UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 001-33861

MOTORCAR PARTS OF AMERICA, INC.

(Exact name of registrant as specified in its charter)

New York	11-2153962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2929 California Street, Torrance, California	90503
---	---
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (310) 212-7910

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MPAA	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☑
Non-accelerated filer ☐	Smaller reporting company ☐
	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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

There were 19,491,395 shares of Common Stock outstanding at February 2, 2023.

MOTORCAR PARTS OF AMERICA, INC.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
	Item 4. Controls and Procedures	30
PART II — OTHER INFORMATION
	Item 1. Legal Proceedings	32
	Item 1A. Risk Factors	32
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 3. Defaults Upon Senior Securities	32
	Item 5. Other Information	32
	Item 6. Exhibits	33
	SIGNATURES	35

MOTORCAR PARTS OF AMERICA, INC.

GLOSSARY

The following terms are frequently used in the text of this report and have the meanings indicated below.

“Used Core” — An automobile part which has previously been used in the operation of a vehicle. Generally, the Used Core is an original equipment (“OE”) automobile part installed by the vehicle manufacturer and subsequently removed for replacement. Used Cores contain salvageable parts, which are an important raw material in the remanufacturing process. We obtain most Used Cores by providing credits to our customers for Used Cores returned to us under our core exchange programs. Our customers receive these Used Cores from consumers who deliver a Used Core to obtain credit from our customers upon the purchase of a newly remanufactured automobile part. When sufficient Used Cores are not available from our customers, we purchase Used Cores from core brokers, who are in the business of buying and selling Used Cores. The Used Cores purchased from core brokers or returned to us by our customers under the core exchange programs, and which have been physically received by us, are part of our raw material and work-in-process inventory. Used Cores returned by consumers to our customers but not yet returned to us are classified as contract assets until we physically receive these Used Cores.

“Remanufactured Core” — The Used Core underlying an automobile part that has gone through the remanufacturing process and through that process has become part of a newly remanufactured automobile part. The remanufacturing process takes a Used Core, breaks it down into its component parts, replaces those components that cannot be reused and reassembles the salvageable components of the Used Core and additional new components into a remanufactured automobile part. Remanufactured Cores held for sale at our customer locations are included in long-term contract assets. The Remanufactured Core portion of stock adjustment returns are classified as contract assets until we physically receive them.

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

			March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	12,579,000		$	23,016,000
Short-term investments	2,169,000			2,202,000
Accounts receivable — net	75,533,000			85,075,000
Inventory	390,574,000			385,504,000
Contract assets	29,072,000			27,500,000
Prepaid expenses and other current assets	26,798,000			13,688,000
Total current assets	536,725,000			536,985,000
Plant and equipment — net	46,693,000			51,062,000
Operating lease assets	85,407,000			81,997,000
Long-term deferred income taxes	26,868,000			26,982,000
Long-term contract assets	314,035,000			310,255,000
Goodwill and intangible assets — net	5,708,000			7,004,000
Other assets	1,138,000			1,413,000
TOTAL ASSETS	1,016,574,000		$	1,015,698,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	144,851,000		$	168,435,000
Customer finished goods returns accrual	33,043,000			38,086,000
Contract liabilities	44,512,000			42,496,000
Revolving loan	175,000,000			155,000,000
Other current liabilities	4,430,000			11,930,000
Operating lease liabilities	8,329,000			6,788,000
Current portion of term loan	3,668,000			3,670,000
Total current liabilities	413,833,000			426,405,000
Term loan, less current portion	10,233,000			13,024,000
Long-term contract liabilities	185,859,000			172,764,000
Long-term deferred income taxes	121,000			126,000
Long-term operating lease liabilities	81,512,000			80,803,000
Other liabilities	10,027,000			7,313,000
Total liabilities	701,585,000			700,435,000
Commitments and contingencies
Shareholders’ equity:
Preferred stock; par value 0.01 per share, 5,000,000 shares authorized; none issued	-			-
Series A junior participating preferred stock; par value 0.01 per share, 20,000 shares authorized; none issued	-			-
Common stock; par value 0.01 per share, 50,000,000 shares authorized; 19,490,859 and 19,104,751<br> shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively	195,000			191,000
Additional paid-in capital	230,630,000			227,184,000
Retained earnings	87,288,000			92,954,000
Accumulated other comprehensive loss	(3,124,000	)		(5,066,000	)
Total shareholders’ equity	314,989,000			315,263,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	1,016,574,000		$	1,015,698,000

All values are in US Dollars.

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended					Nine<br> Months Ended
	December 31,					December 31,
	2022			2021		2022			2021
Net sales	$	151,819,000		$	161,810,000	$	488,347,000		$	486,392,000
Cost of goods sold		130,826,000			129,235,000		410,536,000			394,295,000
Gross profit		20,993,000			32,575,000		77,811,000			92,097,000
Operating expenses:
General and administrative		13,599,000			14,605,000		42,079,000			41,556,000
Sales and marketing		5,634,000			6,274,000		17,242,000			17,162,000
Research and development		2,547,000			2,635,000		8,330,000			7,631,000
Foreign exchange impact of lease liabilities and forward contracts		(4,313,000	)		385,000		(2,553,000	)		1,769,000
Total operating expenses		17,467,000			23,899,000		65,098,000			68,118,000
Operating income		3,526,000			8,676,000		12,713,000			23,979,000
Interest expense, net		11,471,000			3,949,000		27,675,000			11,510,000
(Loss) income before income tax (benefit) expense		(7,945,000	)		4,727,000		(14,962,000	)		12,469,000
Income tax (benefit) expense		(8,971,000	)		1,588,000		(9,296,000	)		4,786,000
Net income (loss)	$	1,026,000		$	3,139,000	$	(5,666,000	)	$	7,683,000
Basic net income (loss) per share	$	0.05		$	0.16	$	(0.29	)	$	0.40
Diluted net income (loss) per share	$	0.05		$	0.16	$	(0.29	)	$	0.39
Weighted average number of shares outstanding:
Basic		19,474,871			19,184,339		19,383,531			19,124,824
Diluted		19,634,153			19,544,174		19,383,531			19,604,780

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended					Nine<br> Months Ended
	December 31,					December 31,
	2022		2021			2022			2021
Net income (loss)	$	1,026,000	$	3,139,000		$	(5,666,000	)	$	7,683,000
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		2,123,000		(414,000	)		1,942,000			2,030,000
Total other comprehensive income (loss), net of tax		2,123,000		(414,000	)		1,942,000			2,030,000
Comprehensive income (loss)	$	3,149,000	$	2,725,000		$	(3,724,000	)	$	9,713,000

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

	Common Stock
	Shares		Amount		Additional<br><br> <br>Paid-in<br><br> <br>Capital			Retained<br><br> <br>Earnings			Accumulated<br><br> <br>Other<br><br> <br>Comprehensive<br><br> <br>(Loss) Income			Total
Balance at March 31, 2022		19,104,751	$	191,000	$	227,184,000		$	92,954,000		$	(5,066,000	)	$	315,263,000
Compensation recognized under employee stock plans		-		-		1,249,000			-			-			1,249,000
Exercise of stock options, net of shares withheld for employee taxes		25,543		-		191,000			-			-			191,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		84,684		1,000		(895,000	)		-			-			(894,000	)
Foreign currency translation		-		-		-			-			(868,000	)		(868,000	)
Net loss		-		-		-			(175,000	)		-			(175,000	)
Balance at June 30, 2022		19,214,978	$	192,000	$	227,729,000		$	92,779,000		$	(5,934,000	)	$	314,766,000
Compensation recognized under employee stock plans		-		-		1,251,000			-			-			1,251,000
Exercise of stock options, net of shares withheld for employee taxes		193,378		2,000		584,000			-			-			586,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		14,792		-		(75,000	)		-			-			(75,000	)
Foreign currency translation		-		-		-			-			687,000			687,000
Net loss		-		-		-			(6,517,000	)		-			(6,517,000	)
Balance at September 30, 2022		19,423,148	$	194,000	$	229,489,000		$	86,262,000		$	(5,247,000	)	$	310,698,000
Compensation recognized under employee stock plans		-		-		1,021,000			-			-			1,021,000
Exercise of stock options, net of shares withheld for employee taxes		14,058		-		121,000			-			-			121,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		53,653		1,000		(1,000	)		-			-			-
Foreign currency translation		-		-		-			-			2,123,000			2,123,000
Net income		-		-		-			1,026,000			-			1,026,000
Balance at December 31, 2022		19,490,859	$	195,000	$	230,630,000		$	87,288,000		$	(3,124,000	)	$	314,989,000
	Common Stock
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Shares			Amount			Additional<br><br> <br>Paid-in<br><br> <br>Capital			Retained<br><br> <br>Earnings		Accumulated<br><br> <br>Other<br><br> <br>Comprehensive<br><br> <br>(Loss) Income			Total
Balance at March 31,2021		19,045,386		$	190,000		$	223,058,000		$	85,593,000	$	(7,696,000	)	$	301,145,000
Compensation recognized under employee stock plans		-			-			1,576,000			-		-			1,576,000
Exercise of stock options, net of shares withheld for employee taxes		19,837			-			354,000			-		-			354,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		35,869			1,000			(543,000	)		-		-			(542,000	)
Foreign currency translation		-			-			-			-		1,833,000			1,833,000
Net income		-			-			-			861,000		-			861,000
Balance at June 30, 2021		19,101,092		$	191,000		$	224,445,000		$	86,454,000	$	(5,863,000	)	$	305,227,000
Compensation recognized under employee stock plans		-			-			1,851,000			-		-			1,851,000
Exercise of stock options, net of shares withheld for employee taxes		7,860			-			78,000			-		-			78,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		63,803			1,000			(1,204,000	)		-		-			(1,203,000	)
Foreign currency translation		-			-			-			-		611,000			611,000
Net income		-			-			-			3,683,000		-			3,683,000
Balance at September 30, 2021		19,172,755		$	192,000		$	225,170,000		$	90,137,000	$	(5,252,000	)	$	310,247,000
Compensation recognized under employee stock plans		-			-			2,030,000			-		-			2,030,000
Exercise of stock options, net of shares withheld for employee taxes		1,846			-			32,000			-		-			32,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		32,183			-			-			-		-			-
Repurchase and cancellation of treasury stock, including fees		(106,486	)		(1,000	)		(1,913,000	)		-		-			(1,914,000	)
Foreign currency translation		-			-			-			-		(414,000	)		(414,000	)
Net income		-			-			-			3,139,000		-			3,139,000
Balance at December 31, 2021		19,100,298		$	191,000		$	225,319,000		$	93,276,000	$	(5,666,000	)	$	313,120,000

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	December 31,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(5,666,000	)	$	7,683,000
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		9,322,000			9,591,000
Amortization of interest		1,131,000			1,189,000
Amortization of core premiums paid to customers		8,670,000			8,497,000
Amortization of finished goods premiums paid to customers		513,000			516,000
Noncash lease expense		5,955,000			5,533,000
Gain due to the change in the fair value of the contingent consideration		-			60,000
Foreign exchange impact of lease liabilities and forward contracts		(2,553,000	)		1,769,000
Loss (gain) on short-term investments		281,000			(245,000	)
Net provision for inventory reserves		14,248,000			9,293,000
Net provision for customer payment discrepancies and credit losses		1,250,000			1,690,000
Deferred income taxes		212,000			(877,000	)
Share-based compensation expense		3,521,000			5,457,000
Loss on disposal of plant and equipment		17,000			33,000
Changes in operating assets and liabilities:
Accounts receivable		7,560,000			3,626,000
Inventory		(20,888,000	)		(65,303,000	)
Prepaid expenses and other current assets		(12,696,000	)		187,000
Other assets		314,000			7,000
Accounts payable and accrued liabilities		(19,518,000	)		(877,000	)
Customer finished goods returns accrual		(5,054,000	)		5,807,000
Contract assets, net		(14,486,000	)		(50,225,000	)
Contract liabilities, net		14,700,000			38,828,000
Operating lease liabilities		(5,135,000	)		(4,219,000	)
Other liabilities		(3,126,000	)		(194,000	)
Net cash used in operating activities		(21,428,000	)		(22,174,000	)
Cash flows from investing activities:
Purchase of plant and equipment		(3,607,000	)		(5,111,000	)
Purchase of short-term investments		(248,000	)		(315,000	)
Net cash used in investing activities		(3,855,000	)		(5,426,000	)
Cash flows from financing activities:
Borrowings under revolving loan		58,000,000			62,000,000
Repayments of revolving loan		(38,000,000	)		(33,000,000	)
Repayments of term loan		(2,813,000	)		(2,813,000	)
Payments for debt issuance costs		(376,000	)		(1,148,000	)
Payments on finance lease obligations		(1,842,000	)		(2,074,000	)
Exercise of stock options, net of cash used to pay employee taxes		898,000			464,000
Cash used to net share settle equity awards		(969,000	)		(1,745,000	)
Repurchase of common stock, including fees		-			(1,914,000	)
Net cash provided by financing activities		14,898,000			19,770,000
Effect of exchange rate changes on cash and cash equivalents		(52,000	)		76,000
Net decrease in cash and cash equivalents		(10,437,000	)		(7,754,000	)
Cash and cash equivalents — Beginning of period		23,016,000			15,523,000
Cash and cash equivalents — End of period	$	12,579,000		$	7,769,000
Supplemental disclosures of cash flow information:
Cash paid for interest, net	$	26,425,000		$	10,348,000
Cash paid for income taxes, net of refunds		13,135,000			5,987,000
Cash paid for operating leases		8,760,000			7,969,000
Cash paid for finance leases		2,042,000			2,343,000
Plant and equipment acquired under finance leases		609,000			601,000
Assets acquired under operating leases		7,530,000			16,141,000
Non-cash capital expenditures		77,000			430,000

The accompanying notes to condensed consolidated financial statements are an integral part hereof.

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

December 31, 2022

(Unaudited)

Company Background and Organization

Motorcar Parts of America, Inc. and its subsidiaries (the “Company”, or “MPA”) is a leading supplier of automotive aftermarket non-discretionary replacement parts, and test solutions and diagnostic equipment. These replacement parts are primarily sold to automotive retail chain stores and warehouse distributors throughout North America and to major automobile manufacturers for both their aftermarket programs and warranty replacement programs (“OES”). The Company’s test solutions and diagnostic equipment primarily serves the global automotive component and powertrain testing market. The Company’s products include (i) rotating electrical products such as alternators and starters, (ii) wheel hub assemblies and bearings, (iii) brake-related products, which include brake calipers, brake boosters, brake rotors, brake pads, and brake master cylinders, and (iv) other products, which include (a) turbochargers and (b) test solutions and diagnostic equipment used for electric vehicle powertrain development and manufacturing including electric motor test systems, e-axle test systems, advanced power emulators, charging unit test systems, test systems for alternators and starters, belt starter generators, bench-top testers, and specialized test services for electric vehicle inverters.

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, the Company has identified its chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understands how such documents are used by the CODM to make financial and operating decisions. The Company has determined through this review process that its business comprises three separate operating segments. The operating segments meet all the criteria to be aggregated and are presented as such.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic continues to adversely impact the U.S. and global economies – creating uncertainty regarding the potential effects on the supply chain disruptions, rate of inflation, increasing interest rates, and customer demand. The extent to which these may impact the Company will depend on numerous factors and future developments, which are highly uncertain and cannot be predicted. The Company may continue to experience adverse impacts to its business because of an economic recession or depression that has occurred or may occur in the future.

Basis of Presentation and New Accounting Pronouncements

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2023. This report should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2022.

The accompanying condensed consolidated financial statements have been prepared on a consistent basis with, and there have been no material changes to the accounting policies described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements that are presented in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Accounts Receivable — Net

The Company has trade accounts receivable that result from the sale of goods and services. Accounts receivable — net includes offset accounts related to allowances for credit losses, customer payment discrepancies, and returned goods authorizations (“RGAs”) issued for in-transit unit returns. The Company uses receivable discount programs with certain customers and their respective banks (see Note 10).

Accounts receivable — net is comprised of the following:

	December 31, 2022			March 31, 2022
Accounts receivable — trade	$	92,112,000		$	98,734,000
Allowance for credit losses		(192,000	)		(375,000	)
Customer payment discrepancies		(1,446,000	)		(1,375,000	)
Customer returns RGA issued		(14,941,000	)		(11,909,000	)
Total accounts receivable — net	$	75,533,000		$	85,075,000

Inventory

Inventory is comprised of the following:

	December 31, 2022			March 31, 2022
Inventory
Raw materials	$	152,094,000		$	150,414,000
Work-in-process		6,512,000			6,880,000
Finished goods		231,175,000			226,729,000
		389,781,000			384,023,000
Less allowance for excess and obsolete inventory		(15,083,000	)		(13,520,000	)
Inventory — net		374,698,000			370,503,000
Inventory unreturned		15,876,000			15,001,000
Total inventory	$	390,574,000		$	385,504,000

Contract Assets

During the three months ended December 31, 2022 and 2021, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $863,000 and $846,000, respectively. During the nine months ended December 31, 2022 and 2021, the Company reduced the carrying value of Remanufactured Cores held at customers’ locations by $2,704,000 and $3,517,000, respectively.

Contract assets are comprised of the following:

	December 31, 2022		March 31, 2022
Short-term contract assets
Cores expected to be returned by customers	$	17,454,000	$	15,778,000
Core premiums paid to customers		9,605,000		10,621,000
Upfront payments to customers		1,454,000		517,000
Finished goods premiums paid to customers		559,000		584,000
Total short-term contract assets	$	29,072,000	$	27,500,000
Remanufactured cores held at customers’ locations	$	265,378,000	$	258,376,000
Core premiums paid to customers		40,475,000		43,294,000
Long-term core inventory deposits		5,569,000		5,569,000
Finished goods premiums paid to customers		2,588,000		2,806,000
Upfront payments to customers		25,000		210,000
Total long-term contract assets	$	314,035,000	$	310,255,000

Significant Customer and Other Information

Significant Customer Concentrations

The largest customers accounted for the following percentage of net sales:

	Three Months Ended<br><br> <br>December 31,						Nine Months<br> Ended<br><br> <br>December 31,
	2022			2021			2022			2021
Net sales
Customer A		36	%		38	%		38	%		38	%
Customer B		27	%		15	%		24	%		17	%
Customer C		21	%		29	%		22	%		30	%
Customer D		4	%		2	%		4	%		2	%

The largest customers accounted for the following percentage of accounts receivable – trade:


Accounts receivable - trade
Customer A	39	%	42	%
Customer B	23	%	21	%
Customer C	-	%	9	%
Customer D	15	%	5	%

Geographic and Product Information

The Company’s products are sold predominantly in the U.S. and accounted for the following percentages of net sales:

	Three Months Ended<br><br> <br>December 31,						Nine Months<br> Ended<br><br> <br>December 31,
	2022			2021			2022			2021
Product line
Rotating electrical products		66	%		68	%		67	%		69	%
Wheel hub products		10	%		13	%		11	%		13	%
Brake-related products		20	%		15	%		19	%		15	%
Other products		4	%		4	%		3	%		3	%
		100	%		100	%		100	%		100	%

Significant Supplier Concentrations

The Company had no suppliers that accounted for more than 10% of inventory purchases for the three and nine months ended December 31, 2022 and 2021.

Debt

The Company is party to a $268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders and PNC Bank, National Association, as administrative agent, consisting of (i) a $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The loans under the Credit Facility mature on May 28, 2026. The Credit Facility currently permits the payment of up to $29,043,000 of dividends and share repurchases for fiscal year 2023, subject to pro forma compliance with financial covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of the assets of the Company.

The Term Loans require quarterly principal payments of $937,500. The Credit Facility bears interest at rates equal to either SOFR (as defined below) plus a margin of 2.25%, 2.50% or 2.75% or a reference rate plus a margin of 1.25%, 1.50% or 1.75%, in each case depending on the senior leverage ratio as of the applicable measurement date. There is also a facility fee of 0.375% to 0.50%, depending on the senior leverage ratio as of the applicable measurement date. The interest rate on the Company’s Term Loans and Revolving Facility was 6.98% and 7.16% respectively, at December 31, 2022, and 2.99% and 3.13% respectively, at March 31, 2022.

The Credit Facility, among other things, requires the Company to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio. In addition, the Credit Facility places limits on the Company’s ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem, or repurchase capital stock, alter the business conducted by the Company and its subsidiaries, transact with affiliates, prepay, redeem, or purchase subordinated debt, and amend or otherwise alter debt agreements.

On November 3, 2022, the Company entered into a fourth amendment to the Credit Facility (the “Fourth Amendment”). The Fourth Amendment, among other things, (i) modified the fixed charge coverage ratio financial covenant for the fiscal quarters ending September 30, 2022 and December 31, 2022, (ii) modified the total leverage ratio financial covenant for the fiscal quarter ending September 30, 2022, (iii) modified the definition of “Consolidated EBITDA”, and (iv) replaced LIBOR as the benchmark rate with a replacement benchmark based on the Secured Overnight Financing Rate (“SOFR”) effective beginning November 3, 2022. The modifications to the financial covenants were effective as of September 30, 2022.

As of December 31, 2022, the Company identified certain defaults with respect to the Credit Facility, which arose from non-compliance with certain financial covenants. On February 3, 2023, the Company entered into a fifth amendment to the Credit Facility (the “Fifth Amendment”). The Fifth Amendment, among other things, (i) waived certain existing defaults and events of default arising from non-compliance with the fixed charge coverage ratio and senior leverage ratio financial covenants as of the end of the fiscal quarter ended December 31, 2022, (ii) modified the fixed charge coverage ratio and senior leverage ratio financial covenants for the quarters ending March 31, 2023 and June 30, 2023, (iii) modified the definitions of “Applicable Margin” and “Consolidated EBITDA”, and (iv) added a new minimum undrawn availability financial covenant.

The following summarizes information about the Term Loans:

	December 31, 2022			March 31, 2022
Principal amount of Term Loans	$	14,062,000		$	16,875,000
Unamortized financing fees		(161,000	)		(181,000	)
Net carrying amount of Term Loans		13,901,000			16,694,000
Less current portion of Term Loans		(3,668,000	)		(3,670,000	)
Long-term portion of Term Loans	$	10,233,000		$	13,024,000

Future repayments of the Term Loans are as follows:

Year Ending March 31,
2023<br> - remaining three months	$	937,000
2024		3,750,000
2025		3,750,000
2026		3,750,000
2027		1,875,000
Total payments	$	14,062,000

The Company had $175,000,000 and $155,000,000 outstanding under the Revolving Facility at December 31, 2022 and March 31, 2022, respectively. In addition, $6,370,000 was outstanding for letters of credit at December 31, 2022. At December 31, 2022, after certain contractual adjustments, $57,250,000 was available under the Revolving Facility.

Contract Liabilities

Contract liabilities are comprised of the following:

	December 31, 2022		March 31, 2022
Short-term contract liabilities
Customer allowances earned	$	18,088,000	$	22,018,000
Customer core returns accruals		16,901,000		12,322,000
Customer deposits		3,236,000		3,306,000
Accrued core payment		3,015,000		1,679,000
Core bank liability		1,673,000		1,634,000
Finished goods liabilities		1,599,000		1,537,000
Total short-term contract liabilities	$	44,512,000	$	42,496,000
Long-term contract liabilities
Customer core returns accruals	$	160,980,000	$	154,940,000
Core bank liability		14,009,000		15,267,000
Accrued core payment		10,045,000		928,000
Finished goods liabilities		825,000		1,588,000
Customer allowances earned		-		41,000
Total long-term contract liabilities	$	185,859,000	$	172,764,000

Leases

The Company leases various facilities in North America and Asia under operating leases expiring through August 2033. The Company has material nonfunctional currency leases that could have a material impact on the Company’s condensed consolidated statements of operations. As required for other monetary liabilities, lessees remeasure foreign currency-denominated lease liabilities using the exchange rate at each reporting date, but the lease assets are nonmonetary assets measured at historical rates and are not affected by subsequent changes in the exchange rates. In connection with the remeasurement of these leases, the Company recorded a gain of $3,129,000 and a loss of $985,000 during the three months ended December 31, 2022 and 2021, respectively. During the nine months ended December 31, 2022 and 2021, the Company recorded gains of $2,108,000 and $64,000, respectively, in connection with the remeasurement of these leases. These amounts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of operations.

Balance sheet information for leases is as follows:

Leases	Classification	December 31, 2022		March 31, 2022
Assets:
Operating	Operating lease assets	$	85,407,000	$	81,997,000
Finance	Plant and equipment		6,157,000		7,470,000
Total leased assets		$	91,564,000	$	89,467,000
Liabilities:
Current
Operating	Operating lease liabilities	$	8,329,000	$	6,788,000
Finance	Other current liabilities		1,910,000		2,330,000
Long-term
Operating	Long-term operating lease liabilities		81,512,000		80,803,000
Finance	Other liabilities		2,600,000		3,425,000
Total lease liabilities		$	94,351,000	$	93,346,000

Lease cost recognized in the condensed consolidated statements of operations is as follows:

	Three Months Ended				Nine Months<br> Ended
	December 31,				December 31,
	2022		2021		2022		2021
Lease cost
Operating lease cost	$	3,232,000	$	3,134,000	$	9,527,000	$	9,325,000
Short-term lease cost		340,000		361,000		1,353,000		1,112,000
Variable lease cost		164,000		225,000		528,000		716,000
Finance lease cost:
Amortization of finance lease assets		503,000		515,000		1,531,000		1,579,000
Interest on finance lease liabilities		68,000		83,000		200,000		269,000
Total lease cost	$	4,307,000	$	4,318,000	$	13,139,000	$	13,001,000

Maturities of lease commitments at December 31, 2022 by fiscal year were as follows:

Maturity of lease liabilities	Operating Leases			Finance Leases			Total
2023<br> - remaining three months	$	3,335,000		$	600,000		$	3,935,000
2024		13,364,000			1,915,000			15,279,000
2025		12,498,000			1,414,000			13,912,000
2026		12,065,000			682,000			12,747,000
2027		10,782,000			191,000			10,973,000
Thereafter		64,621,000			44,000			64,665,000
Total lease payments		116,665,000			4,846,000			121,511,000
Less amount representing interest		(26,824,000	)		(336,000	)		(27,160,000	)
Present value of lease liabilities	$	89,841,000		$	4,510,000		$	94,351,000

Other information about leases is as follows:


Lease term and discount rate
Weighted-average remaining lease term (years):
Finance leases	2.7		2.9
Operating leases	9.2		10.4
Weighted-average discount rate:
Finance leases	5.4	%	5.1	%
Operating leases	5.8	%	5.7	%

Accounts Receivable Discount Programs

The Company uses receivable discount programs with certain customers and their respective banks. Under these programs, the Company may sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These discount arrangements allow the Company to accelerate receipt of payment on customers’ receivables.

The following is a summary of accounts receivable discount programs:

	Nine Months<br> Ended
	December 31,
	2022			2021
Receivables discounted	$	428,868,000		$	418,044,000
Weighted average number of days collection was accelerated		323			335
Annualized weighted average discount rate		5.0	%		1.7	%
Amount of discount recognized as interest expense	$	19,131,000		$	6,798,000

Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing net income (loss) by

    the weighted average number of shares of common stock outstanding during the period. Diluted net income \(loss\) per share includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock to the extent
    such impact is not anti-dilutive.

The following presents a reconciliation of basic and diluted net income (loss) per

  share:

	Three Months Ended				Nine<br> Months Ended
	December 31,				December 31,
	2022		2021		2022			2021
Net income (loss)	$	1,026,000	$	3,139,000	$	(5,666,000	)	$	7,683,000
Basic shares		19,474,871		19,184,339		19,383,531			19,124,824
Effect of potentially dilutive securities		159,282		359,835		-			479,956
Diluted shares		19,634,153		19,544,174		19,383,531			19,604,780
Net income (loss) per share:
Basic net income (loss) per<br><br><br><br><br><br><br><br><br><br><br><br><br> share	$	0.05	$	0.16	$	(0.29	)	$	0.40
Diluted net income (loss) per<br><br><br><br><br><br><br><br><br><br><br><br><br> share	$	0.05	$	0.16	$	(0.29	)	$	0.39

Potential common shares that would have the effect of increasing diluted net income per share or decreasing diluted net loss per share are considered to be anti-dilutive and as such, these shares are not included in calculating diluted net income (loss) per share. For the three months ended December 31, 2022 and 2021, there were 1,201,984 and 1,130,694, respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive. For the nine months ended December 31, 2022 and 2021, there were 1,897,876 and 720,756, respectively, of potential common shares not included in the calculation of diluted net income (loss) per share because their effect was anti-dilutive.

Income Taxes

The Company recorded an income tax benefit of $8,971,000, or an effective tax rate of 112.9%, and income tax expense of $1,588,000, or an effective tax rate of 33.6%, for the three months ended December 31, 2022 and 2021, respectively. The Company recorded an income tax benefit of $9,296,000, or an effective tax rate of 62.1%, and income tax expense of $4,786,000, or an effective tax rate of 38.4%, for the nine months ended December 31, 2022 and 2021, respectively. Effective tax rates are based on current annual projections and any changes in future periods could result in an effective tax rate that is materially different from the current estimate. The effective tax rate for the three and nine months ended December 31, 2022, was primarily impacted by (i) specific jurisdictions that the Company does not expect to recognize the benefit of losses, (ii) foreign income taxed at rates that are different from the federal statutory rate, and (iii) non-deductible executive compensation under Internal Revenue Code Section 162(m).

The Company and its subsidiaries file income tax returns in the U.S. federal, various state, and foreign jurisdictions with varying statutes of limitations. At December 31, 2022, the Company is not under examination in any jurisdiction, and remain subject to examination from the years ended March 31, 2017. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.

Financial Risk Management and Derivatives

Purchases and expenses denominated in currencies other than the U.S. dollar, which are primarily related to the Company’s overseas facilities, expose the Company to market risk from material movements in foreign exchange rates between the U.S. dollar and the foreign currencies. The Company’s primary risk exposure is from fluctuations in the value of the Mexican peso and to a lesser extent the Chinese yuan. To mitigate these risks, the Company enters into forward foreign currency exchange contracts to exchange U.S. dollars for these foreign currencies. The extent to which forward foreign currency exchange contracts are used, is modified periodically in response to the Company’s estimate of market conditions and the terms and length of anticipated requirements.

The Company enters into forward foreign currency exchange contracts in order to reduce the impact of foreign currency fluctuations and not to engage in currency speculation. The use of derivative financial instruments allows the Company to reduce its exposure to the risk that the eventual cash outflow resulting from funding the expenses of the foreign operations will be materially affected by changes in exchange rates between the U.S. dollar and the foreign currencies. The Company does not hold or issue financial instruments for trading purposes. The Company designates forward foreign currency exchange contracts for forecasted expenditure requirements to fund foreign operations.

The Company had forward foreign currency exchange contracts with a U.S. dollar equivalent notional value of $47,369,000 and $44,968,000 at December 31, 2022 and March 31, 2022, respectively. These contracts generally have a term of one year or less, at rates agreed at the inception of the contracts. The counterparty to this derivative transaction is a major financial institution with investment grade credit rating; however, the Company is exposed to credit risk with this institution. The credit risk is limited to the potential unrealized gains (which offset currency fluctuations adverse to the Company) in any such contract should this counterparty fail to perform as contracted. Any changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of operations.

The following shows the effect of derivative instruments on the condensed consolidated statements of operations:

	Gain (Loss) Recognized as Foreign Exchange Impact<br><br> <br>of Lease Liabilities and Forward Contracts
	Three Months Ended				Nine Months Ended
Derivatives Not Designated as	December 31,				December 31,
Hedging Instruments	2022		2021		2022		2021
Forward foreign currency exchange contracts	$	1,184,000	$	600,000	$	445,000	$	(1,833,000	)

The fair value of the forward foreign currency exchange contracts of $1,558,000 and $1,113,000 is included in prepaid expenses and other current assets in the condensed consolidated balance sheets at December 31, 2022 and March 31, 2022, respectively. The changes in the fair values of forward foreign currency exchange contracts are included in “foreign exchange impact of lease liabilities and forward contracts” in the condensed consolidated statements of cash flows for the nine months ended December 31, 2022 and 2021.

Fair Value Measurements

The following summarizes financial assets and liabilities measured at fair value, by level within the fair value hierarchy:

	December 31, 2022								March 31, 2022
			Fair Value Measurements								Fair Value Measurements
			Using Inputs Considered as								Using Inputs Considered as
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments Mutual funds	$	2,169,000	$	2,169,000	$	-	$	-	$	2,202,000	$	2,202,000	$	-	$	-
Prepaid expenses and other current assets Forward foreign currency<br><br> <br>exchange contracts		1,558,000		-		1,558,000		-		1,113,000		-		1,113,000		-
Liabilities
Other current liabilities
Deferred compensation		2,169,000		2,169,000		-		-		2,202,000		2,202,000		-		-

Short-term Investments and Deferred Compensation

The Company’s short-term investments, which fund its deferred compensation liabilities, consist of investments in mutual funds. These investments are classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

Forward Foreign Currency Exchange Contracts

The forward foreign currency exchange contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers (See Note 13).

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the revolving loan, term loan and other long-term liabilities approximate their fair value based on the variable nature of interest rates and current rates for instruments with similar characteristics.

15. Share-based Payments

Stock Options

During the nine months ended December 31, 2022 and 2021, no options to purchase shares of the Company’s common stock were granted.

The following is a summary of stock option transactions:

			Weighted Average<br><br> <br>Exercise Price
Outstanding at March 31, 2022	1,695,499		$	17.53
Granted	-		$	-
Exercised	(323,249	)	$	6.68
Forfeited/Cancelled	(101,257	)	$	18.62
Expired	(3,000	)	$	9.85
Outstanding at December 31, 2022	1,267,993		$	20.22

At December 31, 2022, options to purchase 99,839 shares of common stock were unvested at a weighted average exercise price of $15.16.

At December 31, 2022, there was $295,000 of total unrecognized compensation expense related to unvested stock option awards, which will be recognized over the weighted average remaining vesting period of approximately six months.

Restricted Stock Units and Restricted Stock Awards (collectively

    “RSUs”\)

During the nine months ended December 31, 2022 and 2021, the Company granted (i) performance-based restricted stock awards which had a threshold performance level of 33,333 shares, a target performance level of 66,667 shares, and a maximum performance level of 100,000 shares at the grant date for both periods and (ii) 229,121 and 163,703 of time-based vesting restricted stock units, respectively, based on the closing market price on the grant date.

The following is a summary of non-vested RSUs:

			Weighted Average<br><br> <br>Grant Date Fair<br><br> <br>Value
Outstanding at March 31, 2022	399,063		$	19.98
Granted	329,121		$	13.46
Vested	(228,519	)	$	20.08
Forfeited/Cancelled	(64,921	)	$	19.39
Outstanding at December 31, 2022	434,744		$	15.08

At December 31, 2022, there was $4,143,000 of unrecognized compensation expense related to RSUs, which will be recognized over the weighted average remaining vesting period of approximately 1.7 years.The Company’s unrecognized compensation expense includes restricted stock awards at the target performance level as deemed probable at quarter-end.

Performance Stock Units (“PSUs”)

During the nine months ended December 31, 2022 and 2021, the Company granted 126,028 and 84,593 PSUs (at target performance levels), respectively, which typically cliff vest after three-years subject to continued employment. These awards are contingent and granted separately for each of the following metrics: adjusted EBITDA, net sales, and relative total shareholder return (“TSR”). Compensation cost is determined at the grant date and recognized on a straight-line basis over the requisite service period to the extent the conditions are deemed probable. The number of shares earned at the end of the three-year period will vary, based only on actual performance, from 0% to 150% of the target number of PSUs granted. PSUs are not considered issued or outstanding ordinary shares of the Company.

Adjusted EBITDA and net sales are considered performance conditions. The Company will reassess the probability of achieving each performance condition separately each reporting period. TSR is considered a market condition because it measures the Company’s return against the performance of the Russell 3000, excluding companies classified as financials and real estate, over a given period of time. Compensation cost related to the TSR award will not be adjusted even if the market condition is not met.

The Company calculated the fair value of the PSUs for each component individually. The fair value of PSUs subject to performance conditions is equal to the closing stock price on the grant date. The fair value of PSUs subject to the market condition is determined using the Monte Carlo valuation model.

The following table summarizes the assumptions used in determining the fair value of the TSR awards:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
Risk free interest rate		3.35	%		0.47	%
Expected life in years		3			3
Expected volatility of MPA common stock		51.30	%		53.70	%
Expected average volatility of peer companies		62.70	%		59.30	%
Average correlation coefficient of peer companies		27.50	%		26.70
Expected dividend yield		-			-
Grant date fair value	$	16.02		$	26.89

The following is a summary of non-vested PSUs:

			Weighted Average<br><br> <br>Grant Date Fair<br><br> <br>Value
Outstanding at March 31, 2022	84,593		$	23.19
Granted	126,028		$	14.00
Vested	-		$	-
Forfeited	(15,482	)	$	20.01
Outstanding at December 31, 2022	195,139		$	17.51

At December 31, 2022, there was $2,231,000 of unrecognized compensation expense related to these awards, which will be recognized over the weighted average remaining vesting period of approximately 2.1 years.

Commitments and Contingencies

Warranty Returns

The Company allows its customers to return goods that their consumers have returned to them, whether or not the returned item is defective (“warranty returns”). The Company accrues an estimate of its exposure to warranty returns based on a historical analysis of the level of this type of return as a percentage of unit sales. Amounts charged to expense for these warranty returns are considered in arriving at the Company’s net sales.

The following summarizes the changes in the warranty return accrual:

	Three Months Ended<br><br> <br>December 31,						Nine Months<br> Ended<br><br> <br>December 31,
	2022			2021			2022			2021
Balance at beginning of period	$	18,461,000		$	20,875,000		$	20,125,000		$	21,093,000
Charged to expense		31,621,000			30,282,000			96,436,000			88,380,000
Amounts processed		(32,510,000	)		(32,425,000	)		(98,989,000	)		(90,741,000	)
Balance at end of period	$	17,572,000		$	18,732,000		$	17,572,000		$	18,732,000

Contingencies

The Company is subject to various lawsuits and claims. In addition, government agencies and self-regulatory organizations have the ability to conduct periodic examinations of and administrative proceedings regarding the Company’s business. Following an audit in fiscal 2019, the U.S. Customs and Border Protection stated that it believed that the Company owed additional duties of approximately $17 million from 2011 through mid-2018 relating to products that it imported from Mexico. The Company does not believe that this amount is correct and believes that it has numerous defenses and intends to dispute this amount vigorously. The Company cannot assure that the U.S. Customs and Border Protection will agree or that it will not need to accrue or pay additional amounts in the future.

Share Repurchases

In August 2018, the Company’s board of directors approved an increase in its share repurchase program from $20,000,000 to $37,000,000 of its common stock. During the three and nine months ended December 31, 2022, the Company did not repurchase any shares of its common stock. As of December 31, 2022, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in the Company’s Credit Facility. The Company retired the 837,007 shares repurchased under this program through December 31, 2022. The Company’s share repurchase program does not obligate it to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Related Party Transactions

Operating Lease

In December 2022, the Company entered into an operating lease for its 35,000 square foot manufacturing, warehouse, and office facility in Ontario, Canada, with a company co-owned by a member of management. The lease, commencing January 1, 2023, has an initial term of one year with a base rent of approximately $27,000 per month and includes options to renew for up to four years.

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis presents factors that Motorcar Parts of America, Inc. and its subsidiaries (“our,” “we” or “us”) believe are relevant to an assessment and understanding of our consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our March 31, 2022 audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on June 14, 2022.

Disclosure Regarding Private Securities Litigation Reform Act of 1995

This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our future performance that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements about our strategic initiatives, operational plans and objectives, expectations for economic conditions and recovery and future business and financial performance, as well as statements regarding underlying assumptions related thereto. They include, among others, factors related to the timing and implementation of strategic initiatives, the highly competitive nature of our industry, demand for our products and services, complexities in our inventory and supply chain, challenges with transforming and growing our business and factors related to the current global COVID-19 pandemic. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason. Therefore, you should not place undue reliance on those statements. Please refer to “Item

      1A. Risk Factors” of our most recent Annual Report on Form 10-K filed with the SEC on June 14, 2022, as updated by our subsequent filings with the SEC, for a description of these and other
    risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.

Management Overview

We have a multi-pronged platform for growth within the automotive aftermarket for non-discretionary replacement hard parts and test solutions. In addition, we offer diagnostic equipment applications focused on the fast-evolving electric mobility markets. Our investments in infrastructure and human resources during the past few years reflects the significant expansion of manufacturing capacity to support multiple product lines and continues to be transformative and scalable. These investments included (i) a 410,000 square foot distribution center, (ii) two buildings totaling 372,000 square feet for remanufacturing and core sorting of brake calipers, and (iii) the realignment of production at our initial 312,000 square foot facility in Mexico. New products introduced through our growth strategies include brake pads and rotors, which were formally introduced during the first quarter of fiscal 2023.

Pursuant to the guidance provided under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for segment reporting, we have identified our chief operating decision maker (“CODM”), reviewed the documents used by the CODM, and understand how such documents are used by the CODM to make financial and operating decisions. We have determined through this review process that our business comprises three separate operating segments. The operating segments meet all the criteria to be aggregated and are presented as such.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic continues to adversely impact the U.S. and global economies – creating uncertainty regarding the potential effects on the supply chain disruptions, rate of inflation, increasing interest rates, and customer demand. We incurred costs related to the COVID-19 pandemic, which are included in cost of goods sold and operating expenses in the condensed consolidated statements of operations, of $396,000 and $764,000 during the three months ended December 31, 2022 and 2021, respectively, and $1,873,000 and $2,573,000 during the nine months ended December 31, 2022 and 2021, respectively.

Results of Operations for the Three Months Ended December 31, 2022 and 2021

The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.

The following summarizes certain key operating data:

	Three Months Ended<br><br> <br>December 31,
	2022			2021
Cash flow (used in) provided by operations	$	(4,474,000	)	$	2,165,000
Finished goods turnover (annualized) (1)		3.1			4.0

(1)

Annualized finished goods turnover for the fiscal quarter is calculated by multiplying cost of goods sold for the quarter by 4 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal quarter. We believe this provides a useful measure of our ability to turn our inventory into revenues. Our finished goods turnover ratio for the three months ended December 31, 2022 was impacted by our investment in inventory to address disruptions related to the global supply chain and logistics challenges to meet higher anticipated future sales.

Net Sales and Gross Profit

The following summarizes net sales and gross profit:

	Three Months Ended<br><br> <br>December 31,
	2022			2021
Net sales	$	151,819,000		$	161,810,000
Cost of goods sold		130,826,000			129,235,000
Gross profit		20,993,000			32,575,000
Gross profit percentage		13.8	%		20.1	%

Net Sales. Our net sales for the three months ended December 31, 2022 were $151,819,000, which represents a decrease of $9,991,000, or 6.2%, from the three months ended December 31, 2021 of $161,810,000.

    Sales for the three months ended December 31, 2022 were impacted by \(i\) inventory reduction initiatives from one of our largest customers, \(ii\) changes in the purchasing and return patterns of certain customers, \(iii\) disruptions with global supply
    chain and logistics services, and \(iv\) general economic conditions including extreme weather.

Gross Profit. Our gross profit was $20,993,000, or 13.8% of net sales, for the three months ended December 31, 2022 compared with $32,575,000, or 20.1% of net sales, for the

      three months ended December 31, 2021. Our gross margin for the three months ended December 31, 2022 reflects \(i\) higher inflationary costs— including disruptions with the global supply chain, logistics services, higher wages, \(ii\) lower
      absorption of overhead costs as we manage our inventory levels, and \(iii\) changes in product mix.

Our gross profit for the three months ended December 31, 2022 and 2021 was impacted by (i) additional expenses of $2,370,000 and $3,006,000, respectively, primarily due to certain costs for disruptions in the supply chain, (ii) amortization of core and finished goods premiums paid to customers related to new business of $3,075,000 and $3,146,000, respectively, and (iii) the non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $863,000 and $846,000, respectively.

Additionally, our gross margin was impacted for the three months ended December 31, 2021 by higher freight costs, net of certain price increases, of approximately $1,338,000.

Operating Expenses

The following summarizes operating expenses:

	Three Months Ended<br><br> <br>December 31,
	2022			2021
General and administrative	$	13,599,000		$	14,605,000
Sales and marketing		5,634,000			6,274,000
Research and development		2,547,000			2,635,000
Foreign exchange impact of lease liabilities and forward contracts		(4,313,000	)		385,000
Percent of net sales
General and administrative		9.0	%		9.0	%
Sales and marketing		3.7	%		3.9	%
Research and development		1.7	%		1.6	%
Foreign exchange impact of lease liabilities and forward contracts		(2.8	)%		0.2	%

General and Administrative. Our general and administrative expenses for the three months ended December 31, 2022 were $13,599,000, which represents a decrease of $1,006,000, or 6.9%, from the three months

    ended December 31, 2021 of $14,605,000. This decrease was primarily due to \(i\) $1,060,000 of decreased employee incentives and \(ii\) $1,009,000 of decreased share-based compensation in connection with equity grants made to employees. These decreases
    were partially offset by \(i\) $723,000 of increased severance expense due to headcount reduction and \(ii\) $375,000 of increased employee-related expense at our offshore locations.

Sales and Marketing. Our sales and marketing expenses for the three months ended December 31, 2022 were $5,634,000, which represents a decrease of $640,000, or 10.2%, from the three months ended December

    31, 2021 of $6,274,000. This decrease was primarily due to \(i\) $325,000 of decreased marketing and advertising expenses, \(ii\) $325,000 of decreased commissions due to lower sales, and \(iii\) $289,000 of decreased employee-related expenses due to our
    cost-cutting measures. These decreases were partially offset by $265,000 for increased trade shows as normal business expenses resumed.

Research and Development. Our research and development expenses for the three months ended December 31, 2022 were $2,547,000, which represents a decrease of $88,000, or 3.3%, from the three months ended

    December 31, 2021 of $2,635,000. This decrease was primarily due to our cost-cutting measures.

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts for the three months ended December 31, 2022 was a non-cash gain

    of $4,313,000 compared with a non-cash loss of $385,000 for the three months ended December 31, 2021. This change was primarily due to \(i\) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in a non-cash gain of
    $3,129,000 compared with a non-cash loss of $985,000 for the three months ended December 31, 2022 and 2021, respectively, due to foreign currency exchange rate fluctuations and \(ii\) the forward foreign currency exchange contracts, which resulted in
    non-cash gains of $1,184,000 and $600,000 for the three months ended December 31, 2022 and 2021, respectively, due to the changes in their fair values.

Interest Expense

Interest Expense, net. Our interest expense for the three months ended December 31, 2022 was $11,471,000, which represents an increase of $7,522,000, or 190.5%, from interest

    expense for the three months ended December 31, 2021 of $3,949,000. Of this increase in interest expense, approximately 98% resulted from higher interest rates and approximately 73% of this increase resulted from our accounts receivable discount
    programs utilized by our customers. Our borrowing and receivable discount programs have interest costs that vary with interest rate movements. In addition, our average borrowing under our credit facility increased during the three months ended
    December 31, 2022 as compared with the three months ended December 31, 2021.

Provision for Income Taxes

Income Tax. We recorded an income tax benefit of $8,971,000, or an effective tax rate of 112.9%, and income tax expense of $1,588,000, or an effective tax rate of 33.6%, for the

    three months ended December 31, 2022 and 2021, respectively. Effective tax rates are based on current annual projections and any changes in future periods could result in an effective tax rate that is materially different from the current estimate.
    The effective tax rate for the three months ended December 31, 2022, was primarily impacted by \(i\) foreign income taxed at rates that are different from the federal statutory rate and \(ii\) non-deductible executive compensation under Internal
    Revenue Code Section 162\(m\).

Results of Operations for the Nine Months Ended December 31, 2022 and 2021

The following discussion and analysis should be read together with the financial statements and notes thereto appearing elsewhere herein.

The following summarizes certain key operating data:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
Cash flow used in operations	$	(21,428,000	)	$	(22,174,000	)
Finished goods turnover (annualized) (1)		3.3			4.2

(1)

Annualized finished goods turnover for the fiscal period is calculated by multiplying cost of goods sold for the period by 1.33 and dividing the result by the average between beginning and ending non-core finished goods inventory values for the fiscal period. We believe this provides a useful measure of our ability to turn our inventory into revenues. Our finished goods turnover ratio for the nine months ended December 31, 2022 was impacted by our investment in inventory to address disruptions related to the global supply chain and logistics challenges to meet higher anticipated future sales.

Net Sales and Gross Profit

The following summarizes net sales and gross profit:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
Net sales	$	488,347,000		$	486,392,000
Cost of goods sold		410,536,000			394,295,000
Gross profit		77,811,000			92,097,000
Gross profit percentage		15.9	%		18.9	%

Net Sales. Our net sales for the nine months ended December 31, 2022 were $488,347,000, which represents an increase of $1,955,000, or 0.4%, from the nine months ended December 31, 2021 of $486,392,000,

    which was positively impacted by $13,327,000 in core revenue due to a realignment of inventory at certain customer distribution centers. Excluding the core revenue in the prior year, net sales increased $15,282,000, or 3.2%, for the nine months
    ended December 31, 2022, reflecting increasing sales of our growing brake-related product lines. This increase in sales for the nine months ended December 31, 2022 were partially offset by inventory reduction initiatives from one of our largest
    customers and disruptions with global supply chain and logistics services.

Gross Profit. Our gross profit was $77,811,000, or 15.9% of net sales, for the nine months ended December 31, 2022 compared with $92,097,000, or 18.9% of net sales, for the nine

      months ended December 31, 2021. Our gross margin for the nine months ended December 31, 2022 reflects \(i\) higher inflationary costs— including disruptions with the global supply chain, logistics services, related higher freight costs, higher
      wages, \(ii\) impact of core revenue in the prior period due to a realignment of inventory at certain customer distribution centers, and \(iii\) changes in product mix.

Our gross margin for the nine months ended December 31, 2022 and 2021 was impacted by (i) higher freight costs, net of certain price increases, of $3,290,000, and $7,413,000, respectively, (ii) additional expenses due to certain costs for disruptions in the supply chain of $5,282,000 and $7,144,000, respectively, (iii) amortization of core and finished goods premiums paid to customers related to new business of $9,183,000 and

      $9,013,000, respectively.

In addition, gross margin was impacted by non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value, which resulted in a write-down of $2,704,000 for the nine months ended December 31, 2022.

For the nine months ended December 31, 2021, gross margin was impacted by non-cash quarterly revaluation of cores that are part of the finished goods on the customers’ shelves (which are included in contract assets) to the lower of cost or net realizable value and gain due to realignment of inventory at customer distribution centers, which resulted in a net gain of $1,229,000. Gross margin for the nine months ended December 31, 2021 was further impacted by transition expenses in connection with the expansion of our brake-related operations in Mexico of $2,744,000.

Operating Expenses

The following summarizes operating expenses:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
General and administrative	$	42,079,000		$	41,556,000
Sales and marketing		17,242,000			17,162,000
Research and development		8,330,000			7,631,000
Foreign exchange impact of lease liabilities and forward contracts		(2,553,000	)		1,769,000
Percent of net sales
General and administrative		8.6	%		8.5	%
Sales and marketing		3.5	%		3.5	%
Research and development		1.7	%		1.6	%
Foreign exchange impact of lease liabilities and forward contracts		(0.5	)%		0.4	%

General and Administrative. Our general and administrative expenses for the nine months ended December 31, 2022 were $42,079,000, which represents an increase of $523,000, or 1.3%, from the nine months

    ended December 31, 2021 of $41,556,000. This increase was primarily due to \(i\) $1,722,000 of increased expense resulting from foreign currency transactions, \(ii\) $1,071,000 of increased severance expense due to headcount reduction, \(iii\) $491,000
    of increased employee-related expense at our offshore locations, \(iv\) $436,000 of increased information technology costs in connection with cybersecurity and other productivity tools, \(v\) $301,000 of increased professional services, \(vi\) $299,000
    of increased employee-related expense, and \(vii\) $282,000 of increased general insurance expense. These increases were partially offset by \(i\) $2,129,000 of decreased employee incentives and \(ii\) $1,936,000 of decreased share-based compensation in
    connection with equity grants made to employees.

Sales and Marketing. Our sales and marketing expenses for the nine months ended December 31, 2022 were $17,242,000, which represents an increase of $80,000, or 0.5%, from the nine months ended December

    31, 2021 of $17,162,000. This increase was primarily due to \(i\) $424,000 for increased trade shows as normal business expenses resumed, \(ii\) $366,000 of increased travel costs as some business travel resumed, and \(iii\) $93,000 of increased
    commissions due to higher sales. These increases were partially offset by $592,000 of decreased marketing and advertising expenses and $139,000 of decreased employee-related expenses due to our cost-cutting measures.

Research and Development. Our research and development expenses for the nine months ended December 31, 2022 were $8,330,000, which represents an increase of $699,000, or 9.2%, from the nine months ended

    December 31, 2021 of $7,631,000. This increase was primarily due to \(i\) $356,000 of increased employee-related expenses, primarily due to our electric vehicle testing system initiatives, \(ii\) $271,000 of increased samples for our core library and
    other research and development supplies, and \(iii\) $55,000 of increased outside services primarily due to development projects.

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts for the nine months ended December 31, 2022 was a non-cash gain

    of $2,553,000 compared with a non-cash loss of $1,769,000 for the nine months ended December 31, 2021. This change was primarily due to \(i\) the remeasurement of our foreign currency-denominated lease liabilities, which resulted in non-cash gains of
    $2,108,000 and $64,000 for the nine months ended December 31, 2022 and 2021, respectively, due to foreign currency exchange rate fluctuations and \(ii\) the forward foreign currency exchange contracts, which resulted in a non-cash gain of $445,000
    compared with a non-cash loss of $1,833,000 for the nine months ended December 31, 2022 and 2021, respectively, due to the changes in their fair values.

Interest Expense

Interest Expense, net. Our interest expense for the nine months ended December 31, 2022 was $27,675,000, which represents an increase of $16,165,000, or 140.4%, from interest

    expense for the nine months ended December 31, 2021 of $11,510,000. Of this increase in interest expense, approximately 96% resulted from higher interest rates and approximately 76% of this increase resulted from our accounts receivable discount
    programs utilized by our customers. Our borrowing and receivable discount programs have interest costs that vary with interest rate movements. During the nine months ended December 31, 2022, utilization of our accounts receivable discount programs
    and our average borrowing under our credit facility increased.

Provision for Income Taxes

Income Tax. We recorded an income tax benefit of $9,296,000, or an effective tax rate of 62.1%, and income tax expense of $4,786,000, or an effective tax rate of 38.4%, for the

    nine months ended December 31, 2022 and 2021, respectively. Effective tax rates are based on current annual projections and any changes in future periods could result in an effective tax rate that is materially different from the current estimate.
    The effective tax rate for the nine months ended December 31, 2022, was primarily impacted by \(i\) specific jurisdictions that we do not expect to recognize the benefit of losses, \(ii\) foreign income taxed at rates that are different from the
    federal statutory rate, and \(iii\) non-deductible executive compensation under Internal Revenue Code Section 162\(m\).

Liquidity and Capital Resources

Overview

We had working capital (current assets minus current liabilities) of $122,892,000 and $110,580,000, a ratio of current assets to current liabilities of 1.3:1.0, at December 31, 2022 and March 31, 2022, respectively. The increase in working capital reflects our investment in inventory to address disruptions related to the global supply chain and logistics challenges to meet higher anticipated sales.

Our primary source of liquidity was from the use of our receivable discount programs and credit facility during the nine months ended December 31, 2022. In addition, we have access to our existing cash, as well as our available credit facilities to meet short-term liquidity needs. We believe our cash and cash equivalents, short-term investments, use of receivable discount programs, amounts available under our credit facility, and other sources are sufficient to satisfy our expected future working capital needs, repayment of the current portion of our term loans, and lease and capital expenditure obligations over the next 12 months.

As of December 31, 2022, we identified certain defaults with respect to the Credit Facility, which arose from non-compliance with certain financial covenants. On February 3, 2023, we entered into a fifth amendment to the Credit Facility (the “Fifth Amendment”). The Fifth Amendment, among other things, (i) waived certain existing defaults and events of defaults arising from non-compliance with the fixed charge coverage ratio and senior leverage ratio financial covenants as of the end of the fiscal quarter ended December 31, 2022, (ii) modified the fixed charge coverage ratio and senior leverage ratio financial covenant levels for the quarters ending March 31, 2023 and June 30, 2023, (iii) modified the definitions of “Applicable Margin” and “Consolidated EBITDA”, and (iv) added a new minimum undrawn availability financial covenant.

Share Repurchase Program

In August 2018, our board of directors approved an increase in our share repurchase program from $20,000,000 to $37,000,000 of our common stock. As of December 31, 2022, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our credit facility. We retired the 837,007 shares repurchased under this program through December 31, 2022. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Cash Flows

The following summarizes cash flows as reflected in the condensed consolidated statements of cash flows:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
Cash flows (used in) provided by:
Operating activities	$	(21,428,000	)	$	(22,174,000	)
Investing activities		(3,855,000	)		(5,426,000	)
Financing activities		14,898,000			19,770,000
Effect of exchange rates on cash and cash equivalents		(52,000	)		76,000
Net decrease in cash and cash equivalents	$	(10,437,000	)	$	(7,754,000	)
Additional selected cash flow data:
Depreciation and amortization	$	9,322,000		$	9,591,000
Capital expenditures		3,607,000			5,111,000

Net cash used in operating activities was $21,428,000 and $22,174,000 during the nine months ended December 31, 2022 and 2021, respectively. The change in our operating activities reflects a more significant build-up of inventory in the prior year as compared with the current year partially offset by lower net income and lower accounts payable. We continue to manage our working capital to maximize our operating cash flow.

Net cash used in investing activities was $3,855,000 and $5,426,000 during the nine months ended December 31, 2022 and 2021, respectively. The change in our investing activities primarily resulted from decreased capital expenditures due to the completion of our expansion of our brake-related operations in Mexico during the second quarter of fiscal 2022.

Net cash provided by financing activities was $14,898,000 and $19,770,000 during the nine months ended December 31, 2022 and 2021, respectively. The change in our financing activities resulted from lower borrowing and higher repayments under our credit facility during the nine months ended December 31, 2022. In addition, we repurchased 106,486 shares of our common stock for $1,914,000 during the nine months ended December 31, 2021.

Capital Resources

Credit Facility

We are party to a $268,620,000 senior secured financing, (as amended from time to time, the “Credit Facility”) with a syndicate of lenders, and PNC Bank, National Association, as administrative agent, consisting of (i) a $238,620,000 revolving loan facility, subject to borrowing base restrictions, a $24,000,000 sublimit for borrowings by Canadian borrowers, and a $20,000,000 sublimit for letters of credit (the “Revolving Facility”) and (ii) a $30,000,000 term loan facility (the “Term Loans”). The loans under the Credit Facility mature on May 28, 2026. The Credit Facility currently permits the payment of up to $29,043,000 of dividends and share repurchases for fiscal year 2022, subject to pro forma compliance with financial covenants. In connection with the Credit Facility, the lenders have a security interest in substantially all of our assets.

The Credit Facility, among other things, requires us to maintain certain financial covenants including a maximum senior leverage ratio and a minimum fixed charge coverage ratio. In addition, the Credit Facility places limits on our ability to incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales, redeem, or repurchase capital stock, alter the business conducted by us and our subsidiaries, transact with affiliates, prepay, redeem, or purchase subordinated debt, and amend or otherwise alter debt agreements.

On November 3, 2022, we entered into a fourth amendment to the Credit Facility (the “Fourth Amendment”). The Fourth Amendment, among other things, (i) modified the fixed charge coverage ratio financial covenant for the fiscal quarters ending September 30, 2022 and December 31, 2022, (ii) modified the total leverage ratio financial covenant for the quarter ending September 30, 2022, (iii) modified the definition of “Consolidated EBITDA”, and (iv) replaced LIBOR as the benchmark rate with a replacement benchmark based on the Secured Overnight Financing Rate (“SOFR”) effective November 3, 2022. The modifications to the financial covenants were effective as of September 30, 2022.

As of December 31, 2022, we identified certain defaults with respect to the Credit Facility, which arose from non-compliance with certain financial covenants. On February 3, 2023, we entered into the Fifth Amendment, which among other things, (i) waived certain existing defaults and events of defaults arising from non-compliance with the fixed charge coverage ratio and senior leverage ratio financial covenants as of the end of the fiscal quarter ended December 31, 2022, (ii) modified the fixed charge coverage ratio and senior leverage ratio financial covenant levels for the quarters ending March 31, 2023 and June 30, 2023, (iii) modified the definitions of “Applicable Margin” and “Consolidated EBITDA”, and (iv) added a new minimum undrawn availability financial covenant.

We had $175,000,000 and $155,000,000 outstanding under the Revolving Facility at December 31, 2022 and March 31, 2022, respectively. In addition, $6,370,000 was outstanding for letters of credit at December 31, 2022. At December 31, 2022, after certain contractual adjustments, $57,250,000 was available under the Revolving Facility.

Receivable Discount Programs

We use receivable discount programs with certain customers and their respective banks. Under these programs, we have options to sell those customers’ receivables to those banks at a discount to be agreed upon at the time the receivables are sold. These discount arrangements allow us to accelerate receipt of payment on customers’ receivables. While these arrangements have reduced our working capital needs, there can be no assurance that these programs will continue in the future. Interest expense resulting from these programs would increase if interest rates rise, if utilization of these discounting arrangements expands, if customers extend their payment to us, or if the discount period is extended to reflect more favorable payment terms to customers.

The following is a summary of the receivable discount programs:

	Nine Months Ended<br><br> <br>December 31,
	2022			2021
Receivables discounted	$	428,868,000		$	418,044,000
Weighted average number of days collection was accelerated		323			335
Annualized weighted average discount rate		5.0	%		1.7	%
Amount of discount recognized as interest expense	$	19,131,000		$	6,798,000

Capital Expenditures and Commitments

Capital Expenditures

Our total capital expenditures, including finance leases and non-cash capital expenditures were $3,632,000 and $5,248,000 for the nine months ended December 31, 2022 and 2021, respectively. These capital expenditures primarily include the purchase of equipment for our current operations. We completed the expansion of our operations in Mexico during the second quarter of fiscal 2022. We expect to incur approximately $1,500,000 of capital expenditures primarily to support our current operations, including purchases of equipment, during the remainder of fiscal 2023. We fund these expenditures primarily from our working capital and leasing.

Related Party Transactions

Operating Lease

In December 2022, we entered into an operating lease for our 35,000 square foot manufacturing, warehouse, and office facility in Ontario, Canada, with a company co-owned by a member of management. The lease, commencing January 1, 2023, has an initial term of one year with a base rent of approximately $27,000 per month and includes options to renew for up to four years.

Litigation

There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information provided in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K as of March 31, 2022, which was filed with the SEC on June 14, 2022.

Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our chief executive officer, chief financial officer, and chief accounting officer, as appropriate to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of management, including our chief executive officer, chief financial officer, and chief accounting officer, we have conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our chief executive officer, chief financial officer, and chief accounting officer concluded that MPA’s disclosure controls and procedures were effective as of December 31, 2022.

Inherent Limitations on Effectiveness of Controls

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, applying certain estimates and judgments as required.

Internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings

There have been no material changes to our litigation matters that are presented in our Annual Report on Form 10-K for the year ended March 31, 2022, which was filed on June 14, 2022.

Item 1A.	Risk Factors

There have been no material changes in the risk factors set forth in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed on June 14, 2022.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Limitation on Payment of Dividends and Share Repurchases

The Credit Facility currently permits the payment of up to $29,043,000 of dividends and share repurchases for fiscal year 2023, subject to pro forma compliance with financial covenants.

Purchases of Equity Securities by the Issuer

Shares repurchased during the three months ended December 31, 2022 were as follows:

Periods		Average Price Paid Per Share			Approximate<br><br> <br>Dollar Value of<br><br> <br>Shares That May<br><br> <br>Yet Be Purchased<br><br> <br>Under the Plans<br><br> <br>or Programs (1)
October 1 - October 31, 2022:
Open market and privately negotiated purchases	-	$	-	-	$	18,255,000
November 1 - November 30, 2022:
Open market and privately negotiated purchases	-	$	-	-		18,255,000
December 1 - December 31, 2022:
Open market and privately negotiated purchases	-	$	-	-		18,255,000
Total	0			0	$	18,255,000

(1)

As of December 31, 2022, $18,745,000 was utilized and $18,255,000 remains available to repurchase shares under the authorized share repurchase program, subject to the limit in our Credit Facility. We retired the 837,007 shares repurchased under this program through December 31, 2022. Our share repurchase program does not obligate us to acquire any specific number of shares and shares may be repurchased in privately negotiated and/or open market transactions.

Item 3.

Defaults Upon Senior Securities

---

As of December 31, 2022, the Company was in default under its financial covenants in its Loan Agreement with PNC Bank, National Association. As of February 3, 2023, the Company entered into the Fifth Amendment to the Loan Agreement that waived the defaults and amended the applicable margin, financial covenants and other terms. A copy of the Fifth Amendment is attached to this Form 10-Q as Exhibit 10.2.

Item 5.	Other Information

None.

Item 6.	Exhibits
(a)	Exhibits:
---	---
Number	Description of Exhibit	Method of Filing
---	---	---
3.1	Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 declared effective on March 22, 1994 (the “1994 Registration Statement”).
3.2	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (No. 33-97498) declared effective on November 14, 1995.
3.3	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,<br> 1997.
3.4	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,<br> 1998 (the “1998 Form 10-K”).
3.5	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit C to the Company’s proxy statement on Schedule 14A filed with the SEC on<br> November 25, 2003.
3.6	Amended and Restated By-Laws of Motorcar Parts of America, Inc.	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 24, 2010.
3.7	Certificate of Amendment of the Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on April 17, 2014.
3.8	Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on June 9, 2016	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 14, 2016.
3.9	Amendment to the Amended and Restated By-Laws of the Company	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 22, 2017.
3.10	Third Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on January 26, 2022	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 1, 2022.
4.1	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed on August 9, 2022.
4.2	2004 Non-Employee Director Stock Option Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A for the 2004 Annual Shareholders<br> Meeting.
4.3	2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on December 15, 2010.
4.4	Amended and Restated 2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 5, 2013.

Number	Description of Exhibit	Method of Filing
4.5	Second Amended and Restated 2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 3, 2014.
4.6	2014 Non-Employee Director Incentive Award Plan	Incorporated by reference to Appendix B to the Proxy Statement on Schedule 14A filed on March 3, 2014.
4.7	Third Amended and Restated 2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on November 20, 2017.
4.8	Fourth Amended and Restated 2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on July 24, 2020.
4.9	2022 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on July 29, 2022.
10.1	Fourth Amendment to Amended and Restated Loan Agreement, dated as of November 3, 2022, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party<br> thereto, and PNC Bank, National Association, as administrative agent	Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 9,<br> 2022.
10.2	Fifth Amendment to Amended and Restated Loan Agreement, dated as of February 3, 2023, among Motorcar Parts of America, Inc., D&V Electronics Ltd., Dixie Electric Ltd., Dixie Electric Inc., each lender from time to time party<br> thereto, and PNC Bank, National Association, as administrative agent	Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002	Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002	Filed herewith.
31.3	Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002	Filed herewith.
32.1	Certifications of Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002	Filed herewith.
Number	Description of Exhibit	Method of Filing
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document).
101.SCM	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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, thereunto duly authorized.

	MOTORCAR PARTS OF AMERICA, INC.
Dated: February 9, 2023	By:	/s/ David Lee
	David Lee
	Chief Financial Officer
Dated: February 9, 2023	By:	/s/ Kamlesh Shah
	Kamlesh Shah
	Chief Accounting Officer

Exhibit 10.2

FIFTH AMENDMENT TO AMENDED AND RESTATED

LOAN AGREEMENT

This FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT, dated as of February 3, 2023 (this “Fifth Amendment”) to that certain Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of June 5, 2018 (as amended, restated, amended and restated, refinanced, replaced, supplemented, modified or otherwise changed from time to time, the “Loan Agreement”), by and among Motorcar Parts of America, Inc., a corporation organized under the laws of the State of New York (“MPA”, and together with each Person organized under the laws of a State of the United States joined thereto as a borrower from time to time (other than Dixie US), collectively, the “US Borrowers”, and each, a “US Borrower”), D & V Electronics Ltd., a corporation amalgamated and existing under the laws of the Province of British Columbia (“D&V”), Dixie Electric Ltd., a corporation amalgamated under the laws of Ontario (“Dixie Canada”), Dixie Electric Inc., a Delaware corporation (“Dixie US” and together with D&V, Dixie Canada and each Person organized under the laws of Canada joined thereto as a borrower from time to time, collectively, the “Canadian Borrowers”, and each, a “Canadian Borrower”; the Canadian Borrowers and the US Borrowers are referred to therein each as a “Borrower” and collectively as “Borrowers”), each Person joined thereto as a guarantor from time to time, the financial institutions which are now or which thereafter become a party thereto (collectively, the “Lenders” and each individually a “Lender”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for the Lenders (in such capacity, the “Agent”).

BACKGROUND

Borrowers, Agent and the Lenders are party to the Loan Agreement pursuant to which Agent and Lenders provide Borrowers with certain financial accommodations.

Borrowers have requested that Agent and Lenders (i) waive the Specified Events of Default (as defined below) and (ii) make certain amendments to the Loan Agreement, and Agent and Lenders agree to do so on the terms and conditions hereafter set forth.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto hereby agree as follows:

1. Defined Terms. Any capitalized term used herein and not defined shall have the meaning assigned to it in the Loan Agreement.

2. Waiver. Subject to satisfaction of the conditions precedent set forth in Section 4 below, Agent and the Lenders hereby waive the following Events of Default: (a) any existing Event of Default arising under Section 10.5 of the Loan Agreement resulting from the failure to comply with the minimum Fixed Charge Coverage Ratio level required pursuant to Section 6.5(a) of the Loan Agreement as of the end of the fiscal quarter ending December 31, 2022, (b) any existing Event of Default arising under Section 10.5 of the Loan Agreement resulting from the failure to comply with the maximum Total Leverage Ratio required pursuant to Section 6.5(b) of the Loan Agreement as of the end of the fiscal quarter ending December 31, 2022, and (c) solely relating to any Default or Event of Default described in clauses (a) and (b) above or resulting from the same, any existing Event of Default arising under Section 10.2 of the Loan Agreement resulting from any representation, warranty, certification, or other statement made by the Borrowers that no Default or Event of Default has occurred and is continuing (collectively, the “Specified Events of Default”). Notwithstanding the foregoing waivers, the Borrowers hereby agree that Agent and the Lenders are not obligated to waive any future Event of Default under the Loan Agreement.

3. Amendments.

(a) Section 1.2 of the Loan Agreement is hereby amended by inserting the following new defined terms in appropriate alphabetical order:

“Extraordinary Freight Costs” shall mean extraordinary and non-recurring freight costs above the freight surcharge Borrowers have passed on to Customers.

“Fifth Amendment” shall mean that certain Waiver and Fifth Amendment to Amended and Restated Loan Agreement dated as of February 3, 2023, by and among Borrowers, Agent and the Lenders party thereto.

“Fifth Amendment Effective Date” shall mean the date on which the conditions precedent to the effectiveness of the Fifth Amendment are fulfilled or waived.

“Fifth Amendment Fee Letter” shall mean the fee letter dated February 3, 2023 between Agent and Borrowing Agent.

“Unsuppressed Undrawn Availability” at a particular date shall mean an amount equal to (a) the sum of the US Formula Amount plus the Canadian Formula Amount, minus (b) the sum of (i) the outstanding amount of Advances (other than the Maximum Undrawn Amount of all outstanding Letters of Credit and the Term Loan) plus (ii) all amounts due and owing to any Loan Party’s trade creditors which are outstanding sixty (60) days or more past their due date that are not otherwise (x) on formal extended terms which have been approved by Agent or (y) subject to a good faith dispute.

(b) Section 1.2 of the Loan Agreement is hereby further amended by amending and restating the following defined terms in their entirety:

“Applicable Margin” shall mean for Revolving Advances, Swing Loans, and the Term Loan commencing July 1, 2018 (using the March 31, 2018 financials), and thereafter until the Fifth Amendment Effective Date, effective as of the first day of the month following the month in which the quarterly financial statements of the Loan Parties on a Consolidated Basis and related Compliance Certificate required under Section 9.8 for the most recently completed fiscal quarter are due to be delivered (each day on which an adjustment is to be made, an “Adjustment Date”), the Applicable Margin for each type of Advance shall be adjusted from that in effect prior to such date, if necessary, to the applicable percent per annum set forth in the pricing table below corresponding to the Total Leverage Ratio for the trailing four quarter period ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date:

TOTAL<br><br> <br>LEVERAGE<br><br> <br>RATIO	APPLICABLE MARGINS FOR<br><br> <br>DOMESTIC RATE LOANS		APPLICABLE MARGINS FOR<br><br> <br>TERM SOFR RATE LOANS
	Revolving Advances, Swing Loans	Term Loan	Revolving Advances	Term Loan
Less than or equal to 0.50 to 1.00	1.25%	1.25%	2.25%	2.25%
Greater than 0.50 to 1.00 but less than 1.50 to 1.00	1.50%	1.50%	2.50%	2.50%
Greater than or equal to 1.50 to 1.00	1.75%	1.75%	2.75%	2.75%

Commencing on the Fifth Amendment Effective Date the Applicable Margin shall be as set forth in the pricing table below, based upon a Total Leverage Ratio which is greater than or equal to 1.50 to 1.00, and thereafter on each Adjustment Date, the Applicable Margin for each type of Advance shall be adjusted, if necessary, to the applicable percent per annum set forth in the pricing table below corresponding to the Total Leverage Ratio for the trailing four quarter period ending on the last day of the most recently completed fiscal quarter prior to the applicable Adjustment Date:

TOTAL<br><br> <br>LEVERAGE<br><br> <br>RATIO	APPLICABLE MARGINS FOR<br><br> <br>DOMESTIC RATE LOANS		APPLICABLE MARGINS FOR<br><br> <br>TERM SOFR RATE LOANS
	Revolving Advances, Swing Loans	Term Loan	Revolving Advances	Term Loan
Less than or equal to 0.50 to 1.00	1.75%	1.75%	2.75%	2.75%
Greater than 0.50 to 1.00 but less than 1.50 to 1.00	2.00%	2.00%	3.00%	3.00%
Greater than or equal to 1.50 to 1.00	2.25%	2.25%	3.25%	3.25%

If Loan Parties shall fail to deliver the financial statements, certificates and/or other information required under Section 9.8 by the date required pursuant to such section, each Applicable Margin shall be conclusively presumed to equal the highest Applicable Margin specified in the pricing table set forth above until the date of delivery of such financial statements, certificates and/or other information, at which time the rate will be adjusted based upon the Total Leverage Ratio reflected in such statements. Notwithstanding anything to the contrary contained herein, no downward adjustment in any Applicable Margin shall be made on any Adjustment Date on which any Event of Default shall have occurred and be continuing. Notwithstanding anything to the contrary contained herein, immediately and automatically upon the occurrence of any Event of Default under Sections 10.1, 10.5(i) (solely with respect to a failure to comply with Section 6.5) or 10.7, each Applicable Margin shall increase to and equal the highest Applicable Margin specified in the pricing table set forth above, until the date (if any) on which such Event of Default shall be waived in accordance with the provisions of this Agreement, at which time the rate will be adjusted based upon the Total Leverage Ratio reflected on the most recently delivered financial statements and Compliance Certificate delivered by the Loan Parties to Agent pursuant to Section 9.8. Any increase in interest rates and/or other fees payable by the Loan Parties under the Loan Documents pursuant to the provisions of the foregoing sentence shall be in addition to and independent of any increase in such interest rates and/or other fees resulting from the occurrence of any Event of Default (including, if applicable, any Event of Default arising from a breach of Section 9.8 hereof) and/or the effectiveness of the Default Rate provisions of Section 3.1 hereof or the default fee rate provisions of Section 3.2 hereof.

If, as a result of any restatement of, or other adjustment to, the financial statements of the Loan Parties on a Consolidated Basis or for any other reason, Agent determines that (a) the Total Leverage Ratio as previously calculated as of any applicable date for any applicable period was inaccurate, and (b) a proper calculation of the Total Leverage Ratio for any such period would have resulted in different pricing for such period, then (i) if the proper calculation of the Total Leverage Ratio would have resulted in a higher interest rate and/or fees (as applicable) for such period, automatically and immediately without the necessity of any demand or notice by Agent or any other affirmative act of any party, the interest accrued on the applicable outstanding Advances and/or the amount of the fees accruing for such period under the provisions of this Agreement and the Other Documents shall be deemed to be retroactively increased by, and Loan Parties shall be obligated within three (3) days to pay to Agent for the ratable benefit of Lenders an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period; and (ii) if the proper calculation of the Total Leverage Ratio would have resulted in a lower interest rate and/or fees (as applicable) for such period, then the interest accrued on the applicable outstanding Advances and the amount of the fees accruing for such period under the provisions of this Agreement and the Other Documents shall be deemed to remain unchanged, and Agent and Lenders shall have no obligation to repay interest or fees to the Loan Parties; provided, that, if as a result of any restatement or other event or other determination by Agent a proper calculation of the Total Leverage Ratio would have resulted in a higher interest rate and/or fees (as applicable) for one or more periods and a lower interest rate and/or fees (as applicable) for one or more other periods (due to the shifting of income or expenses from one period to another period or any other reason), then the amount payable by the Loan Parties pursuant to clause (i) above shall be based upon the excess, if any, of the amount of interest and fees that should have been paid for all applicable periods over the amounts of interest and fees actually paid for such periods.

“Consolidated EBITDA” shall mean, with respect to any Person for any period, (a) the Consolidated Net Income of such Person and its Subsidiaries for such period, plus (b) without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period and to the extent deducted in determining Consolidated Net Income of such Person for such period: (i) Consolidated Net Interest Expense, (ii) income tax expense, (iii) depreciation expense, (iv) amortization expense, (v) severance charges in an aggregate amount not to exceed (A) $1,000,000 for the fiscal year of Borrowers ending on March 31, 2021, (B) $500,000 for the fiscal year of Borrowers ending on March 31, 2022, (C) $2,000,000 for the fiscal year of Borrowers ending on March 31, 2023, (D) $2,250,000 for the fiscal year of Borrowers ending on March 31, 2024, and (E) $100,000 for any fiscal year of Borrowers thereafter, (vi) any non-cash expenses incurred in connection with stock options and other equity-based compensation, (vii) non-cash charges reducing Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period, (viii) standard inventory revaluation write-downs and write-ups; provided, that, commencing with the fiscal quarter ending June 30, 2019, such amounts which may be added back pursuant to this clause (viii) with respect to Eligible Inventory which are not subject to a Repurchase Contract or which are at an MPA location shall be an aggregate amount not to exceed $1,000,000 for each fiscal quarter (any portion of such amount not fully used in any given fiscal quarter may be rolled over to a subsequent fiscal quarter during any four quarter period); provided, further, that, commencing with the fiscal quarter ending March 31, 2020, in no event shall the aggregate amount which may be added back pursuant this proviso to this clause (viii) exceed $4,000,000 for any trailing four quarter period, (ix) non-cash losses on Hedging Agreements, (x) any expenses incurred in connection with stock offerings, (xi) the amount of all costs, fees and expenses incurred in connection with the Transactions, (xii) costs and expenses incurred as a result of any step up accounting adjustments, (xiii) all transactional costs, expenses and charges payable in connection with, any acquisition (whether or not consummated) in an amount not to exceed $700,000 for any fiscal year of Borrowers, (xiv) total of Premium To Inventory Purchases and amortization of Core Premium Asset in an aggregate amount not to exceed (I) $30,000,000 during the period April 1, 2018 through June 30,2021, and (II) $30,000,000 during the term of this Agreement for all periods starting on or after July 1, 2021, (xv) non-capitalized transaction expenses related to the Mexico Business Expansion in an aggregate amount not to exceed $32,000,000 for any periods ending on or prior to September 30, 2021, (xvi) specified investments in Customers which are expensed during such period; provided, however, that commencing April 1, 2018 the aggregate amount of such expense which may be added back pursuant to this clause (xvi) shall not exceed $10,855,000 during the term of this Agreement, (xvii) Extraordinary Freight Costs (i) for the fiscal quarter ending on June 30, 2022 not to exceed $1,749,000, and (ii) for the fiscal quarter ending September 30, 2022, not to exceed $1,541,000 and (xviii) for the period commencing on April 1, 2020 and ending on March 31, 2022, costs and expenses incurred as a result of increased operating costs in connection with the COVID-19 pandemic; provided, that, the aggregate amount which may be added back pursuant to this subclause (xviii) for any given period shall not exceed the aggregate amount disclosed for such costs and expenses in the corresponding 10-Q or 10-K filing (as applicable) for MPA for any such period; provided further, that, notwithstanding the preceding proviso, the aggregate amount which may be added back pursuant to this subclause (xviii) shall not exceed $13,000,000, minus (c) without duplication, the sum of the following amounts of such Person and its Subsidiaries for such period and to the extent included in determining Consolidated Net Income of such Person for such period: (i) non-cash items increasing Consolidated Net Income (other than the accrual of revenue or recording of Receivables in the Ordinary Course of Business) for such period and (ii) non-cash gains on Hedging Agreements, plus (d) without duplication and to the extent not included in determining Consolidated Net Income of such Person for such period, Internal Revenue Service refunds not to exceed $5,103,000 in the aggregate with respect to any employee retention credits.

(c) Section 4.6 of the Loan Agreement is hereby amended by deleting “one (1) such visit” and inserting “two (2) such visits” in its place and stead.

(d) Section 4.7 of the Loan Agreement is hereby amended by deleting the reference to “one (1) appraisal in any fiscal year” and inserting “two (2) appraisals in any fiscal year” in its place and stead.

(e) Section 6.5 of the Loan Agreement is hereby amended in its entirety to provide as follows:

“6.5. Financial Covenants.

(a)

Fixed Charge Coverage Ratio. Cause to be maintained as of the end of each fiscal quarter, (i) beginning with the fiscal quarter ended March 31, 2018, a Fixed Charge Coverage Ratio of not less than 1.15 to 1.0, (ii) commencing with the fiscal quarter ended June 30, 2018, a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0, (iii) for the fiscal quarter ended June 30, 2022, a Fixed Charge Coverage Ratio of not less than 1.15 to 1.0, (iv) for the fiscal quarter ended September 30, 2022, a Fixed Charge Coverage Ratio of not less than 1.01 to 1.0, (v) for the fiscal quarter ended December 31, 2022, a Fixed Charge Coverage Ratio of not less than 1.05 to 1.0, (vi) for the fiscal quarters ending March 31, 2023 and June 30, 2023, a Fixed Charge Coverage Ratio of not less than 1.01 to 1.0, and (vii) for the fiscal quarter ending September 30, 2023 and thereafter, a Fixed Charge Coverage Ratio of not less than 1.15 to 1.0, in each case, measured on a rolling four (4) quarter basis.

(b)

Total Leverage Ratio. Maintain as of end of each fiscal quarter, (i) beginning with the fiscal quarter ended March 31, 2018, a Total Leverage Ratio of not greater than 2.5 to 1.0, (ii) commencing with the fiscal quarter ended June 30, 2018, a Total Leverage Ratio of not greater than 3.0 to 1.0, (iii) for the fiscal quarter ended September 30, 2022, a Total Leverage Ratio of not greater than 3.25 to 1.0, (iv) for the fiscal quarter ended December 31, 2022, a Total Leverage Ratio of not greater than 3.0 to 1.0, (v) for the fiscal quarter ending March 31, 2023, a Total Leverage Ratio of not greater than 3.50 to 1.0, (vi) for the fiscal quarter ending June 30, 2023, a Total Leverage Ratio of not greater than 3.25 to 1.0 and (vii) for the fiscal quarter ending September 30, 2023 and thereafter, a Total Leverage Ratio of not greater than 3.0 to 1.0, in each case, measured on a rolling four (4) quarter basis.

(c)

Minimum Undrawn Availability. Maintain at all times Unsuppressed Undrawn Availability of not less than 17.5% of the Maximum Revolving Advance Amount which, as of the Fifth Amendment Effective Date, equals $41,758,500; provided, however, that compliance with this covenant shall cease to be required if the Compliance Certificates for the fiscal quarters ended March 31, 2023 and June 30, 2023 show compliance with the requirements of Sections 6.5 and 7.7 as of the end of such fiscal quarters.”

---

(f) Section 11.5(a) of the Loan Agreement is amended by amending clauses “SEVENTH” and “EIGHTH” in their entirety to provide as follows:

“SEVENTH, to the payment of the outstanding principal amount of the US Obligations (other than principal in respect of US Swing Loans paid pursuant to clause FIFTH above) arising under this Agreement (other than Cash Management Liabilities and Hedge Liabilities) (including the payment or Cash Collateralization of any outstanding Letters of Credit in accordance with Section 3.2(b) hereof);

EIGHTH, to all other US Obligations arising under this Agreement (including Cash Management Liabilities and Hedge Liabilities) which shall have become due and payable (hereunder, under the Other Documents or otherwise) and not repaid pursuant to clauses “FIRST” through “SEVENTH” above;”

(g) Exhibit 1.2A is hereby amended in its entirety and replaced by Exhibit 1.2A annexed to the Fifth Amendment.

4. Conditions to Effectiveness. The effectiveness of this Fifth Amendment is subject to the fulfillment of each of the following conditions precedent (the date such conditions are fulfilled or are waived by Agent is hereinafter referred to as the “Fifth Amendment Effective Date”):

(a) Representations and Warranties; No Event of Default. After giving effect to this Fifth Amendment, including the waiver of the Specified Events of Default pursuant to Section 2 hereof, the following statements shall be true and correct: (i) the representations and warranties contained in this Fifth Amendment, ARTICLE V of the Loan Agreement and in each Other Document, certificate, or other writing delivered to Agent or any Lender pursuant hereto or thereto on or prior to the Fifth Amendment Effective Date are true and correct in all material respects (and in all respects if such representation and warranty is already qualified by materiality or by reference to a Material Adverse Effect) on and as of the Fifth Amendment Effective Date as though made on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date (in which case such representation or warranty shall be true and correct in all material respects (and in all respects if such representation and warranty is already qualified by materiality or by reference to a Material Adverse Effect) on and as of such earlier date) and (ii) no Default or Event of Default (other than the Specified Events of Default) shall have occurred and be continuing on the Fifth Amendment Effective Date or would result from the Fifth Amendment becoming effective in accordance with its terms.

(b) Execution of Amendment. Agent and the Lenders shall have executed this Fifth Amendment and shall have received a counterpart to this Fifth Amendment, duly executed by each Loan Party.

(c) Payment of Fees. Borrowers shall have paid, on or before the Fifth Amendment Effective Date, (i) the amounts set forth in the Fifth Amendment Fee Letter, and (ii) all fees and invoiced costs and expenses (to the extent invoiced at least two (2) Business Days prior to the Fifth Amendment Effective Date) then payable by Borrowers pursuant to the Loan Documents, including, without limitation, Section 16.9 of the Loan Agreement. All fees under this Section 4(c) shall be fully earned and payable as of the Fifth Amendment Effective Date, and may be charged by Agent to the U.S. Borrower’s Account.

(d) Secretary’s Certificate and Authorizing Resolutions. Agent shall have received a certificate of the Secretary or Assistant Secretary (or other equivalent officer, partner or manager) of each Loan Party dated as of the date of this Fifth Amendment which shall certify (i) copies of resolutions of such Loan Party, of the board of directors (or other equivalent governing body, member or partner) of such Loan Party authorizing (x) the execution, delivery and performance of this Fifth Amendment and each Other Document executed in connection with this Fifth Amendment to which such Loan Party is a party, and (y) the reaffirmation of the grant by such Loan Party of the security interests in and liens upon the Collateral to secure all of the Obligations (and such certificate shall state that such resolutions have not been amended, modified, revoked or rescinded as of the date of such certificate), (ii) the incumbency and signature of the officers of such Loan Party authorized to execute this Fifth Amendment and such Other Documents, (iii) that the copies of the Organizational Documents delivered to Agent on the Third Amendment Effective Date remain true, correct and complete as of the date of this Amendment (or, to the extent amended after the Third Amendment Effective Date, attaching true, correct and complete copies of such amended Organizational Documents), and (iv) the good standing (or equivalent status) of such Loan Party in its jurisdiction of organization dated not more than thirty (30) days prior to the date of this Fifth Amendment, issued by the Secretary of State or other appropriate official of each such jurisdiction.

5. Representations and Warranties. Each Loan Party represents and warrants as follows:

(a) Organization, Good Standing, Etc. Each Loan Party (i) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization, (ii) has all requisite power and authority to conduct its business as now conducted and as presently contemplated, and to execute and deliver this Fifth Amendment, and to consummate the transactions contemplated hereby and by the Loan Agreement, as amended hereby, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except (solely for the purposes of this subclause (iii)) where the failure to be so qualified or in good standing could not reasonably be expected to result in a Material Adverse Effect.

(b) Authorization, Etc. The execution, delivery and performance by each Loan Party of this Fifth Amendment, and the performance of the Loan Agreement, as amended hereby, (i) have been duly authorized by all necessary action, (ii) do not and will not contravene any of its Organizational Documents or any Applicable Law in any material respect or any material Contractual Obligation binding on or otherwise affecting it or any of its properties, (iii) do not and will not result in or require the creation of any Lien (other than pursuant to any Loan Document) upon or with respect to any of its properties, and (iv) do not and will not result in any default, noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to its operations or any of its properties.

(c) Governmental Approvals. No authorization or approval or other action by, and no notice to or filing with, any Governmental Body is required in connection with the due execution, delivery and performance of this Fifth Amendment by the Loan Parties, and the performance of the Loan Agreement, as amended hereby.

(d) Enforceability of this Fifth Amendment. This Fifth Amendment and the Loan Agreement, as amended hereby, when delivered hereunder, will be a legal, valid and binding obligation of each Loan Party, enforceable against such Loan Party in accordance with the terms thereof, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally.

(e) Representations and Warranties; No Event of Default. The statements in Section 4(a) of this Fifth Amendment are true and correct.

6. Release. Each Loan Party hereby acknowledges and agrees that: (a) neither it nor any of its Affiliates has any claim or cause of action against Agent or any Lender (or any of their respective Affiliates, officers, directors, employees, attorneys, consultants or agents) and (b) Agent and each Lender has heretofore properly performed and satisfied in a timely manner all of its obligations to the Loan Parties and their Affiliates under the Loan Agreement and the Other Documents that are required to have been performed on or prior to the date hereof. Notwithstanding the foregoing, Agent and the Lenders wish (and the Loan Parties agree) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of Agent and the Lenders’ rights, interests, security and/or remedies under the Loan Agreement and the Other Documents. Accordingly, for and in consideration of the agreements contained in this Fifth Amendment and other good and valuable consideration, each Loan Party (for itself and its Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (collectively, the “Releasors”) does hereby fully, finally, unconditionally and irrevocably release and forever discharge Agent, each Lender and each of their respective Affiliates, officers, directors, employees, attorneys, consultants and agents (collectively, the “Released Parties”) from any and all debts, claims, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done on or prior to the Fifth Amendment Effective Date directly arising out of, connected with or related to this Fifth Amendment, the Loan Agreement or any Other Document, or any act, event or transaction related or attendant thereto, or the agreements of Agent or any Lender contained therein, or the possession, use, operation or control of any of the assets of any Loan Party, or the making of Advances, or the management of such Advances or the Collateral.

No Novation; Reaffirmation and Confirmation.

(a) This Fifth Amendment does not extinguish the obligations for the payment of money outstanding under the Loan Agreement or discharge or release the lien or priority of any mortgage, security agreement, pledge agreement or any other security therefore. Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Loan Agreement or instruments securing the same, which shall remain in full force and effect, except as modified hereby or by instruments executed concurrently herewith. Nothing expressed or implied in this Fifth Amendment shall be construed as a release or other discharge of the Loan Parties under the Loan Agreement, or the Other Documents, as amended hereby, from any of its obligations and liabilities as “Borrowers” thereunder.

(b) Each Borrower hereby (i) acknowledge and reaffirm its obligations as set forth in each Loan Document, as amended hereby, (ii) agrees to continue to comply with, and be subject to, all of the terms, provisions, conditions, covenants, agreements and obligations applicable to it set forth in each Loan Document, as amended hereby, which remain in full force and effect, and (iii) confirms, ratifies and reaffirms that the security interest granted to Agent, for the benefit of Agent and the Lenders, pursuant to the Loan Documents, as amended hereby, in all of its right, title, and interest in all then existing and thereafter acquired or arising Collateral in order to secure prompt payment and performance of the Obligations, is continuing and is and shall remain unimpaired and continue to constitute a first priority security interest (subject to Permitted Liens) in favor of Agent, for the benefit of Agent and the Lenders, with the same force, effect and priority in effect both immediately prior to and after entering into this Fifth Amendment.

Miscellaneous.

(a) Continued Effectiveness of the Loan Agreement and the Other Documents. Except as otherwise expressly provided herein, the Loan Agreement and the other Loan Documents are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, except that on and after the Fifth Amendment Effective Date (i) all references in the Loan Agreement to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended by this Fifth Amendment and (ii) all references in the Other Documents to the “Loan Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended by this Fifth Amendment. To the extent that the Loan Agreement or any Other Document purports to pledge to Agent, or to grant to Agent, a security interest or lien, such pledge or grant is hereby ratified and confirmed in all respects. Except as expressly provided herein, the execution, delivery and effectiveness of this Fifth Amendment shall not operate as an amendment of any right, power or remedy of Agent and the Lenders under the Loan Agreement or any Other Document, nor constitute an amendment of any provision of the Loan Agreement or any Other Document.

(b) Counterparts. This Fifth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Fifth Amendment by fax or electronic mail shall be equally as effective as delivery of an original executed counterpart of this Fifth Amendment. Original signature pages shall promptly be provided to Agent.

(c) Headings. Section headings herein are included for convenience of reference only and shall not constitute a part of this Fifth Amendment for any other purpose.

(d) Costs and Expenses. Borrowers agree to pay on demand all fees, costs and expenses of Agent and the Lenders in connection with the preparation, execution and delivery of this Fifth Amendment.

(e) Fifth Amendment as Other Document. Each Loan Party hereby acknowledges and agrees that this Fifth Amendment constitutes an “Other Document” under the Loan Agreement. Accordingly, it shall be an Event of Default under the Loan Agreement if (i) any representation or warranty made by any Loan Party under or in connection with this Fifth Amendment, which representation or warranty is (A) subject to a materiality or a Material Adverse Effect qualification, shall have been incorrect in any respect when made or deemed made, or (B) not subject to a materiality or a Material Adverse Effect qualification, shall have been incorrect in any material respect when made or deemed made or (ii) any Loan Party shall fail to perform or observe any term, covenant or agreement contained in this Fifth Amendment (subject to any applicable notice or grace periods under the Loan Agreement).

(f) Severability. Any provision of this Fifth Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(g) Governing Law. This Fifth Amendment shall be governed by and construed in accordance with, the laws of the State of New York.

(h) Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS FIFTH AMENDMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.

[Remainder of page intentionally left blank. Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to be executed and delivered by their respective duly authorized officers as of the date first written above.

US BORROWER:
MOTORCAR PARTS OF AMERICA, INC.
By:	/s/ Selwyn Joffe
Name:	Selwyn Joffe
---	---
Title:	President and Chief Executive Officer

CANADIAN BORROWERS:
D & V ELECTRONICS LTD.
By:	/s/ Kalina Loukanov
Name:	Kalina Loukanov
---	---
Title:	Acting Chief Executive Officer
DIXIE ELECTRIC LTD.
---	---
By:	/s/ Selwyn Joffe
Name:	Selwyn Joffe
---	---
Title:	Chief Executive Officer
DIXIE ELECTRIC INC.
By:	/s/ Selwyn Joffe
---	---
Name:	Selwyn Joffe
---	---
Title:	Chief Executive Officer

AGENT AND LENDER:
PNC BANK, NATIONAL ASSOCIATION
By:	/s/ Albert Sarkis
Name:	Albert Sarkis
---	---
Title:	Senior Vice President

WEBSTER BUSINESS CREDIT, A<br><br> <br>DIVISION OF WEBSTER BANK, N.A.
By:	/s/ John R. Saffioti
Name:	John R. Saffioti
---	---
Title:	Director

BANK HAPOALIM B.M.
By:	/s/ John Yoler
Name:	John Yoler
---	---
Title:	EVP
By:	/s/ Michael Gorman III
---	---
Name:	Michael Gorman III
---	---
Title:	FVP

CATHAY BANK
By:	/s/ James Campbell
Name:	James Campbell
---	---
Title:	First Vice President

ISRAEL DISCOUNT BANK OF NEW YORK
By:	/s/ Frank Mancini
Name:	Frank Mancini
---	---
Title:	First Vice President
By:	/s/ Richard Miller
---	---
Name:	Richard Miller
---	---
Title:	Senior Vice President

Exhibit 31.1

CERTIFICATIONS

I, Selwyn Joffe, certify that:

I have reviewed this report on Form 10-Q of Motorcar Parts of America, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused, such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2023	/s/ Selwyn Joffe
	Selwyn Joffe
	Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, David Lee, certify that:

I have reviewed this report on Form 10-Q of Motorcar Parts of America, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2023	/s/ David Lee
	David Lee
	Chief Financial Officer

Exhibit 31.3

CERTIFICATIONS

I, Kamlesh Shah, certify that:

I have reviewed this report on Form 10-Q of Motorcar Parts of America, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2023	/s/ Kamlesh Shah
	Kamlesh Shah
	Chief Accounting Officer

Exhibit 32.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER AND CHIEF

ACCOUNTING OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Motorcar Parts of America, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Selwyn Joffe, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1.	The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2.	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
---	---
/s/ Selwyn Joffe
---
Selwyn Joffe
Chief Executive Officer
February 9, 2023

In connection with the Quarterly Report of Motorcar Parts of America, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, David Lee, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1.	The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2.	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
---	---
/s/ David Lee
---
David Lee
Chief Financial Officer
February 9, 2023

In connection with the Quarterly Report of Motorcar Parts of America, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Quarterly Report”), I, Kamlesh Shah, Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

1.	The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
2.	The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
---	---
/s/ Kamlesh Shah
---
Kamlesh Shah
Chief Accounting Officer
February 9, 2023

The foregoing certifications are being furnished to the Securities and Exchange Commission as part of the accompanying report on Form 10-Q. A signed original of each of these statements has been provided to Motorcar Parts of America, Inc. and will be retained by Motorcar Parts of America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

10-Q

MOTORCAR PARTS OF AMERICA, INC.

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PART I — FINANCIAL INFORMATION

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15. Share-based Payments

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Restricted Stock Units and Restricted Stock Awards (collectively

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Warranty Returns

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Net Sales. Our net sales for the three months ended December 31, 2022 were $151,819,000, which represents a decrease of $9,991,000, or 6.2%, from the three months ended December 31, 2021 of $161,810,000.

Gross Profit. Our gross profit was $20,993,000, or 13.8% of net sales, for the three months ended December 31, 2022 compared with $32,575,000, or 20.1% of net sales, for the

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General and Administrative. Our general and administrative expenses for the three months ended December 31, 2022 were $13,599,000, which represents a decrease of $1,006,000, or 6.9%, from the three months

Sales and Marketing. Our sales and marketing expenses for the three months ended December 31, 2022 were $5,634,000, which represents a decrease of $640,000, or 10.2%, from the three months ended December

Research and Development. Our research and development expenses for the three months ended December 31, 2022 were $2,547,000, which represents a decrease of $88,000, or 3.3%, from the three months ended

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts for the three months ended December 31, 2022 was a non-cash gain

Interest Expense, net. Our interest expense for the three months ended December 31, 2022 was $11,471,000, which represents an increase of $7,522,000, or 190.5%, from interest

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Income Tax. We recorded an income tax benefit of $8,971,000, or an effective tax rate of 112.9%, and income tax expense of $1,588,000, or an effective tax rate of 33.6%, for the

Net Sales. Our net sales for the nine months ended December 31, 2022 were $488,347,000, which represents an increase of $1,955,000, or 0.4%, from the nine months ended December 31, 2021 of $486,392,000,

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Gross Profit. Our gross profit was $77,811,000, or 15.9% of net sales, for the nine months ended December 31, 2022 compared with $92,097,000, or 18.9% of net sales, for the nine

General and Administrative. Our general and administrative expenses for the nine months ended December 31, 2022 were $42,079,000, which represents an increase of $523,000, or 1.3%, from the nine months

Sales and Marketing. Our sales and marketing expenses for the nine months ended December 31, 2022 were $17,242,000, which represents an increase of $80,000, or 0.5%, from the nine months ended December

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Research and Development. Our research and development expenses for the nine months ended December 31, 2022 were $8,330,000, which represents an increase of $699,000, or 9.2%, from the nine months ended

Foreign Exchange Impact of Lease Liabilities and Forward Contracts. Our foreign exchange impact of lease liabilities and forward contracts for the nine months ended December 31, 2022 was a non-cash gain

Interest Expense, net. Our interest expense for the nine months ended December 31, 2022 was $27,675,000, which represents an increase of $16,165,000, or 140.4%, from interest

Income Tax. We recorded an income tax benefit of $9,296,000, or an effective tax rate of 62.1%, and income tax expense of $4,786,000, or an effective tax rate of 38.4%, for the

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