8-K/A - HLLY - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(AMENDMENT No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 11, 2021 (July 16, 2021)

HOLLEY INC.

(Exact name of registrant as specified in its charter)

Delaware	001-39599	87-1727560
(State or other jurisdiction<br> of incorporation)	(Commission<br> File Number)	(IRS Employer<br> Identification No.)
1801 Russellville Road, Bowling Green, KY	42101
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(Address of principal executive offices)	(Zip Code)

(270) 495-4081

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule <br>14a-12<br> under the Exchange Act (17 CFR <br>240.14a-12)
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☐	Pre-commencement<br> communications pursuant to Rule <br>14d-2(b)<br> under the Exchange Act (17 CFR <br>240.14d-2(b))
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☐	Pre-commencement<br> communications pursuant to Rule <br>13e-4(c)<br> under the Exchange Act (17 CFR <br>240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br> <br>Symbol(s)	Name of each exchange<br> <br>on which registered
Common stock, par value $0.0001	HLLY	New York Stock Exchange
Warrants, each exercisable for one share of common stock at an exercise price of $11.50 per share	HLLY WS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

INTRODUCTORY NOTE

This Amendment No. 1 on Form 8-K/A (“Amendment No. 1”) amends the Current Report on Form 8-K of Holley Inc., a Delaware corporation (formerly known as Empower Ltd.) (prior to the Closing Date, “EMPW” and after the Closing Date, “Holley”), filed on July 21, 2021 (the “Original Report”), in which the Company (as defined below) reported, among other events, the completion of the Mergers (as defined in the Original Report) on July 16, 2021 (the “Closing Date”).

In connection with the Closing, the registrant changed its name from Empower Ltd., to Holley Inc. Unless the context otherwise requires, “Holley,” “we,” “us,” “our,” and the “Company” refer to the combined company following the Mergers, together with its subsidiaries, “EMPW” refers to the registrant prior to the closing of the Mergers and “Holley Intermediate” refers to Holley Intermediate Holdings, Inc., together with its subsidiaries, prior to the Mergers.

This Amendment No. 1 includes (i) the unaudited condensed consolidated financial statements of Holley Intermediate as of and for the twenty-six weeks ended June 27, 2021, (ii) Holley Intermediate’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the twenty-six weeks ended June 27, 2021 and June 28, 2020 and (iii) the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020.

This Amendment No. 1 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or its subsidiaries, including Holley Intermediate, subsequent to the filing date of the Original Report. The information previously reported in or filed with the Original Report is hereby incorporated by reference to this Form 8-K/A.

Item 2.02.	Results of Operations and Financial Condition.

This Amendment No. 1 includes (i) the unaudited condensed consolidated financial statements of Holley Intermediate as of and for the twenty-six weeks ended June 27, 2021 (ii) Holley Intermediate’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the twenty-six weeks ended June 27, 2021 and June 28, 2020, and (iii) the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020.

The information set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01.	Financial Statements and Exhibits.

(a) Financial Statements.

The unaudited condensed consolidated financial statements of Holley Intermediate as of and for the twenty-six weeks ended June 27, 2021, and the related notes thereto are attached as Exhibit 99.1 and are incorporated herein by reference. Also included as Exhibit 99.2 and incorporated herein by reference is Holley Intermediate’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the twenty-six weeks ended June 27, 2021 and June 28, 2020.

(b) Pro forma financial information.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020, and the related notes thereto are attached as Exhibit 99.3 and are incorporated herein by reference .

(d) Exhibits.

Exhibit Index

Exhibit<br> No.	Description
99.1	Unaudited condensed consolidated financial statements of Holley Intermediate as of and for the twenty-six weeks ended June 27, 2021 and the year ended December 31, 2020.
99.2	Holley Intermediate’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.
99.3	Unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020.
104	Cover Page Interactive Data File (formatted as Inline XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HOLLEY INC.
By:	/s/ Dominic Bardos
	Name: Dominic Bardos
	Title: Chief Financial Officer

Date: August 11, 2021

EX-99.1

Exhibit 99.1

HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

			As of<br>December 31,<br>2020
ASSETS
Cash and cash equivalents	55,665		$	71,674
Accounts receivable, less allowance for credit losses of 1,570 and 1,240, respectively	62,873			47,341
Inventory	134,833			133,928
Prepaids and other current assets	7,836			5,037
Total current assets	261,207			257,980
Property, plant, and equipment, net	49,692			43,729
Goodwill	377,368			359,099
Other intangibles assets, net	425,423			404,522
Total assets	1,113,690		$	1,065,330
LIABILITIES AND STOCKHOLDER’S EQUITY
Accounts payable	42,744		$	34,601
Accrued interest	5,687			6,588
Accrued liabilities	29,096			26,092
Acquisition contingent consideration payable	24,373			9,200
Current portion of long-term debt	5,528			5,528
Total current liabilities	107,428			82,009
Long-term debt, net of current portion	649,874			649,458
Long-term debt due to related party	20,000			20,000
Deferred taxes	72,538			71,336
Other noncurrent liabilities	2,146			2,146
Total liabilities	851,986			824,949
Commitments and contingencies (Refer to Note 13 - Commitments and Contingencies)
Common stock, 1.00 par value, 100 shares authorized, issued and outstanding	—			—
Additional paid-in capital	239,152			238,890
Accumulated other comprehensive loss	(655	)		(674	)
Retained earnings	23,207			2,165
Total stockholder’s equity	261,704			240,381
Total liabilities and stockholder’s equity	1,113,690		$	1,065,330

All values are in US Dollars.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	For the thirteen weeks ended					For the twenty-six weeks ended
	June 27,<br>2021		June 28,<br>2020			June 27,<br>2021			June 28,<br>2020
Net sales	$	193,041	$	125,296		$	353,373		$	232,453
Cost of goods sold		111,841		70,468			206,494			134,292
Gross profit		81,200		54,828			146,879			98,161
Selling, general, and administrative		26,190		16,294			50,202			31,487
Research and development costs		7,065		5,595			13,034			11,216
Amortization of intangibles		3,502		2,701			6,838			5,400
Acquisition and restructuring costs		2,676		3,118			21,509			4,532
Related party acquisition and management fee costs		1,658		880			2,539			1,771
Other expense (income)		47		(109	)		(86	)		(268	)
Total operating expenses		41,138		28,479			94,036			54,138
Operating income		40,062		26,349			52,843			44,023
Interest expense		11,174		11,013			21,245			22,518
Income before income taxes		28,888		15,336			31,598			21,505
Income tax expense		5,790		2,827			10,556			4,144
Net income	$	23,098	$	12,509		$	21,042		$	17,361
Comprehensive income:
Foreign currency translation adjustment		35		—			19			—
Total comprehensive income	$	23,133	$	12,509		$	21,061		$	17,361

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

(in thousands, except share data)

(unaudited)

	Common Stock
	Shares		Amount		Additional<br> <br>Paid-In Capital			Accumulated Other<br> Comprehensive Loss			Retained Earnings<br> (Accumulated Deficit)			Total
Balance at December 31, 2019		100	$	—	$	236,503		$	(397	)	$	(30,692	)	$	205,414
Net income		—		—		—			—			4,852			4,852
Equity compensation		—		—		121			—			—			121
Balance at March 29, 2020		100		—		236,624			(397	)		(25,840	)		210,387
Net income		—		—		—			—			12,509			12,509
Equity compensation		—		—		114			—			—			114
Capital distributions		—		—		(100	)		—			—			(100	)
Balance at June 28, 2020		100	$	—	$	236,638		$	(397	)	$	(13,331	)	$	222,910
Balance at December 31, 2020		100	$	—	$	238,890		$	(674	)	$	2,165		$	240,381
Net loss		—		—		—			—			(2,056	)		(2,056	)
Equity compensation		—		—		131			—			—			131
Foreign currency translation		—		—		—			(16	)		—			(16	)
Balance at March 28, 2021		100		—		239,021			(690	)		109			238,440
Net income		—		—		—			—			23,098			23,098
Equity compensation		—		—		131			—			—			131
Foreign currency translation		—		—		—			35			—			35
Balance at June 27, 2021		100	$	—	$	239,152		$	(655	)	$	23,207		$	261,704

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	For the twenty-six weeks ended
	June 27, 2021			June 28, 2020
OPERATING ACTIVITIES
Net income	$	21,042		$	17,361
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		4,453			4,013
Amortization of intangible assets		6,838			5,400
Amortization of deferred loan costs		1,955			1,472
Increase in acquisition earn out liability		17,173			—
Equity compensation		262			235
Change in deferred taxes		1,188			451
Loss (gain) on disposal of property, plant and equipment		(282	)		28
Allowance for credit losses		410			176
Change in operating assets and liabilities:
Accounts receivable		(12,457	)		(16,707	)
Inventories		2,465			25,044
Prepaids and other current assets		(2,295	)		593
Accounts payable		6,038			818
Accrued interest		(901	)		(417	)
Accrued liabilities		508			4,982
Net cash from operating activities		46,397			43,449
INVESTING ACTIVITIES
Capital expenditures		(7,141	)		(3,435	)
Proceeds from the disposal of fixed assets		285			—
Cash paid for acquisitions, net		(54,011	)		—
Trademark acquisition		—			(50	)
Net cash used in investing activities		(60,867	)		(3,485	)
FINANCING ACTIVITIES
Net change under revolving credit agreement		—			27,500
Principal payments on long-term debt		(1,539	)		(950	)
Capital distributions		—			(100	)
Net cash (used in) from financing activities		(1,539	)		26,450
Net change in cash and cash equivalents		(16,009	)		66,414
Cash and cash equivalents:
Beginning of period		71,674			8,335
End of period	$	55,665		$	74,749
Supplemental disclosures of cash flow information:
Cash paid for interest	$	20,191		$	21,464
Cash paid for income taxes	$	7,182		$	—

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

HOLLEY INTERMEDIATE HOLDINGS, INC. and SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies

Holley Intermediate Holdings, Inc. and Subsidiaries (“Holdings” or the “Company”), a Delaware corporation, was incorporated on October 25, 2018 to effect the merger of Driven Performance Brands, Inc. (“Driven”) and the purchase of High Performance Industries, Inc. (“HPI”). The Company is a 100% owned subsidiary of Holley Parent Holdings, LLC (“Parent”). Investment funds managed by Sentinel Capital Partners hold a controlling interest in Parent. The Company designs, manufactures and distributes performance automotive products to customers primarily in the United States, Canada and Europe. The Company is a leading manufacturer of a diversified line of performance automotive products, including carburetors, fuel pumps, fuel injection systems, nitrous oxide injection systems, superchargers, exhaust headers, mufflers, distributors, ignition components, engine tuners and automotive performance plumbing products that are produced through its two major subsidiaries, Holley Performance Products Inc. (“Holley”) and Hot Rod Brands Holdings LLC. (“Hot Rod Brands”). The Company is also a leading manufacturer of exhaust products as well as shifters, converters, transmission kits, transmissions, tuners and automotive software. The Company’s products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and drivability. The Company has locations in North America, Canada, Italy and China.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America (“U.S.” or “United States”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

The Company operates on a calendar year that ends on December 31, 2021 and 2020. The three and six month periods ended June 27, 2021 and June 28, 2020 each included 13 weeks and 26 weeks, respectively.

Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Summary of Significant Accounting Policies

There have been no changes to our significant accounting policies described in our audited consolidated financial statements as of and for the year ended December 31, 2020 that have had a material impact on our condensed consolidated financial statements and related notes.

REVENUE RECOGNITION

The Company recognizes revenue with customers when control of the promised goods transfers to the customer. This generally occurs when the product is delivered to the customer. Revenue is recorded at the amount of consideration the Company expects to be entitled to in exchange for the delivered goods, which includes an estimate of variable consideration, expected returns, or refunds when applicable. The Company estimates variable consideration, such as sales incentives, by using the most likely amount approach, which considers the single most likely amount from a range of possible consideration amounts. Estimates of variable consideration result in an adjustment to the transaction price such that it is probable that a significant reversal of cumulative revenue would not occur in the future. Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. Revenue is recorded net of sales tax. Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are included in cost of sales.

FAIR VALUE

The Company has accounts receivable, accounts payable and accrued expenses for which the carrying value approximates fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company at June 27, 2021 and December 31, 2020. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (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. There are three levels of inputs that may be used to measure fair values:

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Estimates are used when accounting for items such as warranties, allowance for credit losses, estimated lives of property, plant and equipment, reserve for excess and obsolete inventories, recoverability of goodwill, intangible assets and other long-lived assets, customer co-operative advertising, sales returns and allowances, tax positions, deferred tax assets, pension obligations and employee medical and prescription drug benefits self-insurance accrual.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU is effective for private companies for annual reporting periods beginning after December 15, 2021 and early adoption is permitted. The ASU will require lessees to report most leases as assets and liabilities on the balance sheet. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirements Benefits – Defined Benefit Plans – General (Subtopic 715-20). The Company expects to adopt this ASU for annual reporting periods beginning after December 15, 2021 and early adoption is permitted. The ASU will update disclosure requirements for employers that sponsor defined benefit pension or other post retirement plans. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) which is intended to simplify various aspects related to accounting for income taxes. The Company expects to adopt this ASU for annual reporting periods beginning after December 15, 2021 and early adoption is permitted. The ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The Company is currently evaluating the potential impact of adopting this guidance on its financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of June 27, 2021, the Company did not adopt any expedients or exceptions under ASU 2020-04. The Company will continue to evaluate the impact of ASU 2020-04 and whether it will apply the optional expedients and exceptions .

SEGMENTS

The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company has one reportable segment.

RISKS AND UNCERTAINTIES

COVID-19 has adversely impacted global supply chain and general economic conditions. The Company has experienced disruptions and higher costs in manufacturing, supply chain, logistical operations, and shortages of certain Company products in distribution channels. The full extent of the impact of the COVID-19 pandemic on the Company’s business and operational and financial performance and condition is currently uncertain and will depend on many factors outside the Company’s control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the utilization and effectiveness of treatments and vaccines, the imposition of effective public safety and other protective measures, the further impact of COVID-19 on the global economy and demand for the Company’s products and services. Should the COVID-19 pandemic, including variants such as Delta, not improve or worsen, or if the Company’s attempt to mitigate its impact on its operations and costs is not successful, the Company’s business, results of operations, financial condition and prospects may be adversely affected.

2.	ACQUISITIONS

On November 11, 2020, the Company acquired Drake Automotive Group LLC (“Drake”). The purchase price was $49,104. The Company acquired 100% of the outstanding member units of Drake. The Company purchased Drake in order to acquire strong brands in the automotive aftermarket. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. Consideration for the assets acquired consisted of cash payments of $47,104 plus an earn out value of $2,000. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill, totaling $32,441. The goodwill arising from the acquisition is primarily due to Drake’s strong market position. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded from the proceeds of debt and cash on hand.

The purchase agreement included a potential contingent payment based on 2020 performance. The seller could earn up to an additional $2,000. The fair value of this contingent payment was determined to be $2,000 based on the likelihood of achieving the required financial performance at the time of the valuation. The earn out payment of $2,000 was paid in March 2021.

The allocation of the purchase price to the assets acquired and liabilities assumed was based on estimates of the fair value of the net assets as follows:

Cash	$	205
Accounts receivable		3,947
Inventory		14,198
Property, plant and equipment		1,296
Other assets		189
Tradenames		7,715
Customer relationships		17,175
Goodwill		7,551
Accounts payable		(2,524	)
Accrued liabilities		(648	)
	$	49,104

The fair value of the acquired customer relationship intangible asset was estimated using the excess earnings approach. The customer relationship intangible asset is being amortized based on the attrition rate of customers which was determined to be 20 years. The fair value of the acquired tradenames intangible asset was estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life.

The contractual value of the accounts receivable acquired was $4,155.

On November 16, 2020, the Company acquired Simpson Performance Products, Inc. (“Simpson”). The purchase price was $117,409. The Company acquired 100% of the outstanding common stock of Simpson. The Company purchased Simpson in order to acquire strong brands in the automotive safety solutions market. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. Consideration for the assets acquired consisted of cash payments of $110,209 and an earn out initially valued at $7,200. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill, totaling $107,618. The goodwill arising from the acquisition is primarily due to Simpson’s strong market position. The goodwill and intangibles generated as a result of this acquisition are not deductible for income tax purposes. The purchase price was funded from the proceeds of debt and cash on hand. The determination of the final purchase price allocation to specific assets acquired and liabilities assumed may change in future periods as the fair value estimate of work-in-process and raw materials inventory is completed.

The purchase agreement included a potential contingent payment based on the performance for the twelve months ended October 3, 2021. The seller could earn up to an additional $25,000. The fair value of this contingent payment was initially determined to be $7,200 using the “Bull Call” option strategy utilizing the option values from the Black-Scholes Option Pricing Model. Based on actual performance and updated projections of Simpson’s performance for the earnout period, the fair value of the contingent payment was determined to be $24,373 as of March 28, 2021. Therefore, during the thirteen weeks ended March 28, 2021, an adjustment of $17,173 was recorded as expense which is recognized in acquisition and restructuring costs in the condensed consolidated statement of comprehensive income for the twenty-six weeks ended June 27, 2021.

The determination of the final purchase price allocation to specific assets acquired and liabilities assumed was adjusted to reflect the final fair value estimate of finished goods inventory, as noted below. The allocation of the purchase price to the assets acquired and liabilities assumed was based on estimates of the fair value of the net assets as follows:

	November 16,<br>2020 (as<br>initially<br>reported)			Measurement<br>Period<br>Adjustments			November 16,<br>2020 (as<br>adjusted)
Cash	$	7,715		$	—		$	7,715
Accounts receivable		3,894			—			3,894
Inventory		19,265			(770	)		18,495
Property, plant and equipment		5,952			—			5,952
Other assets		1,613			—			1,613
Tradenames		23,980			—			23,980
Customer relationships		28,770			—			28,770
Patents		2,720			—			2,720
Goodwill		51,305			843			52,148
Accounts payable		(2,483	)		—			(2,483	)
Accrued liabilities		(7,787	)		—			(7,787	)
Deferred tax liability		(12,993	)		—			(12,993	)
Debt		(4,615	)		—			(4,615	)
	$	117,336		$	73		$	117,409

The fair value of the acquired customer relationship intangible asset was estimated using the excess earnings approach. The customer relationship intangible asset is being amortized based on the attrition rate of customers which was determined to be 20 years. The fair value of the acquired tradenames and patents intangible assets were estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life. The patents are being amortized over 10 years based on the weighted average remaining life of the patent portfolio.

The contractual value of the accounts receivable acquired was $3,894.

On December 18, 2020, the Company acquired Detroit Speed, Inc. (“Detroit Speed”). The purchase price was $11,297. The Company acquired substantially all of the assets and liabilities of Detroit Speed. The Company purchased Detroit Speed in order to acquire strong brands in the automotive aftermarket. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. Consideration for the assets acquired includes cash payments of $9,297 and Class A Units of Parent of $2,000. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill, totaling $4,323. The goodwill arising from the acquisition is primarily due to Detroit Speed’s strong market position. The goodwill and intangibles generated as a result of this acquisition are partially deductible for income tax purposes. The purchase price was funded from cash on hand and distribution of Class A Units of Parent.

The allocation of the purchase price to the assets acquired and liabilities assumed was based on estimates of the fair value of the net assets as follows:

Cash	$	1,784
Accounts receivable		418
Inventory		3,478
Property, plant and equipment		3,040
Other assets		215
Tradenames		1,127
Customer relationships		560
Goodwill		2,636
Accounts payable		(668	)
Accrued liabilities		(1,019	)
Deferred tax liability		(274	)
	$	11,297

The fair value of the acquired customer relationship intangible asset was estimated using the excess earnings approach. The customer relationship intangible asset is being amortized based on the attrition rate of customers which was determined to be 10 years. The fair value of the acquired tradenames intangible asset was estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life.

The contractual value of the accounts receivable acquired was $418.

On April 14, 2021, the Company acquired Advance Engine Management Inc. doing business as AEM Performance Electronics (“AEM”). The purchase price was cash consideration of $51,566. The Company acquired substantially all of the assets and liabilities of AEM. The Company purchased AEM in order to acquire strong brands in the automotive aftermarket. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the purchase price has been allocated based upon the preliminary fair value of the assets acquired and liabilities assumed. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill, totaling $44,906. The goodwill arising from the acquisition is primarily due to AEM’s strong market position. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded from cash on hand.

The determination of the purchase price allocation to specific assets acquired and liabilities assumed is incomplete for AEM. The purchase price allocation may change in future periods as the fair value estimates of assets and liabilities (including, but not limited to, accounts receivable, inventory, property, plant, and equipment, other assets, intangibles, accounts payable, and accrued liabilities). The allocation of the purchase price to the assets acquired and liabilities assumed was based on preliminary estimates of the fair value of the net assets as follows:

Accounts receivable	$	3,454
Inventory		3,892
Property, plant and equipment		1,342
Other assets		493
Tradenames		10,760
Customer relationships		14,640
Patents		1,970
Technology intangibles		110
Goodwill		17,426
Accounts payable		(2,032	)
Accrued liabilities		(489	)
	$	51,566

The fair value of the acquired customer relationship intangible asset was estimated using the excess earnings approach. The customer relationship intangible asset is being amortized based on the attrition rate of customers which was determined to be 20 years. The fair value of the acquired tradenames and patents intangible assets were estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life. The patents are being amortized over 13 years based on the weighted average remaining life of the patent portfolio.

The contractual value of the accounts receivable acquired was $3,454.

The Company’s results for the thirteen weeks and twenty-six weeks ended June 27, 2021 include $5,437 of net sales and $687 of net income from AEM since the date of acquisition. The Company incurred transaction costs in the amount of $2,205 which are reflected in operating expenses in the thirteen weeks and twenty-six weeks ended June 27, 2021.

The following table provides the unaudited consolidated pro forma results for the periods presented as if AEM had been acquired as of January 1, 2020.

	For the thirteen weeks ended				For the twenty-six weeks ended
	June 27,<br>2021		June 28,<br>2020		June 27,<br>2021		June 28,<br>2020
Pro forma net sales	$	201,831	$	131,825	$	362,163	$	244,042
Pro forma net income		25,345		13,574		23,168		18,150

The pro forma results include the effects of the amortization of purchased intangible assets and acquired inventory step-up. The pro forma results are based upon unaudited financial information of the acquired entity and are presented for informational purposes only and are not necessarily indicative of the results of future operations or the results that would have occurred had the acquisitions taken place in the periods noted.

On May 24, 2021, the Company acquired Finspeed LLC (“Finspeed”). The purchase price was cash consideration of $2,505. The Company acquired substantially all of the assets and liabilities of Finspeed. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. The acquisition resulted in non-amortizable intangibles of $268. The purchase price was funded from cash on hand.

3.	INVENTORY

Inventories of the Company consisted of the following:

	June 27,<br>2021		December 31,<br>2020
Raw materials	$	41,875	$	44,474
Work-in-process		16,921		12,946
Finished goods		76,037		76,508
	$	134,833	$	133,928

4.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment of the Company consisted of the following:

	June 27,<br>2021		December 31,<br>2020
Land	$	1,330	$	1,330
Buildings and improvements		10,036		8,594
Machinery and equipment		46,829		44,690
Construction in process		14,861		8,088
Total property, plant and equipment		73,056		62,702
Less: accumulated depreciation		23,364		18,973
Property, plant and equipment, net	$	49,692	$	43,729

The Company’s long-lived assets by geographic locations are as follows:

	June 27,<br>2021		December 31,<br>2020
United States	$	47,552	$	42,264
International		2,140		1,465
Total property, plant and equipment		49,692		43,729
5.	INTANGIBLE ASSETS
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Intangible assets consisted of the following:

	June 27, 2021
	Gross Carrying<br>Amount		Accumulated<br>Amortization			Net Carrying<br>Value
Finite-lived intangible assets:
Customer relationships	$	259,907	$	(27,116	)	$	232,791
Tradenames		13,775		(3,726	)		10,049
Technology		26,673		(7,858	)		18,815
Total finite-lived intangible assets	$	300,355	$	(38,700	)	$	261,655
Indefinite-lived intangible assets:
Tradenames	$	163,768	$	—		$	163,768

	December 31, 2020
	Gross Carrying<br>Amount		Accumulated<br>Amortization			Net Carrying<br>Value
Finite-lived intangible assets:
Customer relationships	$	245,274	$	(21,819	)	$	223,455
Tradenames		13,775		(3,369	)		10,406
Technology		24,595		(6,674	)		17,921
Total finite-lived intangible assets	$	283,644	$	(31,862	)	$	251,782
Indefinite-lived intangible assets:
Tradenames	$	152,740	$	—		$	152,740

Amortization expense over the next five years is estimated to be:

2021 (excluding the <br>twenty-six<br> weeks ended June 27, 2021)	$	7,131
2022		14,028
2023		13,866
2024		13,052
2025		13,016
6.	DEBT
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Debt of the Company consisted of the following:

	June 27,<br>2021			December 31,<br>2020
First lien note	$	540,587		$	541,969
Second lien note		145,000			145,000
Other		4,544			4,701
Less unamortized debt issuance costs		(14,729	)		(16,684	)
		675,402			674,986
Less current portion of long-term debt		(5,528	)		(5,528	)
	$	669,874		$	669,458

The first lien note totals $600,000, comprising of two parts: a revolving component with maximum borrowings of $50,000, and a $550,000 term loan. Interest is based on LIBOR or the prime rate at the Company’s option, plus the applicable margin rate. Interest is due monthly for the prime rate loans and every one to three months for the LIBOR rate loans. The interest rate for the first lien note LIBOR rate loans was 5.2% at June 27, 2021 and December 31, 2020. There were no prime rate loans as of June 27, 2021 or December 31, 2020. Principal payments of $1,382 are due on a quarterly basis. The note is secured by the assets of the Company and the revolving credit facility matures in October 2023 , while the term loan matures in October 2025 . The note requires that the Company maintain a certain fixed charge coverage ratio. At June 27, 2021, the Company was in compliance with all financial covenants. In addition, the Company had outstanding letters of credit under the note, which totaled $1.2 million at June 27, 2021 and December 31, 2020.

The second lien note totals $145,000. Interest is based on LIBOR or the prime rate at the Company’s option, plus the applicable margin rate. Interest is due monthly for the prime rate loans and every one to three months for the LIBOR rate loans. The interest rate for the second lien note LIBOR rate loan was 8.6% and 8.7% at June 27, 2021 and December 31, 2020, respectively. The note is secured by a second lien on the assets of the Company and matures in October 2026. The note requires that the Company maintain a certain fixed charge coverage ratio. At June 27, 2021, the Company was in compliance with all financial covenants. Sentinel Capital Partners Junior Fund I, a related party, holds a portion of the second lien note and the outstanding balance at June 27, 2021 and December 31, 2020 was $20,000.

Future maturities of long-term debt and amortization of debt issuance costs as of June 27, 2021 are as follows:

	Debt		Debt Issuance<br>Costs
2021 (remaining six months)	$	4,148	$	1,955
2022		5,528		3,618
2023		5,528		3,344
2024		5,528		3,090
2025		519,855		2,450
Thereafter		149,544		272
	$	690,131	$	14,729
7.	REVENUE
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The principal activity from which the Company generates its revenue is the manufacturing and distribution of after-market automotive parts for its customers, comprised of resellers and end users. The Company recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customer obtains control of the product upon title transfer and not as the product is manufactured or developed. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e. estimated rebates, co-op advertising, etc.).

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.

The Company allows customers to return products when certain Company-established criteria are met. These sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized, net of returns to stock. Returned products, which are recorded as inventories, are valued at the lower of cost or net realizable value. The physical condition and marketability of the returned products are the major factors considered in estimating realizable value. The Company also estimates expected sales returns and records the necessary adjustment as a charge against gross sales.

The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 365 days. The Company elected the practical expedient to disregard the possible existence of a significant financing component related to payment on contracts, as the Company expects that customers will pay for the products within one year. The Company has evaluated the terms of our arrangements and determined that they do not contain significant financing components. Additionally, as all contracts with customers have an expected duration of one year or less, the Company has elected the practical expedient to exclude disclosure of information regarding the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. The Company provides limited warranties on most of its products against certain manufacturing and other defects. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 13 for more information.

The following table summarizes total revenue by product category:

	For the thirteen weeks ended				For the twenty-six weeks ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
Electronic systems	$	90,724	$	69,852	$	164,275	$	127,122
Mechanical systems		42,565		29,819		81,269		55,835
Exhaust		22,790		18,971		42,616		34,157
Accessories		17,992		6,654		31,019		15,339
Safety		18,970		—		34,194		—
Total sales	$	193,041	$	125,296	$	353,373	$	232,453

The following table summarizes total revenue based on geographic location from which the product is shipped:

	For the thirteen weeks ended				For the twenty-six weeks ended
	June 27, 2021		June 28, 2020		June 27, 2021		June 28, 2020
United States	$	187,993	$	125,296	$	345,570	$	232,453
Italy		5,048		—		7,803		—
Total sales	$	193,041	$	125,296	$	353,373	$	232,453
8.	INCOME TAXES
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The Company’s effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year’s taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

	For the thirteen weeks ended						For the the twenty-six weeks ended
	June 27, 2021			June 28, 2020			June 27, 2021			June 28, 2020
Provision for income taxes	$	5,790		$	2,827		$	10,556		$	4,144
Effective tax rates		20.1	%		18.4	%		33.4	%		19.3	%

For the thirteen weeks ended June 27, 2021 and June 28, 2020, the Company’s effective tax rates of 20.1% and 18.4%, respectively differed from the 21% federal statutory rate primarily due to permanent differences.

For the twenty-six weeks ended June 27, 2021, the difference between the Company’s effective tax rate of 33.4% and the 21% federal statutory rate resulted primarily from the permanent difference related to the increase in the Simpson earnout liability recognized during the thirteen weeks ended March 28, 2021. For the twenty-six weeks ended June 27, 2020, the difference between the Company’s effective tax rate of 19.3% and the 21% federal statutory rate resulted primarily from permanent differences.

BENEFIT PLANS

The following summarizes the components of net periodic benefit cost for the defined benefit pension plan:

	For the thirteen weeks ended						For the twenty-six weeks ended
	June 27, 2021			June 28, 2020			June 27, 2021			June 28, 2020
Components of Expense
Service cost	$	36		$	40		$	72		$	80
Interest cost		38			48			76			96
Expected return on plan assets		(61	)		(64	)		(122	)		(128	)
Amortization of net loss		5			—			10			—
Net periodic benefit cost	$	18		$	24		$	36		$	48

We made matching contributions totaling $526 and $411 to our 401(k) plan during the second quarter of 2021 and 2020, respectively. We made matching contributions totaling $1,000 and $802 to our 401(k) plan during the twenty-six weeks ending June 27, 2021 and June 28, 2020, respectively.

We made contributions of $98 and $111 to our defined contribution pension plan during the second quarter of 2021 and 2020, respectively. We made contributions of $117 and $183 to our defined contribution pension plan during the twenty-six weeks ending June 27, 2021 and June 28, 2020, respectively.

10.	EQUITY-BASED COMPENSATION PLANS

As of June 27, 2021, the amount of unvested profit interest units (“PIUs”) was 31,481, with a weighted average grant date fair value of $.27.

During the twenty-six weeks ended June 27, 2021 and June 28, 2020, 903 and 798 PIUs were fully vested, respectively, with a total grant-date fair value of $262 and $235 in 2021 and 2020, respectively. As of June 27, 2021, the total compensation cost related to nonvested PIUs, which vest related to service-based criteria, not yet recognized and the weighted-average period over which it’s expected to be recognized is $1,475 and 2.9 years, respectively.

During the twenty-six weeks ended June 27, 2021, no PIUs were issued, expired or forfeited.

11.	LEASE COMMITMENTS

The Company is obligated under various operating leases for manufacturing facilities, equipment and automobiles. Leases have a remaining term of one to ten years some of which have an option to renew. The aggregate future minimum fixed lease obligations under operating leases for the Company as of June 27, 2021, are as follows:

2021 (excluding the <br>twenty-six<br> weeks ended June 27, 2021)	$	3,636
2022		5,743
2023		4,445
2024		3,200
2025		2,560
Thereafter		10,615

For the thirteen weeks ended June 27, 2021 and June 28, 2020, total rent expense under operating leases approximated $1,979 and $1,062, respectively. For the twenty-six weeks ended June 27, 2021 and June 28, 2020, total rent expense under operating leases approximated $3,672 and $2,369, respectively. Taxes, insurance and maintenance expenses relating to all leases are obligations of the Company.

12.	ACQUISITION, RESTRUCTURING AND MANAGEMENT FEE COSTS

During the thirteen weeks ended June 27, 2021 the Company incurred $4,334 of acquisition, restructuring and management fee costs comprised of the following: (1) $2,172 of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions; (2) $504 incurred as part of the restructuring of operations including professional and consulting services; and (3) $1,658 of acquisition costs and management fees paid to Sentinel Capital Partners, a related party.

During the twenty-six weeks ended June 27, 2021 the Company incurred $24,048 of acquisition, restructuring and management fee costs comprised of the following: (1) $17,173 reflecting a fair value adjustment to the contingent consideration payable from the Simpson acquisition (2) $3,211 of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions; (3) $1,125 incurred as part of the restructuring of operations including professional and consulting services; and (4) $2,539 of acquisition costs and management fees paid to Sentinel Capital Partners, a related party.

During the thirteen weeks ended June 28, 2020 the Company incurred $3,998 of acquisition, restructuring and management fee costs comprised of the following: (1) $145 of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions; (2) $2,973 incurred as part of the restructuring of operations including professional and consulting services; and (3) $880 of acquisition costs and management fees paid to Sentinel Capital Partners, a related party.

During the twenty-six weeks ended June 28, 2020 the Company incurred $6,303 of acquisition, restructuring and management fee costs comprised of the following: (1) $1,163 of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions; (2) $3,369 incurred as part of the restructuring of operations including professional and consulting services; and (3) $1,771 of acquisition costs and management fees paid to Sentinel Capital Partners, a related party.

13.	COMMITMENTS AND CONTINGENCIES

The Company is a party to various lawsuits and claims in the normal course of business. While the lawsuits and claims against the Company cannot be predicted with certainty, management believes that the ultimate resolution of the matters will not have a material effect on the consolidated financial position or results of operations of the Company.

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product. The accrued product warranty costs are based primarily on historical experience of actual warranty claims and are recorded at the time of the sale.

The following table provides the changes in the Company’s accrual for product warranties which is classified as a component of accrued liabilities in the condensed consolidated balance sheets.

	For the thirteen weeks ended						For the twenty-six weeks ended
	June 27, 2021			June 28, 2020			June 27, 2021			June 28, 2020
Beginning balance	$	2,868		$	3,211		$	3,989		$	3,454
Accrued for current year warranty claims		2,479			2,060			3,436			3,927
Settlement of warranty claims		(2,419	)		(2,309	)		(4,497	)		(4,419	)
Ending balance	$	2,928		$	2,962		$	2,928		$	2,962
14.	SUBSEQUENT EVENTS
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On July 16, 2021 we consummated a business combination (“Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd. (“Empower”), Empower Merger Sub I Inc., a direct wholly owned subsidiary of Empower (“Merger Sub I”), Empower Merger Sub II LLC, a direct wholly owned subsidiary of Empower (“Merger Sub II”), and Holdings.

The Merger Agreement provided for, among other things, the following transactions: (i) Merger Sub I merged with and into Holdings, the separate corporate existence of Merger Sub I ceased and Holdings became the surviving corporation and a wholly owned subsidiary of Empower, and (ii) Holdings merged with and into Merger Sub II, the separate corporate existence of Holdings ceased and Merger Sub II became the surviving limited liability company and a wholly owned subsidiary of Empower. Upon closing, Empower changed its name to Holley Inc. and its trading symbol on the New York Stock Exchange from “EMPW” to “HLLY.”

The Business Combination will be accounted for as a reverse recapitalization. Holdings was deemed the accounting acquirer with Holley Inc. as the successor registrant. As such, Empower will be treated as the acquired company for financial reporting purposes, and financial statements for periods prior to the Business Combination will be those of Holdings.

In connection with the Business Combination, 24,000,000 shares of common stock in Holley Inc. were purchased in a private placement for a total aggregate purchase price of $240,000. Per the Merger Agreement, $100,000 of these proceeds were used to partially pay off Holdings’ second-lien note.

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references to “Holley,” “Holdings,” “we,” “us,”“our” and “the Company” in this section are to the business and operations of Holley Intermediate Holdings, Inc. and its consolidated subsidiaries. The following discussion and analysis should be read in conjunction withHolley’s condensed consolidated financial statements and related notes thereto included in this current report on Form 8-K filing. In addition to historical information, this discussion containsforward-looking statements that involve risks, uncertainties, and assumptions that could cause Holley’s actual results to differ materially from management’s expectations. Factors which could cause such differences are discussed herein andunder the caption, “Cautionary Note Regarding Forward-Looking Statements,” in our registration statement, as filed with the SEC on July 21, 2021, and those in our subsequent filings with the SEC.

Overview

We are a designer, marketer, and manufacturer of high performance automotive aftermarket products serving car and truck enthusiasts, with sales, processing, and distribution facilities reaching most major markets in the United States, Canada, Europe and China. Holley designs, markets, manufactures and distributes a diversified line of performance automotive products including fuel injection systems, tuners, exhaust products, carburetors, safety equipment and various other performance automotive products. The Company’s products are designed to enhance street, off-road, recreational and competitive vehicle performance and safety.

Innovation is at the core of our business and growth strategy. Approximately 40%, 40% and 36%, of our annual sales for fiscal 2020, 2019 and 2018, respectively, were generated by products that we first introduced in just the last five years. We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. We have thoughtfully expanded our product portfolio over time to adapt to consumer needs.

In addition, we have historically used strategic acquisitions to (i) expand our brand portfolio, (ii) enter new product categories and consumer segments, (iii) increase direct-to-consumer (“DTC”) scale and connection, (iv) expand share in current product categories and (v) realize value-enhancing revenue and cost synergies. While we believe our business is positioned for continued organic growth, we intend to continue evaluating opportunities for strategic acquisitions that would complement our current business and expand our addressable target market. Between 2014 and the end of 2020 we completed eight acquisitions, which, in total, have generated $35 million of cost saving synergies through reductions in product cost, elimination of headcount, facility costs and other SG&A expenses.

Factors Affecting our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and those under the caption, “Risk Factors,” in our registration statement, as filed with the SEC on July 21, 2021, and those in our subsequent filings with the SEC.

Business Combination

On July 16, 2021 we consummated a business combination (“Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc., a direct wholly owned subsidiary of Empower (“Merger Sub I”), Empower Merger Sub II LLC, a direct wholly owned subsidiary of Empower (“Merger Sub II”), and Holdings.

The Merger Agreement provided for, among other things, the following transactions: (i) Merger Sub I merged with and into Holdings, the separate corporate existence of Merger Sub I ceased and Holdings became the surviving corporation, and (ii) Holdings merged with and into Merger Sub II, the separate corporate existence of Holdings ceased and Merger Sub II became the surviving limited liability company. Upon closing, Empower changed its name to Holley Inc. and its trading symbol on the New York Stock Exchange (the “NYSE”) from “EMPW” to “HLLY.”

As a result of the Business Combination, Holley Inc. listed on the NYSE, which required us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

Acquisitions

Holley has historically pursued a growth strategy through both organic growth and acquisitions. The Company has pursued acquisitions that it believes will help drive profitability, cash flow and stockholder value. Holley targets companies that are market leaders, expand the Company’s geographic presence, provide a highly synergistic opportunity and enhance Holley’s ability to provide a wide array of its products to its customers through its distribution network.

The most significant of these acquisitions impacting the comparability of our operating results were:

•	AEM Performance Electronics: On April 14, 2021 Holley acquired AEM Performance<br>Electronics (“AEM”), a developer and supplier of electronic control and monitoring systems for performance automotive applications. This acquisition increases Holley’s penetration into the import and other sport compact cars<br>submarket.
•	Drake Automotive Group: On November 11, 2020 Holley acquired Drake<br>Automotive Group LLC (“Drake”), a designer and seller of automotive aftermarket appearance parts, wheels, chassis & suspension products and accessories. This acquisition increases Holley’s penetration within the Ford/Mustang<br>platform where it has historically been under indexed relative to the market.
---	---
•	Simpson Performance Products: On November 16, 2020 Holley acquired Simpson Performance<br>Products, Inc. (“Simpson”), a designer and seller of motorsport safety products including helmets head & neck restraints, seat belts, firesuits and more. This acquisition extended Holley’s footprint into the safety and racing<br>segment.
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The acquisitions have all been accounted for in accordance with FASB ASC Topic 805, Business Combinations, and the operations of the acquired entities are included in our historical results for the periods following the closing of the acquisition. See Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant AccountingPolicies,” and Note 2, “Acquisitions,” in the condensed consolidated financial statements included in this current report on Form 8-K for additional information related to the Company’s acquisitions and investments.

Seasonality

Holley’s operating results have fluctuated on a quarterly and annual basis in the past and can be expected to continue to fluctuate in the future as a result of a number of factors, some of which are beyond the Company’s control. Due to these factors and others, which may be unknown to the Company at this time, operating results in future periods can be expected to fluctuate. Accordingly, the Company’s historical results of operations may not be indicative of future performance.

Geopolitical

Geopolitical factors could adversely impact the U.S. and other economies, with specific impacts felt by the automotive sector. In particular, changes to international trade agreements, such as the United States-Mexico-Canada Agreement or other political pressures could affect the operations of the Company’s customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions.

Competition

The performance automotive industry is highly competitive. The principal factors on which industry participants compete include technical features, performance, product design, innovation, reliability and durability, brand, time to market, customer service, reliable order execution, and price. Existing competitors may expand their product offerings and sales strategies, and new competitors may enter the market. If Holley’s market share decreases due to increased competition, its revenue and ability to generate profits in the future may be impacted.

Regulatory Environment

Holley is subject to federal, state and local regulations including consumer laws and regulations, tax laws and regulations, and engineering and environmental laws and regulations. Holley’s current business plan assumes no material change in these laws and regulations. In the event any such change occurs, compliance with new laws and regulations might significantly affect Holley’s operations and cost of doing business.

COVID-19

Key Components of Results of Operations

Net Sales

The principal activity from which the Company generates its sales is the designing, marketing, manufacturing and distribution of performance after-market automotive parts for its end consumers. Sales are displayed net of rebates and sales returns allowances. Sales returns are recorded as a charge against gross sales in the period in which the related sales are recognized.

Cost of Goods Sold

Cost of goods sold consists primarily of the cost of purchased parts and manufactured products, including materials and direct labor costs. In addition, warranty, shipping and handling and inspection and repair costs are also included within costs of goods sold. Reductions in the cost of inventory to its net realizable value are also a component of cost of goods sold.

Gross Profit and Gross Margin

Gross profit consists of Holley’s net sales less its cost of goods sold. Gross margin is gross profit as a percentage of net sales.

Selling, General, and Administrative

Selling, general, and administrative consist of payroll and related personnel expenses, IT and office services, office rent expense and professional services. In addition, self-insurance, advertising, research and development, pre-production and start-up costs are also included within selling, general, and administrative. The Company expects to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations and other professional services.

Research and Development Costs

Research and development costs consist of personnel expenses and other costs associated with the development and innovation of new products as well as the maintenance of existing products.

Amortization of Intangibles

Amortization of intangibles consists of amortization of definite-lived intangible assets over their respective useful lives.

Acquisition and Restructuring Costs

Acquisition and restructuring costs consist of professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions. In addition, operational restructuring costs are included within this classification.

Related Party Acquisition and Management Fee Costs

Related party acquisition and management fee costs consist of fees paid to the Company’s private equity sponsor pursuant to a management services agreement for management services and consulting services directly attributable to potential acquisitions. Upon the Closing of the Business Combination, the management services agreement with our private equity sponsor was terminated.

Other Expense (Income)

Other expenses consist of foreign currency transaction gains and losses, gains and losses on the disposal of fixed asset and other miscellaneous items.

Operating Income

Operating income consists of Holley’s gross profit less selling, general and administrative expenses, amortization of intangibles, acquisition, restructuring and management fee costs and other expenses.

Interest Expense

Interest expense consists of interest due on the indebtedness under our credit facilities. Interest is based on LIBOR or the prime rate, plus the applicable margin rate. As of June 27, 2021, $540.6 million was outstanding under the First Lien Credit Agreement and $145.0 million outstanding under our Second Lien Credit Agreement.

Income Tax Expense

Income tax expense consists of the Company’s current income tax expense less the deferred income tax benefit.

Foreign Currency Translation Adjustment

Foreign currency translation adjustment is based on the translation of assets and liabilities translated using period end exchange rates and revenue and expenses translated using average exchange rates.

Results of Operations

Thirteen Weeks Ended June 27, 2021 Compared With Thirteen Weeks Ended June 28, 2020

The table below presents Holley’s results of operations for the thirteen weeks ended June 27, 2021 and June 28, 2020:

	For the thirteen weeks ended
	June 27,<br>2021		June 28,<br>2020				%
Net sales	$	193,041	$	125,296				54.07	%
Cost of goods sold		111,841		70,468				58.71	%
Gross profit		81,200		54,828				48.10	%
Selling, general, and administrative		26,190		16,294				60.73	%
Research and development costs		7,065		5,595				26.27	%
Amortization of intangibles		3,502		2,701				29.66	%
Acquisition and restructuring costs		2,676		3,118		)		(14.18	%)
Related party acquisition and management fee costs		1,658		880				88.41	%
Other expense (income)		47		(109	)			n/a
Operating income		40,062		26,349				52.04	%
Interest expense		11,174		11,013				1.46	%
Income before income taxes		28,888		15,336				88.37	%
Income tax expense		5,790		2,827				104.81	%
Net income		23,098		12,509				84.65	%
Foreign currency translation adjustment		35		—				n/a
Total comprehensive income	$	23,133	$	12,509				84.93	%

All values are in US Dollars.

Net Sales

Net sales for the thirteen weeks ended June 27, 2021 increased $67.7 million, or 54.1%, to $193.0 million, as compared to $125.3 million for the thirteen weeks ended June 28, 2020. Net sales during the thirteen weeks ended June 27, 2021 increased $37.3 million due to our recent business acquisitions. In addition our electronic products increased $15.4 million, or 22.1%, and our exhaust products increased $3.8 million, or 20.1%, primarily due to higher sales volume reflecting the continued success of our new product introductions.

Cost of Goods Sold

Cost of goods sold for thirteen weeks ended June 27, 2021 increased $41.4 million, or 58.7%, to $111.8 million, as compared to $70.5 million for the thirteen weeks ended June 28, 2020. The increase in cost of goods sold during the thirteen weeks ended June 27, 2021 was in line with a corresponding increase in product sales during such period.

Gross Profit and GrossMargin

Gross profit for the thirteen weeks ended June 27, 2021 increased $26.4 million, or 48.1%, to $81.2 million, as compared to $54.8 million for the thirteen weeks ended June 28, 2020. The increase in gross profit was driven by the increase in sales. Gross margin for the thirteen weeks ended June 27, 2021 was 42.16% compared to a gross margin of 43.86% for the thirteen weeks ended June 28, 2020.

Selling, General and Administrative

Selling, general and administrative costs for the thirteen weeks ended June 27, 2021 increased $9.9 million, or 60.7%, to $26.2 million, as compared to $16.3 million for the thirteen weeks ended June 28, 2020. When expressed as a percentage of sales, selling, general and administrative costs increased to 13.6% of sales for the thirteen weeks ended June 27, 2021, as compared to 13.0% of sales in 2020. $5.2 million of the increase is related to selling, general and administrative costs of recent acquisitions. The increase in costs was also driven by a $1.8 million increase in shipping costs related to higher sales and a $0.9 million increase in costs associated with the Business Combination.

Research and Development Costs

Research and development costs for the thirteen weeks ended June 27, 2021 increased $1.5 million, or 26.3%, to $7.1 million, as compared to $5.6 million for the thirteen weeks ended June 28, 2020. The increase in research and development costs was primarily due to headcount investments as we continue to pursue product innovation and new products.

Amortization of Intangibles

Amortization of intangible assets for the thirteen weeks ended June 27, 2021 increased $0.8 million, or 29.7%, to $3.5 million, as compared to $2.7 million for the thirteen weeks ended June 28, 2020 due to recent acquisitions.

Acquisition and Restructuring Costs

Acquisition and restructuring costs for the thirteen weeks ended June 27, 2021 decreased $0.4 million, to $2.7 million, as compared to $3.1 million for the thirteen weeks ended June 28, 2020, reflecting ongoing restructuring costs related to the businesses recently acquired.

Related Party Acquisition and Management Fee Costs

Related party acquisition and management fee costs for the thirteen weeks ended June 27, 2021 increased $0.8 million to $1.7 million as compared to $0.9 million for the prior year, primarily due to management fees related to the acquisition of Advance Engine Management, Inc (“AEM”).

Operating Income

As a result of factors described above, operating income for the thirteen weeks ended June 27, 2021 increased $13.7 million, or 52.0%, to $40.1 million, as compared to $26.3 million for the thirteen weeks ended June 28, 2020.

Interest Expense

Interest expense of $11.2 million for the thirteen weeks ended June 27, 2021 was comparable to $11.0 million for the prior year.

Income before IncomeTaxes

As a result of factors described above, income before income taxes for the thirteen weeks ended June 27, 2021 increased $13.6 million to $28.9 million, as compared to $15.3 million for the thirteen weeks ended June 28, 2020.

Income Tax Expense

Income tax expense for the thirteen weeks ended June 27, 2021 increased $3.0 million to $5.8 million, as compared to $2.8 million for the thirteen weeks ended June 28, 2020. The increase was due to an increase in taxable income from the growth in sales. The effective tax rates were 20.1% and 18.4% for the thirteen weeks ended June 27, 2021 and June 28, 2020, respectively.

Net Income

As a result of factors described above, net income for the thirteen weeks ended June 27, 2021 increased $10.6 million to $23.1 million, as compared to $12.5 million for the thirteen weeks ended June 28, 2020.

Total Comprehensive Income

As a result of factors described above, total comprehensive income for the thirteen weeks ended June 27, 2021 increased $10.6 million to $23.1 million, as compared to $12.5 million for the thirteen weeks ended June 28, 2020.

Twenty-six Weeks Ended June 27, 2021 Compared With Twenty-six Weeks Ended June 28, 2020

The table below presents Holley’s results of operations for the twenty-six week periods ended June 27, 2021 and June 28, 2020:

	For the twenty-six weeks ended
	June 27, 2021			June 28, 2020				%
Net sales	$	353,373		$	232,453				52.02%
Cost of goods sold		206,494			134,292				53.76%
Gross profit		146,879			98,161				49.63%
Selling, general, and administrative		50,202			31,487				59.44%
Research and development costs		13,034			11,216				16.21%
Amortization of intangibles		6,838			5,400				26.63%
Acquisition and restructuring costs		21,509			4,532				374.60%
Related party acquisition and management fee costs		2,539			1,771				43.37%
Other income		(86	)		(268	)			(67.91%)
Operating income		52,843			44,023				20.03%
Interest expense		21,245			22,518		)		(5.65%)
Income before income taxes		31,598			21,505				46.93%
Income tax expense		10,556			4,144				154.73%
Net income		21,042			17,361				21.20%
Foreign currency translation adjustment		19			—				n/a
Total comprehensive income	$	21,061		$	17,361				21.31%

All values are in US Dollars.

Net Sales

Net sales for the twenty-six weeks ended June 27, 2021 increased $120.9 million, or 52.0%, to $353.4 million, as compared to $232.5 million for the twenty-six weeks ended June 28, 2020. Net sales during the twenty-six weeks ended June 27, 2021 increased $63.2 million due to our recent business acquisitions. In addition our electronic products increased $31.7 million, or 25.0%, and our exhaust products increased $8.5 million, or 24.8%, primarily due higher sales volume reflecting the continued success of our new product introductions.

Cost of Goods Sold

Cost of goods sold for the twenty-six weeks ended June 27, 2021 increased $72.2 million, or 53.8%, to $206.5 million, as compared to $134.3 million for the twenty-six weeks ended June 28, 2020. The increase in cost of goods sold during the twenty-six weeks ended June 27, 2021 was in line with a corresponding increase in product sales during such period.

Gross Profit and Gross Margin

Gross profit for the twenty-six weeks ended June 27, 2021 increased $48.7 million, or 49.6%, to $146.9 million, as compared to $98.2 million for the twenty-six weeks ended June 28, 2020. The increase in gross profit was driven by the increase in sales. Gross margin of 41.6% for the twenty-six weeks ended June 27, 2021 was comparable to 42.2% for the prior year period.

Selling, General andAdministrative

Selling, general and administrative costs for the twenty-six weeks ended June 27, 2021 increased $18.7 million, or 59.4%, to $50.2 million, as compared to $31.5 million for the twenty-six weeks ended June 28, 2020. When expressed as a percentage of sales, selling, general and administrative costs increased to 14.2% of sales for the twenty-six weeks ended June 27, 2021, as compared to 13.6% of sales in 2020. $8.9 million of the increase is related to selling, general and administrative costs of recent acquisitions. The increase in costs was driven by a $3.4 million increase in shipping and handling costs related to higher sales and a $2.6 million increase in costs associated with the Business Combination.

Research and Development Costs

Research and development costs for the twenty-six weeks ended June 27, 2021 increased $1.8 million, or 16.2%, to $13.0 million, as compared to $11.2 million for the twenty-six weeks ended June 28, 2020. The increase in research and development costs were primarily due to headcount investments of $2.3 million as we continue to pursue product innovation and new products.

Amortization of Intangibles

Amortization of intangible assets for the twenty-six weeks ended June 27, 2021 increased $1.4 million, or 26.7%, to $6.8 million, as compared to $5.4 million for the twenty-six weeks ended June 28, 2020 due to recent acquisitions.

Acquisition and Restructuring Costs

Acquisition and restructuring costs for the twenty-six weeks ended June 27, 2021 increased $17.0 million, or 374.6%, to $21.5 million, as compared to $4.5 million for the twenty-six weeks ended June 28, 2020. The increase was primarily due to an increase of $17.2 million to the contingent consideration payable from the Simpson acquisition.

Related Party Acquisition and Management Fee Costs

Related party acquisition and management fee costs for the twenty-six weeks ended June 27, 2021 increased $0.8 million, or 43.4%, to $2.5 million as compared to $1.8 million for the prior year, primarily due to management fees related to the acquisition of AEM.

Operating Income

As a result of factors described above, operating income for the twenty-six weeks ended June 27, 2021 increased $8.8 million, or 20.0%, to $52.8 million, as compared to $44.0 million for the twenty-six weeks ended June 28, 2020.

Interest Expense

Interest expense for the twenty-six weeks ended June 27, 2021 decreased $1.3 million, or 5.7%, to $21.2 million, as compared to $22.5 million for the twenty-six weeks ended June 28, 2020. The decrease was due to a lower effective interest rate.

Income before Income Taxes

As a result of factors described above, income before income taxes for the twenty-six weeks ended June 27, 2021 increased $10.1 million, or 46.9%, to $31.6 million, as compared to $21.5 million for the twenty-six weeks ended June 28, 2020.

Income Tax Expense

Income tax expense for the twenty-six weeks ended June 27, 2021 increased $6.4 million to $10.6 million, as compared to $4.1 million for the twenty-six weeks ended June 28, 2020. The increase was due to an increase in taxable income from the growth in sales. The effective tax rates were 33.4% and 19.3% for the twenty-six weeks ended June 27, 2021 and June 28, 2020, respectively. The significant difference between the effective tax rate and the federal statutory rate in 2021 was due to the permanent difference resulting from the adjustment to the Simpson earnout during the period.

Net Income

As a result of factors described above, net income for the twenty-six weeks ended June 27, 2021 increased $3.7 million to $21.1 million, as compared to $17.4 million for the twenty-six weeks ended June 28, 2020.

Total Comprehensive Income

As a result of factors described above, total comprehensive income for the twenty-six weeks ended June 27, 2021 increased $3.7 million to $21.1 million, as compared to $17.4 million for the twenty-six weeks ended June 28, 2020.

Non-GAAP Financial Measures

Holley believes EBITDA and Adjusted EBITDA are useful to investors in evaluating the Company’s financial performance. In addition, Holley uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business. Holley believes that these non-GAAP financial measures help to depict a more realistic representation of the performance of the underlying business, enabling the Company to evaluate and plan more effectively for the future. Holley believes that investors should have access to the same set of tools that its management uses in analyzing operating results.

Holley defines EBITDA as earnings before (a) interest expense, (b) income taxes and (c) depreciation and amortization. Holley defines Adjusted EBITDA as EBITDA plus (i) unusual or nonrecurring expenses that consist primarily of the addback of the amortization of the fair market value increase in inventory in 2019 and 2018 (for 2020, the addbacks consist of the amortization of the fair market value increase in inventory and legal settlement) (ii) acquisition and restructuring costs, which for the twenty-six weeks ended June 27, 2021 includes a $17.2 million adjustment due to a change in the fair value of the Simpson acquisition contingent consideration payable, (iii) related party acquisition and management fee costs, and (iv) other expenses, which includes losses from disposal of fixed assets and foreign currency transactions.

EBITDA and Adjusted EBITDA are not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing Holley’s financial performance. These metrics should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP. The following unaudited table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the thirteen weeks ended June 27, 2021 and June 28, 2020 and for the twenty-six weeks ended June 27, 2021 and June 28, 2020:

	For the thirteen weeks ended					For the twenty-six weeks ended
	June 27, 2021		June 28, 2020			June 27, 2021			June 28, 2020
Net income (loss)	$	23,098	$	12,509		$	21,042		$	17,361
Adjustments:
Depreciation		2,201		1,988			4,453			4,013
Amortization of intangibles		3,502		2,701			6,838			5,400
Interest expense		11,174		11,013			21,245			22,518
Income tax expense (benefit)		5,790		2,827			10,556			4,144
EBITDA		45,765		31,038			64,134			53,436
Unusual or nonrecurring expenses		3,993		1,435			9,837			1,673
Acquisition and restructuring costs		2,676		3,118			21,509			4,532
Related party acquisition and management fee costs		1,658		880			2,539			1,771
Other expense		47		(109	)		(86	)		(268	)
Adjusted EBITDA	$	54,139	$	36,362		$	97,933		$	61,144

Liquidity and Capital Resources

Holley’s primary cash needs are to support working capital, capital expenditures, acquisitions, and debt repayments. The Company has generally financed its historical needs with operating cash flows, capital contributions and borrowings under its credit facilities. These sources of liquidity may be impacted by various factors, including demand for Holley’s products, investments made in acquired businesses, plant and equipment and other capital expenditures, and expenditures on general infrastructure and information technology.

The Company believes that its cash on hand, cash from operations and borrowings available under its revolving credit facility will be sufficient to satisfy its liquidity needs and capital expenditure requirements for at least the next twelve months.

Cash Flows

The following table provides a summary of cash flows from operating, investing, and financing activities for the periods presented:

Twenty-six Weeks Ended June 27, 2021 Compared With Twenty-six WeeksEnded June 28, 2020

	For the twenty-six weeks ended
	June 27, 2021			June 28, 2020
Cash flows from operating activities	$	46,397		$	43,449
Cash flows used in investing activities		(60,867	)		(3,485	)
Cash (used in) from financing activities		(1,539	)		26,450
Net increase (decrease) in cash and cash equivalents	$	(16,009	)	$	66,414

Operating Activities. Cash provided by operating activities for the twenty-six weeks ended June 27, 2021 was $46.4 million compared to cash provided by operating activities of $43.4 million during the twenty-six weeks ended June 28, 2020. Cash provided by accrued liabilities, accounts payable and accounts receivable increased by $29.9 million, $5.2 million, and $4.3 million, respectively. Offsetting these increases were decreases in cash provided by inventory of $22.6 million and prepaids and other current assets of $2.9 million. The changes in accrued liabilities, accounts receivable, inventory and accounts payable reflect the growth in the business in 2021. Additionally, the change in accrued liabilities includes the $17.2 million adjustment to the acquisition contingent consideration payable.

Investing Activities. Cash used in investing activities for the twenty-six weeks ended June 27, 2021 was $60.9 million, which included $54.0 million relating to acquisitions and $7.1 million relating to capital expenditures. During the twenty-six weeks ended June 28, 2020, cash used in investing activities was $3.5 million, primarily relating to capital expenditures.

Financing Activities. Cash used by financing activities for the twenty-six weeks ended June 27, 2021 was for payments on long-term debt. Cash provided by financing activities for the twenty-six weeks ended June 28, 2020 related to net borrowings under the revolving credit agreement.

Off-Balance Sheet Arrangements

Holley does not have any off-balance sheet financing arrangements at June 27, 2021, June 28, 2020, or December 31, 2021.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and related disclosures. We evaluate our estimates, judgements and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe that the assumptions, judgements and estimates associated with the following have the greatest potential impact on, and are critical to the understanding of, our results of operations: revenue recognition, accounts receivable and allowance for credit losses, inventory, goodwill and intangible assets, income taxes, business combinations and purchase accounting. For further information see Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies,”

Revenue Recognition

Accounts Receivable andAllowance for Credit Losses

Accounts receivable represent amounts due from customers in the ordinary course of business. The receivables are stated at the amount management expects to collect. The Company is subject to risk of loss from uncollectible receivables in excess of its allowance. The Company maintains an allowance for credit losses for estimated losses from customers’ inability to make required payments. In order to estimate the appropriate level of this allowance, the Company analyzes historical bad debts, customer concentrations, current customer credit worthiness, current economic trends and changes in customer payment patterns. Accounts are written off when management determines the account is uncollectable. Interest is not charged on past due accounts.

Inventory

The Company’s inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. Adjustments to reduce the cost of inventory to its net realizable value are made, if required, for estimated excess, obsolescence or impaired balances.

We regularly monitor inventory quantities on hand and on order and record write-downs for excess and obsolete inventories based on our estimate of the demand for our products, potential obsolescence of technology, product life cycles, and when pricing trends or forecast indicate that the carrying value of inventory exceeds our estimated selling price. These factors are affected by market and economic conditions, technology changes, and new product introductions and require estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on our gross margin. If inventory is written down, a new cost basis will be established that cannot be increased in future periods.

Goodwill and Intangible Assets

Goodwill is not subject to amortization and is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill represents the excess of the purchase price paid over the fair value of its identifiable net assets acquired. If the carrying amount of the goodwill exceeds the fair value, then an impairment loss will be recognized in the amount equal to the excess. After an impairment loss is recognized, the adjusted carrying amount of goodwill is its new accounting basis. Accounting guidance on the testing of goodwill for impairment allows entities testing goodwill for impairment, the option of performing a qualitative assessment to determine the likelihood of goodwill impairment and whether it is necessary to perform such impairment test.

Under Accounting Standards Update (“ASU”) No. 2017-04,Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, step 2 of the goodwill impairment test has been eliminated. Step 2 of the goodwill impairment test required companies to determine the implied fair value of the reporting unit’s goodwill. Under the new standard, an entity recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Intangible assets include trade names, customer relationships and developed technology obtained through business acquisitions. Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible assets acquired. Intangible assets with finite lives are amortized over their estimated useful life and are reported net of accumulated amortization, separately from goodwill. Indefinite life intangibles are not amortized but are subject to testing for impairment annually.

Income Taxes

We are subject to income taxes in the U.S. (federal and state) and foreign jurisdictions. We compute our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the currently enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The income tax effects of these differences are classified as long-term deferred tax assets and liabilities in our consolidated balance sheets.

Significant judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including but not limited to, historical operating results, forecasted earnings, estimates of future taxable income of a character necessary to realize the deferred asset, relative proportions of revenue and pre-tax income in the various domestic and jurisdictions in which we operate, and the existence of prudent and feasible tax planning strategies. Changes in the expectations regarding the realization of deferred tax assets could materially impact income tax expense in future periods.

Business Combinations and Purchase Accounting

Business combinations are accounted for using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their respective fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires knowledge of current market values and the values of assets in use, and often requires the application of judgment regarding estimates and assumptions. While the ultimate responsibility resides with management, for certain acquisitions the Company retains the services of certified valuation specialists to assist with assigning estimated values to certain acquired assets and assumed liabilities, including intangible assets and tangible long-lived assets. Acquired intangible assets, excluding goodwill, are valued using various methodologies including discounted cash flows, relief from royalty, and multiperiod excess earnings depending on the type of intangible asset purchased. These methodologies incorporate various estimates and assumptions, such as projected revenue growth rates, profit margins and forecasted cash flows based on discount rates and terminal growth rates.

Recent Accounting Pronouncements

For a discussion of Holley’s new or recently adopted accounting pronouncements, see Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies,” in the Notes to the Consolidated Financial Statements included elsewhere in this current report on Form 8-K.

Quantitative and QualitativeDisclosures about Market Risk

Interest Rate Risk. Holley is exposed to market risk in the normal course of business due to the Company’s ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. Holley has established policies and procedures governing the Company’s management of market risks and the use of financial instruments to manage exposure to such risks. The Company generally does not hedge its interest rate exposure. The Company had $691.7 million of debt outstanding as of June 27, 2021. A hypothetical 100 basis point increase or decrease in interest rates would result in an approximately $6.9 million change to Holley’s annual interest expense.

Credit and other Risks. Holley is exposed to credit risk associated with cash and cash equivalents and trade receivables. As of June 27, 2021, the majority the Company’s cash and cash equivalents consisted of cash balances in non-interest bearing checking accounts which exceed the insurance coverage provided on such deposits. The Company does not believe that its cash equivalents present significant credit risks because the counterparties to the instruments consist of major financial institutions. Substantially all trade receivable balances of the business are unsecured. The credit risk with respect to trade receivables is concentrated by the number of significant customers that the Company has in its customer base and a prolonged economic downturn could increase exposure to credit risk on the Company’s trade receivables. To manage exposure to such risks, Holley performs ongoing credit evaluations of the Company’s customers and maintains an allowance for potential credit losses.

Exchange Rate Sensitivity. As of June 27, 2021, the Company is exposed to changes in foreign currency exchange rates. While historically this exposure to changes in foreign currency exchange rates has not had a material effect on the Company’s financial condition or results of operations, foreign currency fluctuations could have an adverse effect on business and results of operations in the future. Historically, Holley’s primary exposure has been related to transactions denominated in the Euros and Canadian dollars. The majority of the Company’s sales, both domestically and internationally, are denominated in U.S. Dollars. Historically, the majority of the Company’s expenses have also been in U.S. Dollars and we have been somewhat insulated from currency fluctuations. However, Holley may be exposed to greater exchange rate sensitivity in the future. Currently, the Company does not hedge foreign currency exposure; however, the Company may consider strategies to mitigate foreign currency exposure in the future if deemed necessary.

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below shall have the same meaning as terms defined and included elsewhere in the Current Report on Form 8-K (the “Form 8-K’) filed with the Securities and Exchange Commission (the “SEC’) on July 21, 2021 and, if not defined in the Form 8-K, the Proxy Statement filed with the SEC on June 21, 2021.

The following unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 present the combination of the financial information of Empower and Holley Intermediate after giving effect to the Business Combination, the PIPE Financing, the A&R FPA, and the partial repayment of Holley Intermediate’s debt (“Debt Paydown”), and have been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”.

The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the unaudited historical condensed balance sheet of Empower as of June 30, 2021 with the unaudited historical condensed consolidated balance sheets of Holley Intermediate as of June 27, 2021 giving effect to the Business Combination, the PIPE Financing, the A&R FPA, and the Debt Paydown described in the accompanying notes, on a pro forma basis as if each had been completed as of June 30, 2021.

The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 combines the unaudited historical condensed statements of operations of Empower for the six months ended June 30, 2021 and the period from August 19, 2020 (inception) through December 31, 2020 with the unaudited historical condensed consolidated statements of comprehensive income (loss) of Holley Intermediate for the 26 weeks ended June 27, 2021 and the year ended December 31, 2020 on a pro forma basis giving effect to the Business Combination, the PIPE Financing, the A&R FPA, and the Debt Paydown described in the accompanying notes, on a pro forma basis as if each had been completed on January 1, 2020.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of any integration costs, tax deductibility of transaction costs, or anticipated synergies in the pre-acquisition period of entities acquired by Holley Intermediate. These synergies are effective starting on the date of each acquisition and therefore, are not fully captured in the results for the six months ended June 30, 2021 and the year ended December 31, 2020.

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Company’s financial condition or results of operations would have been had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

On March 11, 2021, Empower entered into the Merger Agreement with Merger Sub I, Merger Sub II and Holley Intermediate, pursuant to which, among other things, following the Domestication, (i) Merger Sub I, a direct wholly owned subsidiary of Empower, merged with and into Holley Intermediate, with Holley Intermediate surviving such merger as a wholly owned subsidiary of Holley and (ii) Merger Sub II, a direct wholly owned subsidiary of Empower, merged with and into Holley Intermediate, with Merger Sub II surviving such merger as a wholly owned subsidiary of Holley.

The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Empower has been treated as the “acquired” company for financial reporting purposes. This determination was primarily based on current shareholders of Holley Intermediate having a relative majority of the voting power of the Company, the operations of Holley Intermediate prior to the acquisition comprising the only ongoing operations of the Company, and senior management of Holley Intermediate comprising the majority of the senior management of the Company. Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Holley Intermediate with the acquisition being treated as the equivalent of Holley Intermediate issuing stock for the net assets of Empower, accompanied by a recapitalization. The net assets of Empower have been stated at historical cost, with no goodwill or other intangible assets recorded.

In connection with the execution of the Merger Agreement, Empower entered into the PIPE Subscription Agreements with the PIPE Investors to sell an additional 24,000,000 shares of Common Stock (at a price of $10.00 per share) at Closing, for a total aggregate purchase price of up to $240.0 million. Per the Merger Agreement, $100.0 million of the PIPE Financing proceeds were used for the Debt Paydown.

Pursuant to the A&R FPA, Empower entered into an agreement to issue 5,000,000 Empower Units to the A&R FPA Investor, which was subsequently assigned to the New FPA Purchasers, and consummated concurrently with the Closing, for total proceeds for $50.0 million.

Unaudited Pro forma Condensed Combined Balance Sheet

As of June 30, 2021

(in USD thousands)

	Empower(Historical)			Holley(Historical)			Pro FormaTransactionAccountingAdjustments			FinancingTransactionAccountingAdjustments			Pro FormaAdjustmentsfor A&RFPA			Pro FormaConsolidated			Note
Assets
Cash and cash equivalents	$	704		$	55,665		$	(154,308	)	$	133,012		$	50,000		$	85,073		a
Accounts receivable, less allowance for credit losses		—			62,873			—			—			—			62,873
Inventory		—			134,833			—			—			—			134,833
Prepaids and other current assets		260			7,836			—			—			—			8,096
Total current assets		964			261,207			(154,308	)		133,012			50,000			290,875
Property, plant and equipment, net		—			49,692			—			—			—			49,692
Goodwill		—			377,368			—			—			—			377,368
Cash and marketable securities held in Trust Account		250,112			—			(250,112	)		—			—			—		a
Other intangible assets, net		—			425,423			—			—			—			425,423
Total assets		251,076			1,113,690			(404,420	)		133,012			50,000			1,143,358
Liabilities and stockholders’ equity
Accounts payable		—			42,744			—			—			—			42,744
Accrued interest		—			5,687			—			—			—			5,687
Accrued liabilities		—			29,096			—			—			—			29,096
Acquisition contingent consideration payable		—			24,373			—			—			—			24,373
Other Accrued expenses		4,271			—			(4,271	)		—			—			—		a
Current portion of long-term debt		—			5,528						—			—			5,528
Total current liabilities		4,271			107,428			(4,271	)		—			—			107,428
Warrant liability		25,233			—			—			—			1,967			27,200		a
A&R FPA liability		3,250			—			—			—			(1,750	)		1,500		a
Earn-out liability		—			—			19,009			—			—			19,009		b
Deferred underwriting fee payable		8,750			—			(8,750	)		—			—			—		a
Long-term debt, net of current portion		—			649,874			—			(100,000	)		—			549,874		c
Long-term debt due to related party		—			20,000			—			—			—			20,000
Deferred taxes		—			72,538			—			—			—			72,538
Other noncurrent liabilities		—			2,146			—			—			—			2,146
Total liabilities		41,504			851,986			5,988			(100,000	)		217			799,695
Ordinary shares subject to possible redemption		204,572			—			(204,572	)		—			—			—		d
Shareholders’ Equity
Class A ordinary shares		—			—			82			22			5			109		d
Class B ordinary shares		1			—			(1	)		—			—			—		d
Common stock		—			—			—			—			—			—
Additional paid-in capital		25,320			239,152			(207,229	)		232,990			49,778			340,011		d
Accumulated other comprehensive loss		—			(655	)		—			—			—			(655	)	d
Retained earnings (accumulated deficit)		(20,321	)		23,207			1,312			—			—			4,198		d
Total stockholders’ equity		5,000			261,704			(205,836	)		233,012			49,783			343,663
Total liabilities and stockholders’ equity	$	251,076		$	1,113,690		$	(404,420	)	$	133,012		$	50,000		$	1,143,358

Unaudited Pro forma Condensed Combined Statement of Comprehensive Income (Loss)

For the six months ended June 30, 2021

(in USD thousands, except share and per share amounts)

	Empower(Historical)			Holley(Historical)			Pro FormaTransactionAccountingAdjustments			FinancingTransactionAccountingAdjustments			Pro FormaAdjustmentsFor A&RFPA		Pro FormaConsolidated			Note
Revenue		—		$	353,373			—			—			—	$	353,373
Cost of goods sold		—			206,494			—			—			—		206,494
Operating Expenses		—			—			—			—			—		—
Selling, general and administrative		—			50,202			—			—			—		50,202
Research and development costs		—			13,034			—			—			—		13,034
Formation and operational costs		4,593			—			—			—			—		4,593
Amortization of intangibles		—			6,838			—			—			—		6,838
Acquisition, restructuring and management fee costs		—			21,509			—			—			—		21,509
Related party acquisition and management fee costs		—			2,539			—			—			—		2,539
Other income (loss)		—			(86	)		—			—			—		(86	)
Total operating expenses		4,593			94,036			—			—			—		98,629
Income (loss) before interest expense and income taxes		(4,593	)		52,843			—			—			—		48,250
Interest expense		—			21,245			—			(4,252	)		—		16,993		AA
Interest income		59			—			(59	)		—			—		—		AB
Income (loss) before income taxes		(4,534	)		31,598			(59	)		4,252			—		31,257
Unrealized gain (loss) on other marketable securities		—			—			—			—			—		—
Change in fair value of warrant liability		(10,143	)		—			—			—			—		(10,143	)
Change in fair value of forward purchase agreement liability		(1,200	)		—			—			—			1,200		—		AC
Transaction costs		—			—			—			—			—		—
Income tax expense		—			10,556			—			1,072			—		11,628		AD
Net income (loss)	$	(15,877	)	$	21,042		$	(59	)	$	3,180		$	1,200	$	9,486
Comprehensive income (loss):		—			—											—
Foreign currency translation adjustment		—			19			—			—			—		19
Pension liability loss		—			—			—			—			—		—
Total comprehensive income (loss)	$	(15,877	)	$	21,061		$	(59	)	$	3,180		$	1,200	$	9,505
Weighted average shares outstanding, basic and diluted		9,363,928														115,805,639
Basic and diluted net income (loss) per share	$	(1.70	)												$	0.08

Unaudited Pro forma Condensed Combined Statement of Comprehensive Income (Loss)

For the year ended December 31, 2020

(in USD thousands, except share and per share amounts)

												Note
Revenue	—		504,179		—		—		—	504,179
Cost of goods sold	—		295,935		—		—		—	295,935
Operating Expenses	—		—		—		—		—	—
Selling, general and administrative	—		70,875		—		—		—	70,875
Research and development costs	—		23,483		—		—		—	23,483
Formation and operational costs	274		—		—		—		—	274
Amortization of intangibles	—		11,082		—		—		—	11,082
Acquisition, restructuring and management fee costs	—		9,743		—		—		—	9,743
Related party acquisition and management fee costs	—		6,089		—		—		—	6,089
Other income	—		1,517		—		—		—	1,517
Total operating expenses	274		122,789		—		—		—	123,063
Income (loss) before interest expense and income taxes	(274	)	85,455		—		—		—	85,181
Interest expense	—		43,772		—		(9,513	)	—	34,259		AA
Interest income	49		—		(49	)	—		—	—		AB
Income (loss) before income taxes	(225	)	41,683		(49	)	9,513		—	50,922
Unrealized gain (loss) on other marketable securities	4		—		—		—		—	4
Change in fair value of warrant liability	(1,690	)	—		—		—		—	(1,690	)
Change in fair value of purchase agreement liability	(2,050	)	—		—		—		2,050	—		AC
Transaction costs	(483	)	—		—		—		—	(483	)
Income tax expense	—		8,826		—		2,399		—	11,225		AD
Net income (loss)	(4,444	)	32,857		(49	)	7,114		2,050	37,528
Comprehensive income (loss):	—		—							—
translation adjustment	—		16		—		—		—	16
Pension liability loss	—		(293	)	—		—		—	(293	)
Total comprehensive income (loss)	(4,444	)	32,580		(49	)	7,114		2,050	37,251
Weighted average shares outstanding, basic and diluted	7,850,413									115,805,639
Basic and diluted net income per share	(0.58	)								0.32

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1 — Basis of Presentation

The pro forma adjustments have been prepared as if the Business Combination had been consummated on June 30, 2021 in the case of the unaudited pro forma condensed combined balance sheet and on January 1, 2020, the beginning of the earliest period presented in the unaudited pro forma condensed combined statement of operations.

The unaudited pro forma condensed combined financial information has been prepared assuming the following methods of accounting in accordance with GAAP.

The pro forma adjustments reflecting the consummation of the Business Combination, the PIPE Financing, and the transactions contemplated by the A&R FPA are based on currently available information and assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the current time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

Notwithstanding the legal form of the Business Combination pursuant to the Merger Agreement, the Business Combination will be accounted for as a reverse capitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Empower is treated as the “acquired” company for financial reporting purposes. The net assets of Empower are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are those of Holley Intermediate.

The Business Combination will be accounted for as a reverse recapitalization because Holley Intermediate has been determined to be the accounting acquirer under Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The determination is primarily based on the evaluation of the following facts and circumstances taking into consideration that:

•	As of the date of the Closing the pre-merger equity holders of Holley<br>Intermediate hold 57.35% of voting rights in the Company;
•	The pre-merger equity holders of Holley Intermediate have the right to<br>appoint the majority of members of the Company’s board of directors;
---	---
•	Senior management of Holley Intermediate comprise the senior management of the Company; and<br>
---	---
•	Operations of Holley Intermediate comprise the ongoing operations of the Company.
---	---

Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Holley Intermediate issuing stock for the net assets of Empower, accompanied by a recapitalization.

Following the Closing, holders of Empower Class A Shares that exercised their redemption rights received their per share redemption price out of the funds in the trust account. Each holder of Empower Class A Shares was able to elect to redeem all or a portion of its Empower Class A Shares at a per-share price, payable in cash, equal to a pro rata share of the aggregate amount on deposit in the trust account (including any interest earned on the funds held in the trust account).

The 2,187,500 Earn-Out Shares issued to Sponsor at Closing are carried as a liability on the pro forma balance sheet. The Earn-Out shares do not have an income statement impact as the fair value of the Earn-Out liability has not materially changed. Please see the section entitled “Proposal No. 1 — The Business Combination Proposal — Other Agreements — Sponsor Agreement” for additional information on vesting and forfeiture of the Earn-Out Shares.

Note 2 — Description of the Business Combination ****

On March 11, 2021, Empower entered into the Merger Agreement with Merger Sub I, Merger Sub II and Holley Intermediate, pursuant to which, among other things, following the Domestication, (i) Merger Sub I merged with and into Holley Intermediate, the separate corporate existence of Merger Sub I ceased and Holley Intermediate became the surviving corporation and a wholly owned subsidiary of Empower, and (ii) Holley Intermediate merged with and into Merger Sub II, the separate corporate existence of Holley Intermediate ceased and Merger Sub II became the surviving limited liability company and a wholly owned subsidiary of Empower.

At the Closing, Empower ceased to exist, and the Company will operate under the name “Holley Inc.”

As a result of and upon the Closing, among other things, all outstanding shares of Holley Intermediate common stock as of immediately prior to the effective time of Merger I were cancelled in exchange for the right to receive an aggregate of $264.7 million in cash (subject to adjustment) and 67,673,884 shares (subject to adjustment) of Common Stock (at a deemed value of $10.00 per share). Cash Merger Consideration was reduced by COVID-19 related deferral taxes and accrued and unpaid income tax liabilities for any tax period prior to the Closing (but giving effect to certain transaction tax deductions and prepayments not less than zero). Because redemptions of Empower Class A Shares resulted in the trust account having an amount less than $540 million at the Closing (after giving effect to proceeds received from the PIPE Financing and A&R FPA, but before payment of the unpaid transaction expenses of the parties), (i) Cash Merger Consideration was proportionally reduced by the shortfall of $99.4 million and (ii) Securities Merger Consideration was proportionally increased at a price of $10.00 per share of Common Stock.

An additional 24,000,000 shares of Common Stock were purchased (at a price of $10.00 per share) at the Closing by the PIPE Investors, for a total aggregate purchase price of $240.0 million. Per the Merger Agreement, $100.0 million of the PIPE Financing proceeds were used to partially pay off Holley Intermediate’s debt.

Pursuant to the A&R FPA, Empower issued 5,000,000 Empower Units to the New FPA Purchasers concurrently with the Closing, for total proceeds for $50.0 million.

Pursuant to the Cayman Constitutional Documents, holders of Empower Class A Shares were offered the opportunity to redeem, upon the Closing, all or a portion of such holder’s Empower Class A Shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit in the trust account (as of two business days prior to the Closing).

Subject to the terms and conditions set forth in the Merger Agreement, the Holley Stockholder received aggregate consideration with a value equal to $1,155,000,000, which consists of (a) $264,717,627 of Cash Merger Consideration and (b) $676,738,839 in shares of Common Stock based on an assumed price of $10.00 per share. This consideration was determined given (i) the trust account value at redemption of $250,113,825, (ii) the per share redemption amount is equal to approximately $10.005, (iii) that 9,930,745 Empower Class A Shares were redeemed for an aggregate payment of approximately $99.4 million from the trust account, and (iv) there is an upward adjustment to the Securities Merger Consideration issued to the Holley Stockholder pursuant to the Merger Agreement.

The following table summarizes the pro forma Common Stock issued and outstanding immediately after the Closing, excluding the potential dilutive effect of the exercise of the Warrants and Earn-Out Shares.

	Shares		%
Empower public shareholders		15,069,255		13.01	%
Holley Stockholder		67,673,884		58.44	%
Sponsor and related parties		9,062,500		7.83	%
PIPE Investors		24,000,000		20.72	%
Closing Shares	****	115,805,639	****	100.00	%

Note 3 — Pro Forma Adjustments

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheets

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2021 are as

follows:

a. Cash. Represents the impact of the Business Combination on the cash balance of Holley. The table below represents the sources and uses of funds related to the Business Combination:

	Note
Cash balance of Empower prior to the Business Combination		$	704
Cash balance of Holley Intermediate prior to the Business Combination		$	55,665
Total Pre-adjustment cash balance			56,369
Proceeds from cash held in Trust Account	1		250,112
PIPE proceeds	2		240,000
A&R FPA proceeds	3		50,000
Payment to redeeming Empower public shareholders	4		(99,353	)
Payment to the Sellers	5		(264,718	)
Payment of accrued expenses	6		(2,998	)
Payment of deferred offering costs	7		(8,750	)
Payment of transaction costs	7		(35,589	)
Debt paydown from PIPE proceeds	8		(100,000	)
Adjustment to cash in connection with the Business Combination			28,704
Ending cash and restricted cash balance			85,073
(1)	Represents the amount of the restricted investments and cash held in the trust account upon consummation of the<br>Business Combination.
---	---
(2)	Represents the issuance, pursuant to the PIPE Financing consummated concurrently with the Closing, to the PIPE<br>Investors of 24.0 million shares of Common Stock at a price of $10 per share.
---	---
(3)	Represents the issuance of 5,000,000 Empower Units under the A&R FPA to the New FPA Purchasers, consummated<br>concurrently with the Closing.
---	---
(4)	Represents the amount paid to and the Class A Shares redeemed by Empower public shareholders who exercised<br>their redemption rights.
---	---
(5)	Represents the amount of cash paid to the existing equity holders of the Holley Stockholder upon the<br>consummation of the Business Combination.
---	---
(6)	Represents payment of Empower’s accrued expenses.
---	---
(7)	Reflects the settlement of $35.6 million of transaction costs and $8.8 million of Empower’s<br>deferred underwriting fees at close in connection with the Business Combination. The $35.6 million of transaction fees relates to advisory, legal, accounting, printing and other fees to be incurred, including $7.0 million of PIPE Financing<br>expenses.
---	---
(8)	Reflects Debt Repayment of Holley Intermediate ’s debt with net cash proceeds from the PIPE Financing in<br>an aggregate principal amount of $100.0 million. See Note 3(b) below.
---	---

b. Earn-Out Liability. Represents recognition of earn-out related to 2,187,500 shares of Common Stock as required under terms of the Merger Agreement. The earn-out is classified as a liability in the unaudited pro forma condensed combined balance sheet and becomes issuable upon achieving certain market share price milestones as outlined in the Merger Agreement during the earn-out period. The earn-out liability was recognized at its estimated fair value of $19,009,375 as of June 30, 2021. This liability will be remeasured to its fair value at the end of each reporting period, and subsequent changes in the fair value post-Business Combination will be recognized in the Company’s statement of operations within other income/expense.

c. Debt. Represents the impact of the Business Combination on the debt balance, specifically in respect of the net cash proceeds from the PIPE Financing in an aggregate principal amount of $100.0 million (as also indicated above per pro forma adjustment (a)(8)). The following table represents the impact of the Debt Paydown by Empower shareholders:

Debt paydown from PIPE proceeds	$	100,000
Allocated to:
Long-term debt, net of current portion and deferred loan costs	$	100,000

d. Equity

The following table represents the impact of the Business Combination on total equity section:

			Common Stock
			Number of Shares						Par Value
	Note		Class AStock			Class BStock			Class AStock			Class BStock			CommonStock		AdditionalPaid inCapital			AccumulatedOtherComprehensiveLoss			RetainedEarningsAccumulatedDeficit
Pre Business Combination—Empower				3,266,381			6,250,000			—			1			—		25,320			—			(20,321	)
Pre Business Combination—Holley				—			—			—			—			—		239,152			(655	)		23,207
Founder Shares		1		4,062,500			(6,250,000	)		—			(1	)		—		—			—			—
Balances after share transaction of the Company				7,328,881			—			—			—			—		264,472			(655	)		2,886
Reclassification of redeemable shares to Class A shares		2		21,733,619			—			22			—			—		214,539			—			—
Less: Redemption of redeemable stock		10		(9,930,745	)		—			(10	)		—			—		(99,307	)		—			—
Cash to the Holley Stockholder at Business Combination		3		—			—			—			—			—		(264,718	)		—			—
Shares issued to the Holley Stockholder as consideration		4		67,673,884			—			68			—			—		(68	)
PIPE Financing Proceeds		5		24,000,000			—			24			—			—		232,987			—			—
Forward purchase agreement proceeds		6		5,000,000			—			5			—			—		49,778			—			—
Earn-out liability		7		—			—			—			—			—		—			—			(19,009	)
Holley transaction costs		8		—			—			—			—			—		(27,965	)		—			—
Empower transaction costs		8		—			—			—			—			—		(9,386	)		—			—
Elimination of historical accumulated deficit of Empower		9		—			—			—			—			—		(20,321	)		—			20,321
Elimination of historical common stock of Holley				—			—			—			—			—		—						—
Post-Business Combination				115,805,639			—			109			—			—		340,011			(655	)		4,198
(1)	Represents the automatic conversion of Empower Class B ordinary shares, par value $0.0001, into Common<br>Stock at Closing; 2,187,500 shares of Common Stock classified as Earn-Out Shares will be restricted from transfer at Closing subject to vesting and forfeiture.
---	---
(2)	Represents redeemable shares of Empower prior to the Closing, which became permanent equity of the Company at<br>Closing.
---	---
(3)	Represents Cash Merger Consideration received by the Holley Stockholder at Closing subject to the terms and<br>conditions set forth in the Merger Agreement.
---	---
(4)	Represents shares of Common Stock that were issued to the Holley Stockholder at Closing subject to the terms<br>and conditions set forth in the Merger Agreement; 67,673,884 shares of Common Stock were issued to the Holley Stockholder.
---	---

(5)	Represents the issuance, in the PIPE Financing consummated concurrently with the Closing, to the PIPE Investors<br>of 24,000,000 shares of Common Stock at a price of $10 per share.
(6)	Represents the issuance of 5,000,000 Empower Units under the A&R FPA to the New FPA Purchasers, consummated<br>concurrently with the Closing.
---	---
(7)	Represents recognition of the earn-out liability under the terms of the<br>Merger Agreement.
---	---
(8)	Represents capitalized expenses related to the Business Combination as a reduction to equity proceeds.<br>
---	---
(9)	Represents the equity reclassification of the historical accumulated deficit of Empower to the combined<br>additional paid-in capital of the Company.
---	---
(10)	Represents the amount paid to and the Empower Class A Shares redeemed by Empower public shareholders who<br>exercised their redemption rights.
---	---

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The adjustments included in the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 and twelve months ended December 31, 2020 are as follows:

Represents the estimated changes in historical interest expense following the partial repayment of the existing debt in the amount of $100.0 million in connection with the Business Combination. The impact of the partial repayment was calculated as follows for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.

Period	Amount		Rate			Interest
1/1/2021 to 2/26/2021	$	100,000		8.73	%	$	1,383
2/27/2021 to 5/28/2021		100,000		8.61	%		2,153
5/29/2021 to 6/30/2021		100,000		8.59	%		716
Total						$	4,252
Period	Amount		Rate			Interest
1/1/2020 to 2/28/2020	$	100,000		10.41	%	$	1,706
3/1/2020 to 5/29/2020		100,000		10.11	%		2,528
5/30/2020 to 8/28/2020		100,000		8.86	%		2,240
8/28/2020 to 11/30/2020		100,000		8.76	%		2,287
12/1/2020 to 12/31/2020		100,000		8.73	%		752
Total						$	9,513
(AB)	Represents elimination of investment income and unrealized loss on marketable securities related to the<br>investment held in the trust account.
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(AC)	Represents the elimination of the loss on Empower’s A&R FPA liability whereby New FPA Purchasers<br>purchased, on a private placement basis, an aggregate of 5,000,000 Empower Units, consisting of one share of Common Stock and one-third of one Public Warrant at the Closing.
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(AD)	Represents the income tax expense resulting from the pro forma adjustment on interest expense. The impact on<br>the income tax expense due to the partial debt repayment was calculated as follows for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively:
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Adjustment	Amount		Tax Rate			Tax Expense
---	---	---	---	---	---	---	---
Partial debt paydown	$	4,252		25.22	%	$	1,072
Adjustment	Amount		Tax Rate			Tax Expense
Partial debt paydown	$	9,513		25.22	%	$	2,399

The estimated tax impacts of the pro forma adjustments have been reflected in Income tax expense in the unaudited pro forma condensed combined statement of comprehensive income (loss) for the year ended December 31, 2020 and for the six months ended June 30, 2021, by using a tax rate which was determined using the weighted average statutory tax rate of the jurisdictions expected to be impacted. The total effective tax rate of the Company could be significantly different depending on the post-acquisition geographical mix of income and other factors. Because the tax rate used for these pro forma condensed combined financial statements is an estimate, it will likely vary from the actual rate in periods subsequent to the consummation of the Business Combination and those differences may be material.

4. Net Income (Loss) per Share

Represents the net income (loss) per share calculated using the historical weighted average shares outstanding and the issuance of additional shares in connection with the Business Combination and other related events, assuming such additional shares were outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred as of January 1, 2020, the calculation of weighted average shares outstanding for basic and diluted net income (loss) per share assumes the shares issued in connection with the Business Combination have been outstanding for the entire periods presented.

	Six months ended<br>June 30, 2021
Numerator
Pro forma total comprehensive income	$	9,505
Denominator
Empower public shareholders		15,069,255
Sellers		67,673,884
Sponsor and related parties		9,062,500
PIPE Investors		24,000,000
Basic and diluted weighted average shares outstanding		115,805,639
Earnings per share—basic and diluted	$	0.08
	Year ended<br><br><br>December 31, 2020
Numerator
Pro forma total comprehensive income	$	37,251
Denominator
Empower public shareholders		15,069,255
Sellers		67,673,884
Sponsor and related parties		9,062,500
PIPE Investors		24,000,000
Basic and diluted weighted average shares outstanding		115,805,639
Earnings per share—basic and diluted	$	0.32

Pursuant to the Sponsor Agreement, 2,187,500 Earn-Out Shares vest in two equal tranches; 1,093,750 of the Earn-Out Shares will vest the earlier of the date (x) the closing price of the Common Stock equals or exceeds $13.00 per share for any twenty (20) trading days within any thirty-trading day period or (y) Holley completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of Holley’s stockholders having the right to exchange their Common Stock at a price per share equal to or exceeding $13.00 per share. The other 1,093,750 of Earn-Out Shares will be subject to the same conditions but will vest at a target price that equals or exceeds $15.00 per share.

The additional 2,187,500 Earn-Out Shares and warrants are not included in the computation of diluted earnings per share as the share price as of the Closing is less than $13.00 per share.