MOTORCAR PARTS OF AMERICA INC
For the period ended Dec 31, 2025. Filed Feb 9, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2025 · Filed Feb 9, 2026
MPAA$10.52+3.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-10.
0001140361-25-041376
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-12-31; filed 2026-02-09.
0001140361-26-004387
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 113 current paragraphs.
72 unchanged; 35 reworded; 6 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Net Sales. Our consolidated net sales for the three months ended December 31, 2025 were $167,697,000, which represents a decrease of $18,479,000, or 9.9%, from the three months ended December 31, 2024 of $186,176,000. This decrease in sales was primarily due to the continued impact of lower purchases by one of our largest customers during the three months ended December 31, 2025 compared with the three months ended December 31, 2024.
Current report
General and Administrative. Our general and administrative expenses for the three months ended December 31, 2025 were $15,328,000, which represents a decrease of $884,000, or 5.5%, from the three months ended December 31, 2024 of $16,212,000. This decrease was primarily due to $1,225,000 of lower employee incentives partially offset by $397,000 of severance due to headcount reductions.
Current report
Interim Reporting
Current report
In 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. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.
Current report
Codification Improvements
Current report
In 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. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures.
Removed paragraphs (2)
Previous report
General and Administrative. Our general and administrative expenses for the three months ended September 30, 2025 were $17,086,000, which represents an increase of $2,034,000, or 13.5%, from the three months ended September 30, 2024 of $15,052,000. This increase was primarily due to (i) $967,000 of increased share-based compensation and (ii) $702,000 of increased general and administrative expenses due to the timing of expenses at our offshore locations.
Previous report
Net Sales. Our consolidated net sales for the six months ended September 30, 2025 were $409,834,000, which represents an increase of $31,761,000, or 8.4%, from the six months ended September 30, 2024 of $378,073,000. Our sales for the six months ended September 30, 2025 compared with the six months ended September 30, 2024 reflect strong demand for rotating electrical and brake-related products. In addition, our sales for the six months ended September 30, 2025 compared with the six months ended September 30, 2024 reflect the recognition of remanufactured core revenue of $14,797,000 in connection with the realignment of inventory at certain customer distribution centers offset by the timing of purchases by one of our largest customers.
Reworded paragraphs (35)
Previous wording
Gross Profit. Our consolidated gross profit was $42,727,000, or 19.3% of consolidated net sales, for the three months ended September 30, 2025 compared with $41,277,000, or 19.8% of consolidated net sales, for the three months ended September 30, 2024. The gross profit was impacted by $698,000 for net tariff costs paid for products sold before price increases were effective.
Current wording
Gross Profit. Our consolidated gross profit was $32,878,000, or 19.6% of consolidated net sales, for the three months ended December 31, 2025 compared with $44,882,000, or 24.1% of consolidated net sales, for the three months ended December 31, 2024. The decrease of 4.5% in gross margin was primarily due to lower sales as discussed above.
Previous wording
In addition, our gross margin for the three months ended September 30, 2025 and 2024 was impacted by (i) the continued amortization of core and finished goods premiums of $2,988,000 and $2,621,000, respectively and (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $1,225,000 and $1,164,000, respectively.
Current wording
In addition, our gross margin for the three months ended December 31, 2025 and 2024 was impacted by (i) the continued amortization of core and finished goods premiums of $2,980,000 and $2,664,000, respectively and (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $554,000 and $758,000, respectively.
Previous wording
Sales and Marketing. Our sales and marketing expenses for the three months ended September 30, 2025 were $6,811,000, which represents an increase of $977,000, or 16.7%, from the three months ended September 30, 2024 of $5,834,000. This increase was primarily due to (i) $459,000 of increased commissions expense and (ii) $359,000 from increased headcount to support our growth initiatives.
Current wording
Sales and Marketing. Our sales and marketing expenses for the three months ended December 31, 2025 were $6,350,000, which represents an increase of $729,000, or 13.0%, from the three months ended December 31, 2024 of $5,621,000. This increase was primarily due to (i) $257,000 from increased headcount to support our growth initiatives, (ii) $245,000 of increased advertising expense, and (iii) $212,000 of increased trade show expense.
Previous wording
Research and Development. Our research and development expenses for the three months ended September 30, 2025 were $3,928,000, which represents an increase of $1,485,000, or 60.8%, from the three months ended September 30, 2024 of $2,443,000. This increase was primarily due to (i) $787,000 for engineering-related professional services, (ii) $410,000 for increased headcount to support our new product introductions, and (iii) $286,000 of increased expense for supplies and our sample library.
Current wording
Research and Development. Our research and development expenses for the three months ended December 31, 2025 were $3,460,000, which represents an increase of $452,000, or 15.0%, from the three months ended December 31, 2024 of $3,008,000. This increase was primarily due to (i) $205,000 for engineering-related professional services, (ii) $123,000 for increased headcount to support our new product introductions, and (iii) $110,000 of increased expense for supplies and our sample library.
Previous wording
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $9,817,000 compared with a non-cash loss of $16,506,000 for the six months ended September 30, 2025 and 2024, respectively. This change during the six months ended September 30, 2025 compared with the six months ended September 30, 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of $5,469,000 compared with a non-cash loss of $9,687,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in a non-cash gain of $4,348,000 compared with a non-cash loss of $6,819,000, respectively, due to the changes in their fair values.
Current wording
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $594,000 compared with a non-cash loss of $2,460,000 for the three months ended December 31, 2025 and 2024, respectively. This change during the three months ended December 31, 2025 compared with the three months ended December 31, 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of $1,183,000 compared with a non-cash loss of $1,875,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in non-cash losses of $589,000 and $585,000, respectively, due to the changes in their fair values.
Previous wording
Consolidated Operating Income. Our consolidated operating income for the three months ended September 30, 2025 was $16,371,000 compared with $12,520,000 for the three months ended September 30, 2024. This increase was primarily due to (i) our foreign exchange impact of lease liabilities and forward contracts and (ii) other items as discussed above.
Current wording
Consolidated Operating Income. Our consolidated operating income for the three months ended December 31, 2025 was $8,334,000 compared with $17,581,000 for the three months ended December 31, 2024. This decrease was primarily due to the impact of lower sales partially offset by the foreign exchange remeasurement of lease liabilities and forward contracts, as discussed above.
Previous wording
Interest Expense, net. Our interest expense for the six months ended September 30, 2025 was $25,511,000, which represents a decrease of $3,058,000, or 10.7%, from interest expense for the six months ended September 30, 2024 of $28,569,000. This decrease was primarily due to (i) lower average outstanding balances under our credit facility and (ii) lower interest rates on both our credit facility and accounts receivable discount programs.
Current wording
Interest Expense, net. Our interest expense for the three months ended December 31, 2025 was $10,901,000, which represents a decrease of $3,534,000, or 24.5%, from interest expense for the three months ended December 31, 2024 of $14,435,000. This decrease was primarily due to (i) lower utilization of our accounts receivable discount programs, (ii) lower average outstanding balances under our credit facility, and (iii) lower interest rates on both our credit facility and accounts receivable discount programs.
Previous wording
Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability associated with the convertible notes issued on March 31, 2023 was a non-cash loss of $2,260,000 and $380,000 for the three months ended September 30, 2025 and 2024, respectively.
Current wording
Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability associated with the convertible notes issued on March 31, 2023 was a non-cash gain of $3,910,000 and $260,000 for the three months ended December 31, 2025 and 2024, respectively.
Previous wording
Income Tax. We recorded an income tax expense of $3,561,000, or an effective tax rate of 252.2%, and $912,000, or an effective tax rate of (44.7)%, for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate for the three months ended September 30, 2025, was primarily impacted by the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities and foreign income taxed at rates that are different from the federal statutory rate.
Current wording
Income Tax. We recorded an income tax benefit of $434,000, or an effective tax rate of (32.3)%, and income tax expense of $1,115,000, or an effective tax rate of 32.7%, for the three months ended December 31, 2025 and 2024, respectively. The effective tax rate for the three months ended December 31, 2025, was primarily impacted by the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities and foreign income taxed at rates that are different from the federal statutory rate.
Previous wording
Results of Operations for the Six Months Ended September 30, 2025 and 2024
Current wording
Results of Operations for the Nine Months Ended December 31, 2025 and 2024
Previous wording
Annualized finished goods turnover for the fiscal period is calculated by multiplying cost of goods sold for the period by 2 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal period. We believe this provides a useful measure of our ability to turn our inventory into revenues.
Current wording
Annualized finished goods turnover for the fiscal period is calculated by multiplying cost of goods sold for the period by 1.33 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal period. We believe this provides a useful measure of our ability to turn our inventory into revenues.
Previous wording
Net Sales. Our consolidated net sales for the three months ended September 30, 2025 were $221,470,000, which represents an increase of $13,284,000, or 6.4%, from the three months ended September 30, 2024 of $208,186,000. Our sales for the three months ended September 30, 2025 compared with the three months ended September 30, 2024 reflect the recognition of remanufactured core revenue of $14,797,000 in connection with the realignment of inventory at certain customer distribution centers offset by the timing of purchases by one of our largest customers.
Current wording
Net Sales. Our consolidated net sales for the nine months ended December 31, 2025 were $577,531,000, which represents an increase of $13,282,000, or 2.4%, from the nine months ended December 31, 2024 of $564,249,000. Our sales for the nine months ended December 31, 2025 compared with the nine months ended December 31, 2024 reflects the recognition of remanufactured core revenue of $14,797,000 in connection with the realignment of inventory at certain customer distribution centers.
Previous wording
Gross Profit. Our consolidated gross profit was $76,644,000, or 18.7% of consolidated net sales, for the six months ended September 30, 2025 compared with $70,451,000, or 18.6% of consolidated net sales, for the six months ended September 30, 2024. The gross profit was impacted by $2,124,000 for net tariff costs paid for products sold before price increases were effective.
Current wording
Gross Profit. Our consolidated gross profit was $109,522,000, or 19.0% of consolidated net sales, for the nine months ended December 31, 2025 compared with $115,333,000, or 20.4% of consolidated net sales, for the nine months ended December 31, 2024. Our gross margin for the nine months ended December 31,2025 was impacted by $2,124,000 of net tariff costs paid for products sold before price increases were effective.
Previous wording
In addition, our gross margin for the six months ended September 30, 2025 and 2024 was impacted by (i) continued amortization of core and finished goods premiums of $5,835,000 and $5,349,000, respectively and (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $2,251,000 and $1,558,000, respectively.
Current wording
In addition, our gross margin for the nine months ended December 31, 2025 and 2024 was impacted by (i) continued amortization of core and finished goods premiums of $8,815,000 and $8,013,000, respectively and (ii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $2,805,000 and $2,316,000, respectively.
Previous wording
General and Administrative. Our general and administrative expenses for the six months ended September 30, 2025 were $29,766,000, which represents a decrease of $1,956,000, or 6.2%, from the six months ended September 30, 2024 of $31,722,000. This decrease was primarily due to a headcount reduction in the prior year, which resulted in $2,940,000 of severance during the six months ended September 30, 2024, partially offset by $913,000 of increased share-based compensation.
Current wording
General and Administrative. Our general and administrative expenses for the nine months ended December 31, 2025 were $45,094,000, which represents a decrease of $2,840,000, or 5.9%, from the nine months ended December 31, 2024 of $47,934,000. This decrease was primarily due to $2,936,000 of severance costs recorded during the nine months ended December 31, 2024.
Previous wording
Sales and Marketing. Our sales and marketing expenses for the six months ended September 30, 2025 were $13,021,000, which represents an increase of $1,738,000, or 15.4%, from the six months ended September 30, 2024 of $11,283,000. This increase was primarily due to (i) $801,000 of increased commissions expense and (ii) $590,000 from increased headcount to support our growth initiatives.
Current wording
Sales and Marketing. Our sales and marketing expenses for the nine months ended December 31, 2025 were $19,371,000, which represents an increase of $2,467,000, or 14.6%, from the nine months ended December 31, 2024 of $16,904,000. This increase was primarily due to (i) $846,000 from increased headcount to support our growth initiatives, (ii) $745,000 of increased commissions expense, (iii) $412,000 of increased advertising and marketing expenses, and (iv) $227,000 of increased trade show expense.
Previous wording
Research and Development. Our research and development expenses for the six months ended September 30, 2025 were $7,234,000, which represents an increase of $2,358,000, or 48.4%, from the six months ended September 30, 2024 of $4,876,000. This increase was primarily due to (i) $1,103,000 for engineering-related professional services, (ii) $867,000 for increased headcount to support our new product introductions, and (iii) $380,000 of increased expense for supplies and our sample library.
Current wording
Research and Development. Our research and development expenses for the nine months ended December 31, 2025 were $10,694,000, which represents an increase of $2,810,000, or 35.6%, from the nine months ended December 31, 2024 of $7,884,000. This increase was primarily due to (i) $1,308,000 for engineering-related professional services, (ii) $990,000 for increased headcount to support our new product introductions, and (iii) $490,000 of increased expense for supplies and our sample library.
Previous wording
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $1,469,000 compared with a non-cash loss of $5,428,000 for the three months ended September 30, 2025 and 2024, respectively. This change during the three months ended September 30, 2025 compared with the three months ended September 30, 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of $1,467,000 compared with a non-cash loss of $3,978,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in a non-cash gain of $2,000 compared with a non-cash loss of $1,450,000, respectively, due to the changes in their fair values.
Current wording
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash gain of $10,411,000 compared with a non-cash loss of $18,966,000 for the nine months ended December 31, 2025 and 2024, respectively. This change during the nine months ended December 31, 2025 compared with the nine months ended December 31, 2024 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of $6,652,000 compared with a non-cash loss of $11,562,000, respectively, due to foreign currency exchange rate fluctuations and (ii) the forward foreign currency exchange contracts, which resulted in a non-cash gain of $3,759,000 compared with a non-cash loss of $7,404,000, respectively, due to the changes in their fair values.
Previous wording
Consolidated Operating Income. Our consolidated operating income for the six months ended September 30, 2025 was $36,440,000 and $6,064,000 for the six months ended September 30, 2024. This increase was primarily due to (i) our foreign exchange impact of lease liabilities and forward contracts and (ii) other items as discussed above.
Current wording
Consolidated Operating Income. Our consolidated operating income for the nine months ended December 31, 2025 was $44,774,000 and $23,645,000 for the nine months ended December 31, 2024. This increase was primarily due to the impact of the foreign exchange remeasurement of lease liabilities and forward contracts and other items as discussed above.
Previous wording
Interest Expense, net. Our interest expense for the three months ended September 30, 2025 was $12,699,000, which represents a decrease of $1,483,000, or 10.5%, from interest expense for the three months ended September 30, 2024 of $14,182,000. This decrease was primarily due to (i) lower average outstanding balances under our credit facility and (ii) lower interest rates on both our credit facility and accounts receivable discount programs.
Current wording
Interest Expense, net. Our interest expense for the nine months ended December 31, 2025 was $36,412,000, which represents a decrease of $6,592,000, or 15.3%, from interest expense for the nine months ended December 31, 2024 of $43,004,000. This decrease was primarily due to (i) lower interest rates on both our credit facility and accounts receivable discount programs and (ii) lower average outstanding balances under our credit facility.
Previous wording
Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability associated with the convertible notes issued on March 31, 2023 was a non-cash loss of $4,050,000 compared with a non-cash gain of $2,200,000 for the six months ended September 30, 2025 and 2024, respectively.
Current wording
Change in Fair Value of Compound Net Derivative Liability. Our change in fair value of compound net derivative liability associated with the convertible notes issued on March 31, 2023 was a non-cash loss of $140,000 compared with a non-cash gain of $2,460,000 for the nine months ended December 31, 2025 and 2024, respectively.
Previous wording
Income Tax. We recorded an income tax expense of $5,986,000, or an effective tax rate of 87.0%, and $734,000, or an effective tax rate of (3.6)%, for the six months ended September 30, 2025 and 2024, respectively. The effective tax rate for the six months ended September 30, 2025, was primarily impacted by the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities and foreign income taxed at rates that are different from the federal statutory rate.
Current wording
Income Tax. We recorded income tax expense of $5,552,000, or an effective tax rate of 67.5%, and $1,849,000, or an effective tax rate of (10.9)%, for the nine months ended December 31, 2025 and 2024, respectively. The effective tax rate for the nine months ended December 31, 2025, was primarily impacted by the change in valuation allowance on certain jurisdictions’ deferred tax assets resulting from current year activities and foreign income taxed at rates that are different from the federal statutory rate.
Previous wording
We had working capital (current assets minus current liabilities) of $171,950,000 and $160,446,000, a ratio of current assets to current liabilities of 1.5:1.0 at September 30, 2025 and March 31, 2025.
Current wording
We had working capital (current assets minus current liabilities) of $166,975,000 and $160,446,000, a ratio of current assets to current liabilities of 1.4:1.0 at December 31, 2025 and 1.5:1.0 at March 31, 2025.
Previous wording
Our primary source of liquidity was from cash generated from operations, the use of our receivable discount programs, and credit facility during the six months ended September 30, 2025. We believe our cash and cash equivalents, use of receivable discount programs, and amounts available under our credit facility are sufficient to satisfy our expected future liquidity needs, including lease and capital expenditure obligations over the next 12 months.
Current wording
Our primary source of liquidity was from cash generated from operations and the use of our receivable discount programs during the nine months ended December 31, 2025. We believe our cash and cash equivalents, use of receivable discount programs, and amounts available under our credit facility are sufficient to satisfy our expected future liquidity needs, including lease and capital expenditure obligations over the next 12 months.
Previous wording
In August 2018, our board of directors approved an increase in our share repurchase program from $20,000,000 to $37,000,000 of our common stock. During the six months ended September 30, 2025, we repurchased 287,910 shares of our common stock for $3,355,000. As of September 30, 2025, $26,932,000 has been utilized and $10,068,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our credit facility and convertible notes. We retired the 1,667,051 shares repurchased under this program through September 30, 2025. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.
Current wording
In December 2025, our board of directors approved an increase in our share repurchase program from $37,000,000 to $57,000,000 of our common stock. During the nine months ended December 31, 2025, we repurchased 669,472 shares of our common stock for $8,351,000. As of December 31, 2025, $31,928,000 has been utilized and $25,072,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our credit facility and convertible notes. We retired the 2,048,613 shares repurchased under this program through December 31, 2025. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.
Previous wording
Net cash provided by operating activities was $31,893,000 and $2,011,000 during the six months ended September 30, 2025 and 2024, respectively. The changes in our operating activities were primarily due to (i) changes in our working capital as we continue to maximize our operating cash flow and (ii) increased operating results (net income (loss) plus the net add-back for non-cash transactions in earnings).
Current wording
Net cash provided by operating activities was $23,664,000 and $36,368,000 during the nine months ended December 31, 2025 and 2024, respectively. Our operating activities were primarily impacted by (i) changes in operating results (net income (loss) plus the net add-back for non-cash transactions in earnings) and (ii) changes in our working capital due primarily to the build-up of our inventory to support future sales. We continue to manage our working capital to maximize our operating cash flow.
Previous wording
Net cash used in investing activities was $1,742,000 and $979,000 during the six months ended September 30, 2025 and 2024, respectively. The change in our investing activities primarily resulted from increased capital expenditures.
Current wording
Net cash used in investing activities was $2,146,000 and $1,614,000 during the nine months ended December 31, 2025 and 2024, respectively. The change in our investing activities primarily resulted from increased capital expenditures.
Previous wording
Net cash used in financing activities was $24,341,000 and $4,365,000 during the six months ended September 30, 2025 and 2024, respectively. The change in our financing activities were primarily due to (i) increased net repayments of amounts outstanding under our revolving facility during the six months ended September 30, 2025 compared with the six months ended September 30, 2024 and (ii) the repurchase of 287,910 shares of our common stock for $3,355,000 during the six months ended September 30, 2025.
Current wording
Net cash used in financing activities was $14,339,000 and $36,796,000 during the nine months ended December 31, 2025 and 2024, respectively. The change in our financing activities were primarily due to (i) higher net repayments of amounts outstanding under our revolving facility during the prior year and (ii) the repurchase of 669,472 shares of our common stock for $8,351,000 and 268,130 shares of our common stock for $2,096,000 during the nine months ended December 31, 2025 and 2024, respectively.
Previous wording
We had $72,419,000 and $90,787,000 outstanding under the Revolving Facility at September 30, 2025 and March 31, 2025, respectively. In addition, $15,470,000 was outstanding for letters of credit at September 30, 2025. At September 30, 2025, after certain contractual adjustments, $145,376,000 was available under the Revolving Facility. The interest rate on our Revolving Facility was 7.42% and 7.46%, at September 30, 2025 and March 31, 2025, respectively.
Current wording
We had $88,010,000 and $90,787,000 outstanding under the Revolving Facility at December 31, 2025 and March 31, 2025, respectively. In addition, $15,470,000 was outstanding for letters of credit at December 31, 2025. At December 31, 2025, after certain contractual adjustments, $128,583,000 was available under the Revolving Facility. The interest rate on our Revolving Facility was 6.97% and 7.46%, at December 31, 2025 and March 31, 2025, respectively.
Previous wording
The Credit Facility requires us 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 six months ended September 30, 2025, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested.
Current wording
The Credit Facility requires us 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 nine months ended December 31, 2025, undrawn availability was greater than the 22.5% threshold, therefore, the fixed charge coverage ratio financial covenant was not required to be tested.
Previous wording
The Company Redemption option has been combined with the Conversion Option 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 condensed consolidated balance sheets at September 30, 2025 and March 31, 2025. 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 $29,600,000 and $9,000,000, and an asset of $18,080,000 and $1,530,000 at September 30, 2025 and March 31, 2025, respectively. During the three months ended September 30, 2025 and 2024, we recorded a non-cash loss of $2,260,000 and $380,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the condensed consolidated statement of operations. During the six months ended September 30, 2025 and 2024, we recorded a non-cash loss of $4,050,000 and a non-cash gain of $2,200,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the condensed consolidated statements of operations and condensed consolidated statements of cash flows.
Current wording
The Company Redemption option has been combined with the Conversion Option 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 condensed consolidated balance sheets at December 31, 2025 and March 31, 2025. 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 $19,600,000 and $9,000,000, and an asset of $11,990,000 and $1,530,000 at December 31, 2025 and March 31, 2025, respectively. During the three months ended December 31, 2025 and 2024, we recorded a non-cash gain of $3,910,000 and $260,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the condensed consolidated statements of operations. During the nine months ended December 31, 2025 and 2024, we recorded a non-cash loss of $140,000 and a non-cash gain of $2,460,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the condensed consolidated statements of operations and condensed consolidated statements of cash flows.
Previous wording
We utilize a supplier finance program, which allows certain of our suppliers to sell their receivables due from us 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 increased to $40,000,000 from $30,000,000 during the three months ended September 30, 2025. We have 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. We are not a party to agreements negotiated between participating suppliers and the financial institution. Our obligations to our suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program. We do 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 September 30, 2025 and March 31, 2025, we had $36,644,000 and $33,661,000, respectively, of outstanding supplier obligations confirmed as valid under this program, included in accounts payable in the condensed consolidated balance sheets.
Current wording
We utilize a supplier finance program, which allows certain of our suppliers to sell their receivables due from us 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 December 31, 2025. We have 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. We are not a party to agreements negotiated between participating suppliers and the financial institution. Our obligations to our suppliers, including amounts due and payment terms, are not affected by a supplier's decision to participate in this program. We do 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 December 31, 2025 and March 31, 2025, we had $32,632,000 and $33,661,000, respectively, of outstanding supplier obligations confirmed as valid under this program, included in accounts payable in the condensed consolidated balance sheets.
Previous wording
Our total capital expenditures were $3,866,000 and $1,219,000 for six months ended September 30, 2025 and 2024, respectively. These capital expenditures include (i) cash paid for the purchase of plant and equipment, (ii) plant and equipment acquired under finance leases, and (iii) accrued capital expenditures. Capital expenditures for the six months ended September 30, 2025 primarily include the purchase of equipment for our current operations and our global growth initiatives. We expect to incur approximately $7,000,000 of capital expenditures primarily to support our global growth initiatives and maintenance of our facilities and equipment during fiscal 2026. We have used and expect to continue using our working capital and additional capital lease obligations to finance these capital expenditures.
Current wording
Our total capital expenditures were $4,231,000 and $2,531,000 for nine months ended December 31, 2025 and 2024, respectively. These capital expenditures include (i) cash paid for the purchase of plant and equipment, (ii) plant and equipment acquired under finance leases, and (iii) accrued capital expenditures. Capital expenditures for the nine months ended December 31, 2025 primarily include the purchase of equipment for our current operations and our global growth initiatives. We expect to incur approximately $5,000,000 of capital expenditures primarily to support our global growth initiatives and maintenance of our facilities and equipment during fiscal 2026. We have used and expect to continue using our working capital and additional capital lease obligations to finance these capital expenditures.
Previous wording
We have an operating lease for our 35,000 square foot manufacturing, warehouse, and office facility in Ontario, Canada, with a company co-owned by a member of management. We renewed this operating lease for an additional three-year period, effective January 1, 2025. The rent expense recorded for this related party lease was $94,000 and $81,000 for the three months ended September 30, 2025 and 2024, respectively. The rent expense recorded for this related party lease was $187,000 and $162,000 for the six months ended September 30, 2025 and 2024, respectively.
Current wording
We have an operating lease for our 35,000 square foot manufacturing, warehouse, and office facility in Ontario, Canada, with a company co-owned by a member of management. We renewed this operating lease for an additional three-year period, effective January 1, 2025. The rent expense recorded for this related party lease was $93,000 and $81,000 for the three months ended December 31, 2025 and 2024, respectively. The rent expense recorded for this related party lease was $280,000 and $243,000 for the nine months ended December 31, 2025 and 2024, respectively.
Previous wording
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). This standard requires us 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 us to annually disclose our 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 prospective basis, although optional retrospective application is permitted. We are currently evaluating the impact this guidance will have on our financial statement disclosures.
Current wording
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). This standard requires us 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 us to annually disclose our 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 prospective basis, although optional retrospective application is permitted. We will adopt this standard as of March 31, 2026, and are currently evaluating the impact this guidance will have on our financial statement disclosures. We expect our consolidated financial statements as of March 31, 2026 to include the expanded income tax disclosures required by the standard.