MOTORCAR PARTS OF AMERICA INC
For the period ended Sep 30, 2026. Filed Nov 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.
Sep 30, 2026 · Filed Nov 9, 2026
MPAA$7.72-26.6%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-10.
0001140361-26-032013
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001140361-26-042779
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 74 previous paragraphs and 97 current paragraphs.
51 unchanged; 22 reworded; 12 added; 1 removed; 0 previous and 12 current paragraphs rearranged.
Tables are not compared: 5 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 (12)
Current report
Net Sales. Our consolidated net sales for the three months ended September 30, 2026 were $169,217,000 compared with net sales for the three months ended of September 30, 2025 of $221,470,000, which included $14,797,000 of core revenue in connection with the realignment of inventory at certain customer distribution centers. The net decrease in net sales was $37,456,000, or 18.1% of net sales, primarily due to delayed customer orders and lower tariff pass-throughs.
Current report
Net Sales and Gross Profit
Current report
Net Sales. Our consolidated net sales for the six months ended September 30, 2026 were $337,238,000 compared with net sales for the six months ended of September 30, 2025 of $409,834,000, which included $14,797,000 of core revenue in connection with the realignment of inventory at certain customer distribution centers. The net decrease in net sales was $57,799,000, or 14.6% of net sales, primarily due to delayed customer orders and lower tariff pass-throughs.
Current report
Gross Profit. Our consolidated gross profit was $68,121,000, or 20.2% of consolidated net sales, for the six months ended September 30, 2026 compared with $76,644,000, or 18.7% of consolidated net sales, for the six months ended September 30, 2025. Our gross margin for the six months ended September 30, 2026 was impacted by $11,052,000 of refunds received for previously paid IEEPA tariffs partially offset by $4,125,000 of transition expenses incurred in connection with the relocation of certain manufacturing to our lower cost facilities in Mexico.
Current report
Operating Expenses
Current report
General and Administrative. Our general and administrative expenses for the six months ended September 30, 2026 were $33,751,000, which represents an increase of $3,985,000, or 13.4%, from the six months ended September 30, 2025 of $29,766,000. This increase was primarily due to $2,659,000 of increased non-cash share-based compensation and $2,182,000 of increased legal and other professional services, partially offset by $1,425,000 of decreased employee incentives.
Current report
Sales and Marketing. Our sales and marketing expenses were consistent at $13,188,000 for the six months ended September 30, 2026 compared with $13,021,000 for the six months ended September 30, 2025.
Current report
Research and Development. Our research and development expenses for the six months ended September 30, 2026 were $6,267,000, which represents a decrease of $967,000, or 13.4%, from the six months ended September 30, 2025 of $7,234,000. This decrease was primarily due to (i) $461,000 of decreased engineering-related professional services, (ii) $344,000 of decreased expense for supplies and our sample library, and (iii) $174,000 of decreased employee-related costs.
Current report
Operating Income
Current report
Interest Expense
Current report
Interest Expense, net. Our interest expense for the six months ended September 30, 2026 was $23,333,000, which represents a decrease of $2,178,000, or 8.5%, from interest expense for the six months ended September 30, 2025 of $25,511,000. This decrease was primarily due to lower utilization of our accounts receivable discount programs partially offset by higher average outstanding balances under our credit facility.
Current report
Provision for Income Taxes
Removed paragraphs (1)
Previous report
Net Sales. Our consolidated net sales for the three months ended June 30, 2026 were $168,021,000, which represents a decrease of $20,343,000, or 10.8%, from the three months ended June 30, 2025 of $188,364,000. This decrease in sales was primarily due to lower sales of rotating electrical products partially offset by strong demand for brake-related products during the three months ended June 30, 2026 compared with the three months ended June 30, 2025.
Reworded paragraphs (22)
Previous wording
Gross Profit. Our consolidated gross profit was $27,174,000, or 16.2% of consolidated net sales, for the three months ended June 30, 2026 compared with $33,917,000, or 18.0% of consolidated net sales, for the three months ended June 30, 2025. Our gross margin for the three months ended June 30, 2026 was impacted by lower sales as discussed above and transition expenses of $2,767,000 in connection with our on-going strategy to utilize our global footprint to enhance operating efficiencies.
Current wording
Gross Profit. Our consolidated gross profit was $40,947,000, or 24.2% of consolidated net sales, for the three months ended September 30, 2026 compared with $42,727,000, or 19.3% of consolidated net sales, for the three months ended September 30, 2025. Our gross margin for the three months ended September 30, 2026 was impacted by $11,052,000 of refunds received for previously paid IEEPA tariffs partially offset by $1,358,000 of transition expenses incurred in connection with the relocation of certain manufacturing to our lower cost facilities in Mexico.
Previous wording
In addition, our gross margin for the three months ended June 30, 2026 and 2025 was impacted by (i) the continued amortization of core and finished goods premiums of $3,406,000 and $2,847,000, 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 $705,000 and $1,026,000, respectively.
Current wording
In addition, our gross margin for the three months ended September 30, 2026 and 2025 was impacted by (i) the continued amortization of core and finished goods premiums of $3,544,000 and $2,988,000, 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 $1,238,000 and $1,225,000, respectively.
Previous wording
General and Administrative. Our general and administrative expenses for the three months ended June 30, 2026 were $15,517,000, which represents an increase of $2,837,000, or 22.4%, from the three months ended June 30, 2025 of $12,680,000. This increase was primarily due to (i) $1,192,000 of increased share-based compensation and (ii) $1,145,000 of increased legal and other professional services.
Current wording
General and Administrative. Our general and administrative expenses for the three months ended September 30, 2026 were $18,234,000, which represents an increase of $1,148,000, or 6.7%, from the three months ended September 30, 2025 of $17,086,000. This increase was primarily due to $1,467,000 of increased non-cash share-based compensation and $1,037,000 of increased legal and other professional services partially offset by $1,454,000 of decreased employee incentives.
Previous wording
Sales and Marketing. Our sales and marketing expenses for the three months ended June 30, 2026 were $6,546,000, which represents an increase of $336,000, or 5.4%, from the three months ended June 30, 2025 of $6,210,000. This increase was primarily due to increased advertising and other marketing expenses.
Current wording
Sales and Marketing. Our sales and marketing expenses were consistent at $6,642,000 for the three months ended September 30, 2026 compared with $6,811,000 for the three months ended September 30, 2025.
Previous wording
Research and Development. Our research and development expenses for the three months ended June 30, 2026 were $3,176,000, which represents a decrease of $130,000, or 3.9%, from the three months ended June 30, 2025 of $3,306,000. This decrease was primarily due to lower expenses for supplies and our sample library.
Current wording
Research and Development. Our research and development expenses for the three months ended September 30, 2026 were $3,091,000, which represents a decrease of $837,000, or 21.3%, from the three months ended September 30, 2025 of $3,928,000. This decrease was primarily due to (i) $439,000 of decreased engineering-related professional services, (ii) $248,000 of decreased expense for supplies and our sample library, and (iii) $147,000 of decreased employee-related costs.
Previous wording
Consolidated Operating Income. Our consolidated operating income for the three months ended June 30, 2026 was $3,532,000 compared with $20,069,000 for the three months ended June 30, 2025. This decrease was primarily due to the impact of the foreign exchange remeasurement of lease liabilities and forward contracts and other items as discussed above.
Current wording
Consolidated Operating Income. Our consolidated operating income for the three months ended September 30, 2026 was $9,969,000 compared with $16,371,000 for the three months ended September 30, 2025. This decrease 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 June 30, 2026 was $12,044,000, which represents a decrease of $768,000, or 6%, from interest expense for the three months ended June 30, 2025 of $12,812,000. This decrease was primarily due to lower utilization of our accounts receivable discount programs.
Current wording
Interest Expense, net. Our interest expense for the three months ended September 30, 2026 was $11,289,000, which represents a decrease of $1,410,000, or 11.1%, from interest expense for the three months ended September 30, 2025 of $12,699,000. This decrease was primarily due to lower utilization of our 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 were non-cash losses of $1,540,000 and $1,790,000 for the three months ended June 30, 2026 and 2025, 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 were a non-cash gain of $3,240,000 compared with a non-cash loss of $2,260,000 for the three months ended September 30, 2026 and 2025, respectively.
Previous wording
Income Tax. We recorded income tax expense of $3,369,000, or an effective tax rate of (33.5)%, and $2,425,000, or an effective tax rate of 44.4%, for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate for the three months ended June 30, 2026, 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 $562,000, or an effective tax rate of 29.3%, and $3,561,000, or an effective tax rate of 252.2%, for the three months ended September 30, 2026 and 2025, respectively. The effective tax rate for the three months ended September 30, 2026, 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
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were non-cash gains of $1,597,000 and $8,348,000 for the three months ended June 30, 2026 and 2025, respectively. This change during the three months ended June 30, 2026 compared with the three months ended June 30, 2025 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities resulting in non-cash gains of $1,681,000 and $4,002,000, respectively, and (ii) the change in the fair values of forward foreign currency exchange contracts resulting in a non-cash loss of $84,000 compared with a non-cash gain of $4,346,000, respectively.
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 loss of $1,414,000 compared with a non-cash gain of $9,817,000 for the six months ended September 30, 2026 and 2025, respectively. This change during the six months ended September 30, 2026 compared with the six months ended September 30, 2025 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities resulting in non-cash gains of $645,000 and $5,469,000, respectively, and (ii) the change in the fair values of forward foreign currency exchange contracts resulting in a non-cash loss of $2,059,000 compared with a non-cash gain of $4,348,000, respectively.
Previous wording
We had working capital (current assets minus current liabilities) of $173,010,000 and $184,386,000, a ratio of current assets to current liabilities of 1.4:1.0 at June 30, 2026 and 1.5:1.0 at March 31, 2026.
Current wording
We had working capital (current assets minus current liabilities) of $179,730,000 and $184,386,000, a ratio of current assets to current liabilities of 1.4:1.0 at September 30, 2026 and 1.5:1.0 at March 31, 2026.
Previous wording
Our primary source of liquidity was from the use of our accounts receivable discount programs and credit facility during the three months ended June 30, 2026. We believe our cash and cash equivalents, use of accounts receivable discount programs, and amounts available under our credit facility are sufficient to satisfy our expected future liquidity needs over the next 12 months.
Current wording
Our primary source of liquidity was from the use of our accounts receivable discount programs and credit facility during the six months ended September 30, 2026. We believe our cash and cash equivalents, use of accounts receivable discount programs, and amounts available under our credit facility are sufficient to satisfy our expected future liquidity needs over the next 12 months.
Previous 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 three months ended June 30, 2026, we repurchased 129,523 shares of our common stock for $1,929,000. As of June 30, 2026, $36,857,000 has been utilized and $20,143,000 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 2,464,272 shares repurchased under this program through June 30, 2026. 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 three months ended September 30, 2026, we did not repurchase any shares of our common stock. During the six months ended September 30, 2026, we repurchased 129,523 shares of our common stock for $1,929,000. During the three and six months ended September 30, 2025, we repurchased 90,114 shares of our common stock for $1,389,000 and 287,910 shares of our common stock for $3,355,000, respectively. As of September 30, 2026, $36,857,000 has been utilized and $20,143,000 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 2,464,272 shares repurchased under this program through September 30, 2026. 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 used in operating activities was $11,303,000 compared with net cash provided by operating activities of $10,028,000 during the three months ended June 30, 2026 and 2025, respectively. The change in our operating activities was primarily due to (i) a decrease in our accounts payable balances during the three months ended June 30, 2026 compared with an increase during the three months ended June 30, 2025 and (ii) the continued build-up of our inventory to support future sales. In addition, our operating activities were further impacted by changes in operating results (net (loss) income plus the net add-back for non-cash transactions in earnings). We continue to manage our working capital to maximize our operating cash flow.
Current wording
Net cash used in operating activities was $15,364,000 compared with net cash provided by operating activities of $31,893,000 during the six months ended September 30, 2026 and 2025, respectively. The change in our operating activities was primarily due to (i) a decrease in our accounts payable balances during the six months ended September 30, 2026 due to lower purchases and the paydown of accounts payable balances compared with an increase during the prior year, (ii) higher inventory balances to support future growth, (iii) a decrease in our accounts receivable balances during the six months ended September 30, 2026 due to lower sales, and (iv) an increase in core premiums paid to customers in connection with new business during the six months ended September 30, 2026 compared with the prior year. In addition, our operating activities were further impacted by changes in operating results (net (loss) income plus the net add-back for non-cash transactions in earnings). We continue to manage our working capital to maximize our operating cash flow. We continue to manage our working capital to maximize our operating cash flow.
Previous wording
Net cash used in investing activities was $5,169,000 and $806,000 during the three months ended June 30, 2026 and 2025, respectively. The change in our investing activities was primarily due to the purchase of certain intangible assets during the three months ended June 30, 2026.
Current wording
Net cash used in investing activities was $5,928,000 and $1,742,000 during the six months ended September 30, 2026 and 2025, respectively. The change in our investing activities was primarily due to the purchase of certain intangible assets during the six months ended September 30, 2026.
Previous wording
Net cash provided by financing activities was $20,823,000 compared with net cash used in financing activities of $6,778,000 during the three months ended June 30, 2026 and 2025, respectively. The change in our financing activities was primarily due to net borrowing of $24,171,000 during the three months ended June 30, 2026 compared with net repayments of $3,931,000 during the three months ended June 30, 2025 under our revolving facility.
Current wording
Net cash provided by financing activities was $27,481,000 compared with net cash used in financing activities of $24,341,000 during the six months ended September 30, 2026 and 2025, respectively. The change in our financing activities was primarily due to net borrowing of $31,927,000 during the six months ended September 30, 2026 compared with net repayments of $18,368,000 during the six months ended September 30, 2025 under our revolving facility.
Previous wording
We had $118,839,000 and $94,668,000 outstanding under the Revolving Facility at June 30, 2026 and March 31, 2026, respectively. In addition, $15,470,000 was outstanding for letters of credit at June 30, 2026. At June 30, 2026, after certain contractual adjustments, $93,302,000 was available under the Revolving Facility. The interest rate on our Revolving Facility was 6.83% and 6.79%, at June 30, 2026 and March 31, 2026, respectively.
Current wording
We had $126,595,000 and $94,668,000 outstanding under the Revolving Facility at September 30, 2026 and March 31, 2026, respectively. In addition, $15,470,000 was outstanding for letters of credit at September 30, 2026. At September 30, 2026, after certain contractual adjustments, $84,008,000 was available under the Revolving Facility. The interest rate on our Revolving Facility was 6.88% and 6.79%, at September 30, 2026 and March 31, 2026, respectively.
Previous wording
The Credit Facility requires us to maintain; (i) a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and (ii) a specified minimum undrawn availability. During the three months ended June 30, 2026, undrawn availability was greater than the 22.5% threshold at all times, therefore, the fixed charge coverage ratio financial covenant was not required to be tested at any point during the fiscal quarter.
Current wording
The Credit Facility requires us to maintain; (i) a minimum fixed charge coverage ratio if undrawn availability is less than 22.5% of the aggregate revolving commitments and (ii) a specified minimum undrawn availability. During the three and six months ended September 30, 2026, undrawn availability was greater than the 22.5% threshold at all times, therefore, the fixed charge coverage ratio financial covenant was not required to be tested at any point during the fiscal period.
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 June 30, 2026 and March 31, 2026. 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 $20,600,000 and $16,900,000, and an asset of $12,720,000 and $10,560,000 at June 30, 2026 and March 31, 2026, respectively. During the three months ended June 30, 2026 and 2025, we recorded a non-cash loss of $1,540,000 and $1,790,000, 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 September 30, 2026 and March 31, 2026. 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 $8,900,000 and $16,900,000, and an asset of $4,260,000 and $10,560,000 at September 30, 2026 and March 31, 2026, respectively. During the three months ended September 30, 2026 and 2025, we recorded a non-cash gain of $3,240,000 and a non-cash loss of $2,260,000, respectively, as the change in fair value of the Compound Net Derivative Liability in the condensed consolidated statements of operations. During the six months ended September 30, 2026 and 2025, we recorded a non-cash gain of $1,700,000 and a non-cash loss of $4,050,000, 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 were $40,000,000 as of June 30, 2026. 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 June 30, 2026 and March 31, 2026, we had $40,982,000 and $42,076,000, respectively, in 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 September 30, 2026. 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, 2026 and March 31, 2026, we had $38,789,000 and $42,076,000, respectively, in 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 $904,000 and $2,708,000 for three months ended June 30, 2026 and 2025, 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 three months ended June 30, 2026 primarily include the purchase of equipment for our current operations. We expect to incur approximately $9,000,000 of capital expenditures primarily to support our operations in fiscal 2027. 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 $1,698,000 and $3,866,000 for six months ended September 30, 2026 and 2025, 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, 2026 primarily include the purchase of equipment for our current operations. We expect to incur approximately $7,000,000 of capital expenditures primarily to support our operations in fiscal 2027. 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 $93,000 and $93,000 for the three months ended June 30, 2026 and 2025, 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 $94,000 for the three months ended September 30, 2026 and 2025, respectively, and $186,000 and $187,000 for the six months ended September 30, 2026 and 2025, respectively.
Rearranged current paragraphs (12)
Current report — wording carried from elsewhere
Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts were a non-cash loss of $3,011,000 compared with a non-cash gain of $1,469,000 for the three months ended September 30, 2026 and 2025, respectively. This change during the three months ended September 30, 2026 compared with the three months ended September 30, 2025 was primarily due to (i) the remeasurement of our foreign currency-denominated lease liabilities resulting in a non-cash loss of $1,036,000 compared with a non-cash gain of $1,467,000, respectively, and (ii) the change in the fair values of forward foreign currency exchange contracts resulting in a non-cash loss of $1,975,000 compared with a non-cash gain of $2,000, respectively.
Current report — wording carried from elsewhere
Results of Operations for the Six Months Ended September 30, 2026 and 2025
Current report — wording carried from elsewhere
The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.
Current report — wording carried from elsewhere
The following summarizes certain key consolidated operating data:
Current report — wording carried from elsewhere
Annualized finished goods turnover for the fiscal period is calculated by multiplying cost of goods sold for the fiscal 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 report — wording carried from elsewhere
The following summarizes net sales and gross profit:
Current report — wording carried from elsewhere
In addition, our gross margin for the six months ended September 30, 2026 and 2025 was impacted by (i) the continued amortization of core and finished goods premiums of $6,950,000 and $5,835,000, 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 $1,943,000 and $2,251,000, respectively.
Current report — wording carried from elsewhere
The following summarizes our consolidated operating expenses:
Current report — wording carried from elsewhere
Consolidated Operating Income. Our consolidated operating income for the six months ended September 30, 2026 was $13,501,000 compared with $36,440,000 for the six months ended September 30, 2025. This decrease was primarily due to the impact of the foreign exchange remeasurement of lease liabilities and forward contracts and other items as discussed above.
Current report — wording carried from elsewhere
Change in Fair Value of Compound Net Derivative Liability
Current report — wording carried from elsewhere
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 were a non-cash gain of $1,700,000 compared with a non-cash loss of $4,050,000 for the six months ended September 30, 2026 and 2025, respectively.
Current report — wording carried from elsewhere
Income Tax. We recorded income tax expense of $3,931,000, or an effective tax rate of (48.3)%, and $5,986,000, or an effective tax rate of 87.0%, for the six months ended September 30, 2026 and 2025, respectively. The effective tax rate for the six months ended September 30, 2026, 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.