets the criteria of a reportable segment. The Test Solutions and Diagnostic Equipment and Heavy Duty segments are not material, and are not required to be separately reported.\n\n \n\nFinancial information relating to the Company’s segments is as follows:\n\n \n\n             \n\n \n  Years Ended March 31,    \n\n \n\n \n  2026  \n  2025  \n  2024  \n\n \n    \n    \n    \n\nNet sales to external customers for Hard Parts reportable segment\n\n $741,243,000 \n $707,210,000 \n $669,904,000 \n\nIntersegment sales for Hard Parts reportable segment\n\n  701,000 \n  1,016,000 \n  895,000 \n\nTotal net sales for Hard Parts reportable segment\n\n  741,944,000 \n  708,226,000 \n  670,799,000 \n\n \n    \n    \n    \n\nReconciliation of net sales\n\n    \n    \n    \n\nOther net sales (1)\n\n  48,563,000 \n  50,144,000 \n  47,780,000 \n\nElimination of intersegment net sales\n\n  (701,000) \n  (1,016,000) \n  (895,000) \n\nTotal consolidated net sales\n\n $789,806,000 \n $757,354,000 \n $717,684,000 \n\n \n    \n    \n    \n\nLess (2):\n\n    \n    \n    \n\nMaterial, labor, and overhead expenses\n\n  460,623,000 \n  465,656,000 \n  450,913,000 \n\nLogistic expenses (3)\n\n  131,205,000 \n  99,264,000 \n  92,969,000 \n\nRevaluation of cores on customers' shelves\n\n  3,590,000 \n  2,805,000 \n  5,353,000 \n\nForeign exchange impact of lease liabilities and forward contracts\n\n  (8,924,000) \n  15,892,000 \n  (3,814,000) \n\nOther segment items (4)\n\n  88,028,000 \n  83,693,000 \n  76,878,000 \n\nTotal operating income for Hard Parts reportable segment\n\n $67,422,000 \n $40,916,000 \n $48,500,000 \n\n \n    \n    \n    \n\nReconciliation of profit (loss)\n\n    \n    \n    \n\nOther operating loss (1)\n\n  (1,624,000) \n  (1,064,000) \n  (2,431,000) \n\nElimination of intersegment operating income\n\n  37,000 \n  71,000 \n  51,000 \n\nInterest expense, net\n\n  (46,696,000) \n  (55,550,000) \n  (60,040,000) \n\nChange in fair value of compound net derivative liability\n\n  1,130,000 \n  (60,000) \n  1,020,000 \n\nLoss on extinguishment of debt\n\n   -  \n   -  \n  (168,000) \n\nTotal consolidated income (loss) before income tax expense\n\n $20,269,000 \n $(15,687,000) \n $(13,068,000) \n\n \n    \n    \n    \n\nReconciliations of other significant items and assets:\n\n    \n    \n    \n\n \n    \n    \n    \n\nDepreciation and amortization\n\n    \n    \n    \n\nDepreciation and amortization for Hard Parts reportable segment (5)\n\n $8,454,000 \n $9,579,000 \n $10,371,000 \n\nOther depreciation and amortization (1)\n\n  1,334,000 \n  821,000 \n  1,248,000 \n\nTotal consolidated depreciation and amortization\n\n $9,788,000 \n $10,400,000 \n $11,619,000 \n\n \n    \n    \n    \n\nCapital Expenditures\n\n    \n    \n    \n\nCaptial expenditures for Hard Parts reportable segment\n\n $2,136,000 \n $3,445,000 \n $621,000 \n\nOther capital expenditures (1)\n\n  1,560,000 \n  1,133,000 \n  379,000 \n\nTotal consolidated capital expenditures\n\n $3,696,000 \n $4,578,000 \n $1,000,000 \n\n \n    \n    \n    \n\nAssets\n\n \n\nMarch 31, 2026\n\n \n \n\nMarch 31, 2025\n\n \n    \n\nTotal assets for Hard Parts reportable segment\n\n $1,037,721,000 \n $967,178,000 \n    \n\nOther assets (1)\n\n  54,638,000 \n  58,355,000 \n    \n\nElimination of intersegment assets\n\n  (72,922,000) \n  (67,897,000) \n    \n\nTotal consolidated assets\n\n $1,019,437,000 \n $957,636,000 \n    \n\n(1)\n\nNet sales, operating loss, depreciation and amortization, capital expenditures, and assets from segments below the quantitative threshold are attributable to the Company’s Test Solutions and Diagnostic Equipment and the Heavy Duty operating segments. Neither of these two operating segments has ever met any of the quantitative thresholds for determining reportable segments.\n\n(2)\n\nThe significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM for the Company’s Hard Parts reportable segment. Intersegment expenses are included within the amounts shown.\n\n(3)\n\nLogistic expenses include freight, tariffs, and customs duties.\n\n(4)\n\nOther segment items include general and administrative expenses, sales and marketing expenses, and research and development expenses.\n\n(5)\n\nDepreciation and amortization for the Company’s Hard Parts reportable segment are included within material, labor, and overhead expenses and other segment items.\n\n \n\nF-40\n\n[Table of Contents](#tableOfContents0)\n\n21. Share Repurchase Program\n\n \n\nIn December 2025, the Company’s board of directors approved an increase in its share repurchase program from $37,000,000 to $57,000,000 of its common stock. During the year ended March 31, 2026, the Company repurchased 955,608 shares of its common stock for $11,351,000. During the year ended March 31, 2025, the Company repurchased 542,134 shares of its common stock for $4,832,000. During the year ended March 31, 2024, the Company did not repurchase any shares of its common stock. As of March 31, 2026, $34,928,000 was utilized and $22,072,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in the Company’s Credit Facility and Convertible Notes. The Company retired the 2,334,749 shares repurchased under this program through March 31, 2026. The Company’s share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.\n\n \n\n22. Related Party Transactions\n\n \n\nLease\n\n \n\nThe Company has an operating lease for its 35,000 square foot manufacturing, warehouse, and office facility in Ontario, Canada, with a company co-owned by a member of management. The Company renewed this operating lease for an additional three-year period, effective January 1, 2025. The rent expense recorded for the related party lease was $374,000, $332,000 and $328,000 for the years ended March 31, 2026, 2025, and 2024, respectively.\n\n \n\nConvertible Note and Election of New Director\n\n \n\nOn March 31, 2023, the Company entered into the Note Purchase Agreement with Bison Capital Partners VI, L.P. and Bison Capital Partners VI-A, L.P., and Bison Capital Partners VI, L.P. as the Purchaser Representative, for the issuance and sale of the Convertible Notes. In connection with the issuance of the Convertible Notes and at the recommendation of the Nominating and Corporate Governance Committee of the Board and in connection with the bylaws of the Company, the Board appointed Douglas Trussler, a co-founder of Bison Capital in 2001, to the Board. Mr. Trussler’s compensation is consistent with the Company’s previously disclosed standard compensation practices for non-employee directors, other than Mr. Trussler does not accept the annual grant of equity to non-employee directors, which are described in the Company’s Definitive Proxy Statement, filed with the SEC on July 29, 2025. There are no other transactions between Mr. Trussler and the Company that would be reportable under Item 404(a) of Regulation S-K.\n\n \n\nF-41\n\n[Table of Contents](#tableOfContents0)\n\nSchedule II — Valuation and Qualifying Accounts\n\n \n\nAccounts Receivable — Allowance for credit losses\n\n \n\n                   \n\n \n  \n    \n  \n\nCharge to\n \n    \n    \n\n \n  \n  \n\nBalance at\n \n  \n\n(recovery of)\n \n    \n  \n\nBalance at\n \n\nYears Ended\n\n  \n  \n\nbeginning of\n \n  \n\nbad debts\n \n  \n\nAmounts\n \n  \n\nend of\n \n\nMarch 31,\n\n \n\nDescription\n\n \nyear \n \nexpense \n \nwritten off \n \nyear \n\n2026\n\n \n\nAllowance for credit losses\n\n $207,000 \n $94,000 \n $10,000 \n $291,000 \n\n2025\n\n \n\nAllowance for credit losses\n\n $189,000 \n $42,000 \n $24,000 \n $207,000 \n\n2024\n\n \n\nAllowance for credit losses\n\n $339,000 \n $(133,000) \n $17,000 \n $189,000 \n\n \n\nAccounts Receivable — Allowance for customer-payment discrepancies\n\n \n\n                   \n\n \n  \n  \n\nBalance at\n \n  \n\nCharge to\n \n    \n  \n\nBalance at\n \n\nYears Ended\n\n  \n  \n\nbeginning of\n \n  \n\ndiscrepancies\n \n  \n\nAmounts\n \n  \n\nend of\n \n\nMarch 31,\n\n \n\nDescription\n\n \nyear \n \nexpense \n \nProcessed \n \nyear \n\n2026\n\n \n\nAllowance for customer-payment discrepancies\n\n $1,765,000 \n $570,000 \n $703,000 \n $1,632,000 \n\n2025\n\n \n\nAllowance for customer-payment discrepancies\n\n $1,206,000 \n $1,507,000 \n $948,000 \n $1,765,000 \n\n2024\n\n \n\nAllowance for customer-payment discrepancies\n\n $1,634,000 \n $1,452,000 \n $1,880,000 \n $1,206,000 \n\n \n\nInventory — Allowance for excess and obsolete inventory\n\n \n\n                   \n\n \n  \n    \n  \n\nProvision for\n \n    \n    \n\n \n  \n  \n\nBalance at\n \n  \n\nexcess and\n \n    \n  \n\nBalance at\n \n\nYears Ended\n\n  \n  \n\nbeginning of\n \n  \n\nobsolete\n \n  \n\nAmounts\n \n  \n\nend of\n \n\nMarch 31,\n\n \n\nDescription\n\n \nyear \n \ninventory \n \nwritten off \n \nyear \n\n2026\n\n \n\nAllowance for excess and obsolete inventory\n\n $18,964,000 \n $9,891,000 \n $9,853,000 \n $19,002,000 \n\n2025\n\n \n\nAllowance for excess and obsolete inventory\n\n $17,372,000 \n $15,009,000 \n $13,417,000 \n $18,964,000 \n\n2024\n\n \n\nAllowance for excess and obsolete inventory\n\n $16,436,000 \n $16,233,000 \n $15,297,000 \n $17,372,000 \n\n \n\nDeferred Tax Assets — Valuation allowance for deferred tax assets\n\n \n\n                   \n\n \n  \n  \n\nBalance at\n \n  \n\nCharge to\n \n    \n  \n\nBalance at\n \n\nYears Ended\n\n  \n  \n\nbeginning of\n \n  \n\nincome tax\n \n  \n\nCharged to\n \n  \n\nend of\n \n\nMarch 31,\n\n \n\nDescription\n\n \nyear \n \nexpense \n \nOther Accounts \n \nyear \n\n2026\n\n \n\nValuation allowance for deferred tax assets\n\n $52,233,000 \n $2,432,000 \n $ -  \n $54,665,000 \n\n2025\n\n \n\nValuation allowance for deferred tax 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