UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form ~~10-Q~~10-Q/A

(Mark One)


[			☒			]			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2021


[			☐			]			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to

Commission file number 0-21513

DXP Enterprises, Inc.

(Exact name of registrant as specified in its charter)


Texas						76-0509661
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

5301 Hollister, Houston, Texas 77040

(Address of principal executive offices, including zip code)

(713) 996-4700


(Registrant's telephone number, including area code)

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


Title of Each Class	Trading Symbol	Name of Exchange on which Registered
Common Stock par value $0.01	DXPE	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 [X] 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [X] 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 Exchange Act). Yes [☐] No [X]

Number of shares of registrant's Common Stock outstanding as of April 30, 2021: 19,206,923 par value $0.01 per share.

EXPLANATORY NOTE

DXP Enterprises, Inc. (collectively with its subsidiaries, the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (this “Form 10-Q/A” or this “report”) to amend its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on May 10, 2021 (the “Original Report”). The Company is filing this Form 10-Q/A to correct the untimely clearing of unvouchered purchase order discrepancies arising from our three-way matching process and the recognition of true-up consideration in business combination accounting. The Company is restating its consolidated balance sheets as of December 31, 2020 and March 31, 2021, and condensed consolidated statements of operations and comprehensive income, cash flows, and equity for the quarters ended March 31, 2021 and 2020.

In addition, the Company's consolidated financial statements for the periods covered in the Original Report have also been restated to correct certain immaterial adjustments. These adjustments primarily reflect proper cut-off for direct ship sales to customers and credit card payments, adjustments for inventory obsolescence reserves. The impacts of the restatement on our Condensed Statements of Income and Balance Sheets are detailed in Note 4 to the Notes to the Consolidated Financial Statements.

The Company filed Amendment No. 1 on Form 10-K/A (“Form 10-K/A”) to amend its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 18, 2021 (“2020 Form 10-K”). This Form 10-Q/A should be read in conjunction with the Form 10-K/A, as filed with the SEC on October 22, 2021. The historical periods presented in this Form 10-Q/A reflect adjustments to the information presented in the Company’s previously-filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, the Form 10-K and the Original Report.

The Company is also revising its disclosures in Part I, Item 2, “Management's Discussion and Analysis of Financial Condition and Results of Operations” to reflect corresponding changes and its disclosures in Part II, Item 4, “Controls and Procedures” to discuss the material weakness in internal controls that resulted in filing this Form 10-Q/A. This Form 10-Q/A includes new certifications from the Company’s Chief Executive Officer and Chief Financial Officer dated as of the date of the filing of this Form 10-Q/A, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

Except as described above, no other information included in the Original Report is being amended or updated by this Amendment No. 1 on Form 10-Q/A and this Amendment No. 1 on Form 10-Q/A does not purport to reflect any information or events subsequent to the Original Report, nor does it modify or update any disclosures that may have been affected by events occurring subsequent to, the date of the filing of the Original Report.

DXP ENTERPRISES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

DESCRIPTION


Item		Page
PART I: FINANCIAL INFORMATION
	ITEM 1. Financial Statements	34
	a) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Restated)	34
	b) Unaudited Condensed Consolidated Balance Sheets (Restated)	45
	c) Unaudited Condensed Consolidated Statements of Cash Flows (Restated)	56
	d) Unaudited Condensed Consolidated Statements of Equity (Restated)	67
	e) Notes to Unaudited Condensed Consolidated Financial Statements (Restated)	67
	ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1217
	ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	1722
	ITEM 4. Controls and Procedures	1923

PART II: OTHER INFORMATION		2024
	ITEM 1. Legal Proceedings	2024
	ITEM 1A. Risk Factors	2024
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	2024
	ITEM 3. Default upon Senior Securities	2024
	ITEM 4. Mine Safety Disclosures	2024
	ITEM 5. Other Information	2024
	ITEM 6. Exhibits	2125
	Signatures	2226

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share amounts) (unaudited)


								Three Months Ended March 31,
		Three Months Ended March 31,				2021		2020
		2021		2020				(Restated)		(Restated)
Sales	Sales	$	245,616	$	300,983		Sales	$	245,587	$	300,983
Cost of sales	Cost of sales	174,007		216,998			Cost of sales	173,957		217,869
Gross profit	Gross profit	71,609		83,985			Gross profit	71,630		83,114
Selling, general and administrative expenses	Selling, general and administrative expenses	65,397		73,070			Selling, general and administrative expenses	65,397		71,795
Income from operations	Income from operations	6,212		10,915			Income from operations	6,233		11,319
Other income	Other income	(430)		(834)			Other income	(430)		(834)
Interest expense	Interest expense	5,243		4,377			Interest expense	5,243		4,377
Income before income taxes	Income before income taxes	1,399		7,372			Income before income taxes	1,420		7,776
Provision for income taxes	Provision for income taxes	1,271		1,724			Provision for income taxes	1,261		1,786
Net income	Net income	128		5,648			Net income	159		5,990
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	(212)		(62)			Net loss attributable to noncontrolling interest	(212)		(62)
Net income attributable to DXP Enterprises, Inc.	Net income attributable to DXP Enterprises, Inc.	340		5,710			Net income attributable to DXP Enterprises, Inc.	371		6,052
Preferred stock dividend	Preferred stock dividend	23		23			Preferred stock dividend	23		23
Net income attributable to common shareholders	Net income attributable to common shareholders	$	317	$	5,687		Net income attributable to common shareholders	$	348	$	6,029

Net income	Net income	$	128	$	5,648		Net income	$	159	$	5,990
Currency translation adjustments	Currency translation adjustments	5,106		(1,163)			Currency translation adjustments	1,277		(1,163)
Comprehensive income	Comprehensive income	$	5,234	$	4,485		Comprehensive income	$	1,436	$	4,827

Earnings per share (Note 9) :
Earnings per share (Note 10) :							Earnings per share (Note 10) :
Basic	Basic	$	0.02	$	0.32		Basic	$	0.02	$	0.34
Diluted	Diluted	$	0.02	$	0.31		Diluted	$	0.02	$	0.32
Weighted average common shares outstanding :	Weighted average common shares outstanding :						Weighted average common shares outstanding :
Basic	Basic	19,186		17,713			Basic	19,186		17,713
Diluted	Diluted	20,026		18,553			Diluted	20,026		18,553

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) (unaudited)

March 31, 2021 December 31, 2020
ASSETS
Current assets:
Cash $ 127,361 $ 117,353
Restricted cash 91 91
Accounts Receivable, net of allowance of $8,441 and $8,929 168,003 163,429
Inventories 103,407 97,071
Costs and estimated profits in excess of billings 14,415 18,459
Prepaid expenses and other current assets 7,534 4,548
Federal income taxes receivable 5,773 5,632
Total current assets 426,584 406,583
Property and equipment, net 54,110 56,899
Goodwill 248,499 248,339
Other intangible assets, net 76,008 80,088
Operating lease ROU assets 59,949 55,188
Other long-term assets 4,332 4,764
Total assets $ 869,482 $ 851,861
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $ 3,300 $ 3,300
Trade accounts payable 81,595 75,744
Accrued wages and benefits 19,179 20,621
Customer advances 3,967 3,688
Billings in excess of costs and estimated profits 5,950 4,061
Short-term operating lease liabilities 17,590 15,891
Other current liabilities 21,775 20,834
Total current liabilities 153,356 144,139
Long-term debt, net of unamortized debt issuance costs 316,741 317,139
Long-term operating lease liabilities 41,267 38,010
Other long-term liabilities 2,930 2,930
Deferred income taxes 2,248 1,777
Total long-term liabilities 363,186 359,856
Total liabilities 516,542 503,995
Commitments and contingencies (Note 10)
0 0
Shareholders' Equity:
Series A and B preferred stock, $1.00 par value each; 1,000,000 shares authorized each 16 16
Common stock, $0.01 par value, 100,000,000 shares authorized; 19,200,923 and 19,208,067 outstanding 189 189
Additional paid-in capital 191,931 192,068
Retained earnings 176,954 176,637
Accumulated other comprehensive loss (16,736) (21,842)
Total DXP Enterprises, Inc. Equity 352,354 347,068
Noncontrolling interest 586 798
Total Equity 352,940 347,866
Total liabilities and Equity $ 869,482 $ 851,861

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

~~DXP ENTERPRISES, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands) (unaudited)~~

Three Months Ended March 31,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to DXP Enterprises, Inc. $ 340 $ 5,710
Less: net loss attributable to non-controlling interest (212) (62)
Net income 128 5,648
Reconciliation of net income to net cash provided (used in) by operating activities:
Depreciation 2,480 2,828
Amortization of intangible assets 4,146 3,197
Gain on sale of property and equipment (246) 0
Provision for credit losses (682) 28
Fair value adjustment on contingent consideration 0 13
Amortization of debt issuance costs 427 468
Stock compensation expense 380 904
Deferred income taxes 459 928
Changes in operating assets and liabilities:
      Trade accounts receivable (2,245) (5,183)
      Costs and estimated profits in excess of billings 4,052 (3,381)
      Inventories (6,310) (2,215)
      Prepaid expenses and other assets (7,293) (1,933)
      Trade accounts payable and accrued expenses 10,115 6,048
      Billings in excess of costs and estimated profits 1,884 (7,327)
      Other long-term liabilities 3,257 (1,635)
Net cash provided by (used in) operating activities $ 10,552 $ (1,612)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (680) (3,235)
Proceeds from the sale of property and equipment 1,297 0
Acquisition of business, net of cash acquired 0 (14,153)
Net cash provided by (used in) investing activities $ 617 $ (17,388)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal debt payments (825) (625)
Dividends paid (23) (23)
Payment for employee taxes withheld from stock awards (517) (94)
Net cash used in financing activities $ (1,365) $ (742)
Effect of foreign currency on cash 204 (1,730)
Net change in cash and restricted cash 10,008 (21,472)
Cash and restricted cash at beginning of period 117,444 54,326
Cash and restricted cash at end of period $ 127,452 $ 32,854



	March 31, 2021		December 31, 2020
	(Restated)		(Restated)
ASSETS
Current assets:
Cash	$	127,361	$	119,328
Restricted cash	91		91
Accounts Receivable, net of allowance of $8,441 and $8,628	169,632		166,941
Inventories	103,407		97,071
Costs and estimated profits in excess of billings	14,415		18,459
Prepaid expenses and other current assets	7,534		4,548
Federal income taxes receivable	3,234		2,987
Total current assets	425,674		409,425
Property and equipment, net	54,110		56,899
Goodwill	261,927		261,767
Other intangible assets, net	76,008		80,088
Operating lease ROU assets	59,949		55,188
Other long-term assets	4,332		4,764
Total assets	$	882,000	$	868,131
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	3,300	$	3,300
Trade accounts payable	70,650		64,849
Accrued wages and benefits	19,179		20,621
Customer advances	3,967		3,688
Billings in excess of costs and estimated profits	5,950		4,061
Short-term operating lease liabilities	17,590		15,891
Other current liabilities	35,645		34,729
Total current liabilities	156,281		147,139
Long-term debt, net of unamortized debt issuance costs	316,741		317,139
Long-term operating lease liabilities	41,267		38,010
Other long-term liabilities	2,930		2,930
Deferred income taxes	2,369		1,777
Total long-term liabilities	363,307		359,856
Total liabilities	519,588		506,995
Commitments and contingencies (Note 11)	0		0
Shareholders' Equity:
Series A and B preferred stock, $1.00 par value each; 1,000,000 shares authorized each	16		16
Common stock, $0.01 par value, 100,000,000 shares authorized; 19,200,923 and 19,208,067 outstanding	189		189
Additional paid-in capital	191,931		192,068
Retained earnings	186,426		186,078
Accumulated other comprehensive loss	(16,736)		(18,013)
Total DXP Enterprises, Inc. Equity	361,826		360,338
Noncontrolling interest	586		798
Total Equity	362,412		361,136
Total liabilities and Equity	$	882,000	$	868,131

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)


	Three Months Ended March 31,
	2021		2020
	(Restated)		(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income attributable to DXP Enterprises, Inc.	$	371	$	6,052
Less: net loss attributable to non-controlling interest	(212)		(62)
Net income	159		5,990
Reconciliation of net income to net cash provided (used in) by operating activities:
Depreciation	2,480		2,828
Amortization of intangible assets	4,146		3,197
Gain on sale of property and equipment	(246)		—
Provision for credit losses	(682)		28
Fair value adjustment on contingent consideration	—		13
Amortization of debt issuance costs	427		468
Stock compensation expense	380		904
Deferred income taxes	580		941
Changes in operating assets and liabilities:
Trade accounts receivable	(4,191)		(5,183)
Costs and estimated profits in excess of billings	4,052		(3,381)
Inventories	(6,310)		(849)
Prepaid expenses and other assets	(7,293)		(1,205)
Trade accounts payable and accrued expenses	9,934		3,599
Billings in excess of costs and estimated profits	1,884		(7,327)
Other long-term liabilities	3,257		(1,635)
Net cash provided by (used in) operating activities	$	8,577	$	(1,612)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(680)		(3,235)
Proceeds from the sale of property and equipment	1,297		—
Acquisition of business, net of cash acquired	—		(14,153)
Net cash provided by (used in) investing activities	$	617	$	(17,388)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal debt payments	(825)		(625)
Dividends paid	(23)		(23)
Payment for employee taxes withheld from stock awards	(517)		(94)
Net cash used in financing activities	$	(1,365)	$	(742)
Effect of foreign currency on cash	204		(1,730)
Net change in cash and restricted cash	8,033		(21,472)
Cash and restricted cash at beginning of period	119,419		54,326
Cash and restricted cash at end of period	$	127,452	$	32,854

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands) (unaudited)


		Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Non controlling interest		Accum other comp loss		Total equity			Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Non controlling interest		Accum other comp loss		Total equity
Balance at December 31, 2019		$	1	$	15	$	174	$	157,886	$	205,680	$	1,146	$	(19,954)	$	344,948
Balance at December 31, 2019 (Restated)																		Balance at December 31, 2019 (Restated)	$	1	$	15	$	174	$	157,886	$	215,664	$	1,146	$	(19,954)	$	354,932
Preferred dividends paid	Preferred dividends paid	—		—		—		—		(23)		—		—		(23)		Preferred dividends paid	—		—		—		—		(23)		—		—		(23)
Compensation expense for restricted stock	Compensation expense for restricted stock	—		—		—		904		—		—		—		904		Compensation expense for restricted stock	—		—		—		904		—		—		—		904
Tax related items for share based awards	Tax related items for share based awards	—		—		—		(94)		—		—		—		(94)		Tax related items for share based awards	—		—		—		(94)		—		—		—		(94)
Issuance of shares of common stock	Issuance of shares of common stock	—		—		1		1,999		—		—		—		2,000		Issuance of shares of common stock	—		—		1		1,999		—		—		—		2,000
Currency translation adjustment	Currency translation adjustment	—		—		—		—		—		—		(1,163)		(1,163)		Currency translation adjustment	—		—		—		—		—		—		(1,163)		(1,163)
Net income	Net income	—		—		—		—		5,710		(62)		—		5,648		Net income	—		—		—		—		6,052		(62)		—		5,990
Balance at March 31, 2020		$	1	$	15	$	175	$	160,695	$	211,367	$	1,084	$	(21,117)	$	352,220
Balance at March 31, 2020 (Restated)																		Balance at March 31, 2020 (Restated)	$	1	$	15	$	175	$	160,695	$	221,693	$	1,084	$	(21,117)	$	362,546


		Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Non controlling interest		Accum other comp loss		Total equity			Series A preferred stock		Series B preferred stock		Common stock		Paid-in capital		Retained earnings		Non controlling interest		Accum other comp loss		Total equity
Balance at December 31, 2020		$	1	$	15	$	189	$	192,068	$	176,637	$	798	$	(21,842)	$	347,866
Balance at December 31, 2020 (Restated)																		Balance at December 31, 2020 (Restated)	$	1	$	15	$	189	$	192,068	$	186,078	$	798	$	(18,013)	$	361,136
Preferred dividends paid	Preferred dividends paid	—		—		—		—		(23)		—		—		(23)		Preferred dividends paid	—		—		—		—		(23)		—		—		(23)
Compensation expense for restricted stock	Compensation expense for restricted stock	—		—		—		380		—		—		—		380		Compensation expense for restricted stock	—		—		—		380		—		—		—		380
Tax related items for share based awards	Tax related items for share based awards	—		—		—		(517)		—		—		—		(517)		Tax related items for share based awards	—		—		—		(517)		—		—		—		(517)
Currency translation adjustment	Currency translation adjustment	—		—		—		—		0		—		5,106		5,106		Currency translation adjustment	—		—		—		—		—		—		1,277		1,277
Net income	Net income	—		—		—		—		340		(212)		—		128		Net income	—		—		—		—		371		(212)		—		159
Balance at March 31, 2021		$	1	$	15	$	189	$	191,931	$	176,954	$	586	$	(16,736)	$	352,940
Balance at March 31, 2021 (Restated)																		Balance at March 31, 2021 (Restated)	$	1	$	15	$	189	$	191,931	$	186,426	$	586	$	(16,736)	$	362,412

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

DXP ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY

DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") was incorporated in Texas on July 26, 1996. DXP Enterprises, Inc. and its subsidiaries are engaged in the business of distributing maintenance, repair and operating ("MRO") products and service to a variety of end markets and industrial customers. Additionally, DXP provides integrated, custom pump skid packages, pump remanufacturing and manufactures branded private label pumps to energy and industrial customers. The Company is organized into 3 business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). See Note 1112 - Segment Reporting for discussion of the business segments.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES

Basis of Presentation

The Company's financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited condensed consolidated financial statements have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, 2020. For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated Annual Report on Form ~~10-K~~10-K/A filed with the Securities and Exchange Commission on ~~March 18,~~October 22, 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of results expected for the full fiscal year. In the opinion of management, these condensed consolidated financial statements contain all adjustments necessary to present fairly the Company's condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2021 and March 31, 2020, condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, condensed consolidated statements of cash flows for the three months ended March 31, 2021 and March 31, 2020, and condensed consolidated statement of equity for the three months ended March 31, 2021 and March 31, 2020. All such adjustments represent normal recurring items.

All inter-company accounts and transactions have been eliminated upon consolidation.

NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the potential impact of this ASU on the financial statements.

All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

NOTE 4 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

As previously reported, the Company restated its consolidated balance sheets as of December 31, 2020 and 2019, and consolidated statements of earnings, cash flows, and comprehensive income and retained earnings for the years ended December 31, 2020, 2019 and 2018. The restatement also affected periods prior to 2018. The impact of the restatement on such prior periods was reflected as a n adjustment to retained earnings as of January 1, 2018. In addition, the restatement impacts the first, second and third quarters of 2020 and the first quarter of 2021. The restated amounts for the comparable interim period in 2020 are presented below. The restatement corrects errors resulting from the failure to timely clear aged payables resulting from the Company's three-way match process discrepancies, the recognition of additional consideration related to a business combination, as well as certain additional adjustments that the Company has determined to be immaterial, both individually and in aggregate. Set forth below are the restatement adjustments included in the restatement of the previously issued financial statements for the year ended December 31, 2020, and the quarters ended March 31, 2020 and March 31, 2021, each of which is an “error” within the meaning of ASC Topic 250: Accounting Changes and Error Corrections.

The following tables presents the impact of the restatement adjustments described below on net income and comprehensive income for the quarter ended March 31, 2021 and 2020:


	For the Three Months Ended March 31, 2021						For the Three Months Ended March 31, 2020
	As previously reported						As previously reported
			Adjustments		As restated				Adjustments		As restated
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Sales	$	245,616	$	(29)	$	245,587	$	300,983	$	—	$	300,983
Cost of sales	174,007		(50)		173,957		216,998		871		217,869
Gross profit	71,609		21		71,630		83,985		(871)		83,114
Selling, general and administrative costs	65,397		—		65,397		73,070		(1,275)		71,795
Income before income taxes	1,399		21		1,420		7,372		404		7,776
Provision for income taxes	1,271		(10)		1,261		1,724		62		1,786
Net income	$	128	$	31	$	159	$	5,648	$	342	$	5,990

Basic earnings per share	$	0.02	$	—	$	0.02	$	0.32	$	0.02	$	0.34

Diluted earnings per share	$	0.02	$	—	$	0.02	$	0.31	$	0.01	$	0.32


	For the Three Months Ended March 31, 2021			For the Three Months Ended March 31, 2020
	As previously reported			As previously reported
		Adjustments	As restated		Adjustments	As restated
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net income	128	31	159	5,648	342	5,990
Total comprehensive income	5,234	(3,798)	1,436	4,485	342	4,827

Adjustments to Net Sales and Related Adjustments to Cost of Products Sold

Unvouchered Purchase Orders The Company determined it had aged unvouchered purchase orders included in trade accounts payable.After lengthy investigation and research, DXP determined that these balances were not valid legal obligations to vendors and will not be invoiced or paid.As a result, the Company wrote off the aged balances that no longer represented legal obligations, resulting in a net reduction in accounts payable.

Landed cost inventory adjustment The Company determined that cost mark-ups for landed costs for certain inventory items related to our private label pumps had not been properly relieved upon the sale of these items.

Direct shipment cut off adjustment Direct shipment orders placed near period end may not be properly reflected in the correct period. The Company adjusted sales and cost of goods sold for items recorded in the incorrect period, as well as accounts receivable and payable.

Other Adjustments to Earnings from Continuing Operations Before Non-Controlling Interest and Income Taxes

Cut-off for credit card payment accruals In January 2020, the Company recorded its monthly payment for its P-Card credit card program, however, the charges were incurred in December 2019.This adjustment reflects the accrual in the correct period, resulting in a shift in other current liabilities between periods.

Sales tax payable accruals The Company increased other current liabilities for its accrual for state sales tax obligations stemming from open audits.

Adjustments to Provision for Income Taxes

The adjustments reflected for the provision for income taxes are the tax consequences of the above listed corrections.

Balance sheet adjustments related to purchase accounting and consolidation

On December 31, 2020, DXP closed on the acquisition of 4 businesses.The owners of 2 of the targets were eligible for true-up consideration based upon the closing financial results of calendar year 2020. This true-up consideration was paid in July 2021; however, the amount of true-up consideration was deemed to have been accrued as of the closing of the acquisitions. Therefore this adjustment resulted in an accrual for the true-up consideration and an increase in goodwill of $13.4 million.

As described above, the unvouchered purchase order discrepancies resulted in a reduction of accounts payable in the amount of $12.2 million as of December 31, 2020 and March 31, 2021.

During the consolidation of the 4 acquisitions closed on December 31, 2020, the Company improperly reflected the cash on hand at the targets as an increase in cumulative translation adjustment and other comprehensive income for approximately $2 million. This reclassification adjustment properly records the increase in cash and restricted cash upon closing.In addition, cumulative translation adjustment was also reduced by $1.8 million as a result of a reclassification associated with trade accounts receivable.

The following table presents the impact of the restatement adjustments on the Company’s previously reported balance sheets as of December 31, 2020 and March 31, 2021 on a condensed basis:



BALANCE SHEET (AT DECEMBER 31, 2020):	As Reported		Adjustments		As restated
Cash and restricted cash	$	117,444	$	1,975	$	119,419
Accounts Receivable	163,429		3,512		166,941
Federal income taxes receivable	5,632		(2,645)		2,987
Goodwill	248,339		13,428		261,767
Total Assets	$	851,861	$	16,270	$	868,131

Accounts Payable	$	75,744	$	(10,895)	$	64,849
Other current liabilities	20,834		13,895		34,729
Deferred Taxes	1,777		—		1,777
Total Liabilities	$	503,995	$	3,000	$	506,995
					—
Accumulated other comprehensive loss	$	(21,842)	$	3,829	$	(18,013)
Retained Earnings	176,637		9,441		186,078
Equity	347,866		13,270		361,136
Total Liabilities & Equity	$	851,861	$	16,270	$	868,131


	As
BALANCE SHEET (AT MARCH 31, 2021):	Reported		Adjustments		As restated
Cash and restricted cash	$	127,452	$	—	$	127,452
Accounts Receivable	168,003		1,629		169,632
Federal income taxes receivable	5,773		(2,539)		3,234
Goodwill	248,499		13,428		261,927
Total Assets	$	869,482	$	12,518	$	882,000

Accounts Payable	$	81,595	$	(10,945)	$	70,650
Other current liabilities	21,775		13,870		35,645
Deferred Taxes	2,248		121		2,369
Total Liabilities	$	516,542	$	3,046	$	519,588

Accumulated other comprehensive loss	$	(16,736)	0		$	(16,736)
Retained Earnings	176,954		9,472		186,426
Equity	352,940		9,472		362,412
Total Liabilities & Equity	$	869,482	$	12,518	$	882,000

The table below presents the impact to Operating Cash Flows on a Condensed Basis as a result of the restatement for the periods ended March 31, 2021 and 2020:


	For the Three Months Ended March 31, 2021						For the Three Months Ended March 31, 2020
	As previously reported						As previously reported
			Adjustments		As restated				Adjustments		As restated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Net income	$	128	$	31	$	159	$	5,648	$	342	$	5,990
Reconciliation of net income to net cash provided (used in) by operating activities:
Deferred income taxes	459		121		580		928		13		941
Changes in operating assets and liabilities	3,460		(2,127)		1,333		(15,626)		(355)		(15,981)
Net cash provided by (used in) operating activities	$	10,552	$	(1,975)	$	8,577	$	(1,612)	$	—	$	(1,612)

NOTE 5 - LEASES

The Company frequently utilizes operating leases for buildings, vehicles, machinery and equipment. For more information on lease accounting, see Note 4 - Lease to the consolidated financial statements of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Supplemental cash flow information related to leases was as follows (in thousands):


	Three Months Ended March 31,		Three Months Ended March 31,
Lease	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,058	$	4,672
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	10,126		4,326

Supplemental balance sheet information related to leases was as follows (in thousand):


Lease	Lease	Classification	March 31, 2021		March 31, 2020		Lease	Classification	March 31, 2021		December 31, 2020
Assets	Assets						Assets
Operating	Operating	Operating lease right-of-use assets	$	59,949	$	65,268	Operating	Operating lease right-of-use assets	$	59,949	$	55,188

Liabilities	Liabilities						Liabilities
Current operating	Current operating	Short-term operating lease liabilities	17,590		15,926		Current operating	Short-term operating lease liabilities	17,590		15,891
Non-current operating	Non-current operating	Long-term operating lease liabilities	41,267		47,480		Non-current operating	Long-term operating lease liabilities	41,267		38,010
Total operating lease liabilities	Total operating lease liabilities		$	58,857	$	63,406	Total operating lease liabilities		$	58,857	$	53,901

During the three months ended March 31, 2021, the Company paid $0.5 million in current and future lease obligations to entities invested in by the Company’s Chief Executive Officer.

NOTE 56 – INVENTORIES

The carrying values of inventories are as follows (in thousands):


	March 31, 2021		December 31, 2020
Finished goods	$	103,560	$	105,527
Work in process	24,699		17,021
Obsolescence reserve	(24,852)		(25,477)
Inventories	$	103,407	$	97,071

NOTE 67 – COSTS AND ESTIMATED PROFITS ON UNCOMPLETED CONTRACTS

Under our customized pump production contracts in our IPS segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of a contract. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contract assets are presented as “Cost and estimated profits in excess of billings” on our condensed consolidated balance sheets. However, we sometimes receive advances or deposits from our customers before revenue is recognized, resulting in contract liabilities that are presented as “Billings in excess of costs and estimated profits” on our condensed consolidated balance sheets.

Costs and estimated profits on uncompleted contracts and related amounts billed were as follows (in thousands):


	March 31, 2021		December 31, 2020
Costs incurred on uncompleted contracts	$	29,426	$	36,969
Estimated profits, thereon	5,259		6,711
Total	34,685		43,680
Less: billings to date	26,217		29,315
Net	$	8,468	$	14,365

Such amounts were included in the accompanying condensed Consolidated Balance Sheets for March 31, 2021 and December 31, 2020 under the following captions (in thousands):


	March 31, 2021		December 31, 2020
Costs and estimated profits in excess of billings	$	14,415	$	18,459
Billings in excess of costs and estimated profits	(5,950)		(4,061)
Translation adjustment	3		(33)
Net	$	8,468	$	14,365

During the three months ended March 31, 2021, $0.9 million of the balances that were previously classified as contract liabilities at the beginning of the period shipped. Contract assets and liability changes were primarily due to normal activity and timing differences between our performance and customer payments.

NOTE 78 – INCOME TAXES

Our effective tax rate from continuing operations was ~~a tax expense of 90.9~~88.8 percent for the three months ended March 31, 2021 compared to ~~a tax expense of~~ 23.3 percent for the three months ended March 31, 2020. Compared to the U.S. statutory rate for the three months ended March 31, 2021, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded due to tax authorities’ aggressive auditing of research and development tax credits. The effective tax was decreased by research and development tax credits and other credits. Compared to the U.S. statutory rate for the three months ended March 31, 2020, the effective tax rate was increased by state taxes, foreign taxes, and nondeductible expenses and was partially offset by research and development tax credits, foreign tax credits, and other tax credits.

To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts would be classified as a component of income tax provision (benefit) in the financial statements consistent with the Company’s policy.

NOTE 89 – LONG-TERM DEBT

The components of the Company's long-term debt consisted of the following (in thousands):


		March 31, 2021				December 31, 2020					March 31, 2021				December 31, 2020
		Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value			Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
ABL Revolver	ABL Revolver	$	0	$	0	$	0	$	0	ABL Revolver	$	—	$	—	$	—	$	—
Term Loan B	Term Loan B	329,175		329,175		330,000		325,875		Term Loan B	329,175		329,175		330,000		325,875
Total long-term debt	Total long-term debt	329,175		329,175		330,000		325,875		Total long-term debt	329,175		329,175		330,000		325,875
Less: current portion	Less: current portion	(3,300)		(3,300)		(3,300)		(3,259)		Less: current portion	(3,300)		(3,300)		(3,300)		(3,259)
Long-term debt less current maturities	Long-term debt less current maturities	$	325,875	$	325,875	$	326,700	$	322,616	Long-term debt less current maturities	$	325,875	$	325,875	$	326,700	$	322,616

(1) Carrying value amounts do not include unamortized debt issuance costs of $9.1 million and $9.6 million for March 31, 2021 and December 31, 2020, respectively.

Credit Agreements

On March 17, 2020, the Company entered into an Increase Agreement (the "Increase Agreement") that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver") a $50.0 million increase above the $85.0 million original revolver. The Increase Agreement amends and supplements that certain Loan and Security Agreement, dated as of August 29,

2017. As of March 31, 2021, the Company had 0no amount outstanding under the ABL Revolver and had $131.2 million of borrowing capacity, net of the impact of outstanding letters of credit.

On December 23, 2020, DXP entered into a new seven year, $330 million Senior Secured Term Loan B (the “Term Loan B Agreement”), which replaced DXP’s previously existing Senior Secured Term Loan.

The fair value measurements used by the Company are considered Level 2 inputs, as defined in the fair value hierarchy. The fair value estimates were based on quoted prices for identical or similar securities.

The Company was in compliance with all financial covenants under the ABL Revolver and Term Loan B Agreements as of March 31, 2021.

NOTE 910 - EARNINGS PER SHARE DATA

Basic earnings per share is computed based on weighted average shares outstanding and excludes dilutive securities. Diluted earnings per share is computed including the impacts of all potentially dilutive securities.

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except per share data):

Three Months Ended March 31,
2021 2020
Basic:
Weighted average shares outstanding 19,186 17,713
Net income attributable to DXP Enterprises, Inc. $ 340 $ 5,710
Convertible preferred stock dividend 23 23
Net income attributable to common shareholders $ 317 $ 5,687
Per share amount $ 0.02 $ 0.32
Diluted:
Weighted average shares outstanding 19,186 17,713
Assumed conversion of convertible preferred stock 840 840
Total dilutive shares 20,026 18,553
Net income attributable to common shareholders $ 317 $ 5,687
Convertible preferred stock dividend 23 23
Net income attributable to DXP Enterprises, Inc. $ 340 $ 5,710
Per share amount $ 0.02 $ 0.31


	Three Months Ended March 31,
	2021		2020
	(Restated)		(Restated)
Basic:
Weighted average shares outstanding	19,186		17,713
Net income attributable to DXP Enterprises, Inc.	$	371	$	6,052
Convertible preferred stock dividend	23		23
Net income attributable to common shareholders	$	348	$	6,029
Per share amount	$	0.02	$	0.34

Diluted:
Weighted average shares outstanding	19,186		17,713
Assumed conversion of convertible preferred stock	840		840
Total dilutive shares	20,026		18,553
Net income attributable to common shareholders	$	348	$	6,029
Convertible preferred stock dividend	23		23
Net income attributable to DXP Enterprises, Inc.	$	371	$	6,052
Per share amount	$	0.02	$	0.32

NOTE 1011 - COMMITMENTS AND CONTINGENCIES

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. While DXP is unable to predict the outcome of these lawsuits, it believes that the ultimate resolution will not have, either individually or in the aggregate, a material adverse effect on DXP's consolidated financial position, cash flows, or results of operations.

NOTE 1112 - SEGMENT REPORTING

The Company's reportable business segments are: Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Service Centers segment is engaged in providing maintenance, MRO products, equipment and integrated services, including logistics capabilities, to industrial customers. The Service Centers segment provides a wide range of MRO products in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply, safety products and safety services categories. The Innovative Pumping Solutions segment fabricates and assembles custom-made pump packages,

re-manufactures pumps and manufactures branded private label pumps. The Supply Chain Services segment provides a wide range of MRO products and manages all or part of a customer's supply chain, including warehouse and inventory management.

The high degree of integration of the Company's operations necessitates the use of a substantial number of allocations and apportionments in the determination of business segment information. Sales are shown net of inter-segment eliminations.

The following table sets out financial information related to the Company's segments excluding amortization (in thousands):


																			Three Months Ended March 31,
		Three Months Ended March 31,																	2021								2020
		2021								2020									(Restated)								(Restated)
		SC		IPS		SCS		Total		SC		IPS		SCS		Total			SC		IPS		SCS		Total		SC		IPS		SCS		Total
Product sales1	Product sales1	$	165,371	$	0	$	31,777	$	197,148	$	169,795	$	0	$	44,152	$	213,947	Product sales1	$	165,342	$	—	$	31,777	$	197,119	$	169,795	$	—	$	44,152	$	213,947
Inventory services2	Inventory services2	0		0		4,196		$	4,196	0		0		4,225		$	4,225	Inventory services2	—		—		4,196		4,196		—		—		4,225		4,225
Staffing services3	Staffing services3	21,027		0		0		$	21,027	12,790		0		0		$	12,790	Staffing services3	21,027		—		—		21,027		12,790		—		—		12,790
Pump production4	Pump production4	0		23,245		0		$	23,245	0		70,021		0		$	70,021	Pump production4	—		23,245		—		23,245		—		70,021		—		70,021
Total Revenue	Total Revenue	$	186,398	$	23,245	$	35,973	$	245,616	$	182,585	$	70,021	$	48,377	$	300,983	Total Revenue	$	186,369	$	23,245	$	35,973	$	245,587	$	182,585	$	70,021	$	48,377	$	300,983
Income (loss) from operations	Income (loss) from operations	$	22,116	$	947	$	2,323	$	25,386	$	16,926	$	10,428	$	3,755	$	31,109	Income (loss) from operations	$	22,137	$	947	$	2,323	$	25,407	$	17,330	$	10,428	$	3,755	$	31,513

1Product sales that are recognized at a point in time.

2 Inventory management services that are recognized over the contract life.

3Staffing services that are invoiced on a day-rate basis.

4Custom pump production is recognized over time.

The following table presents reconciliations of operating income for reportable segments to the consolidated income before taxes (in thousands):


								Three Months Ended March 31,
		Three Months Ended March 31,				2021		2020
		2021		2020				(Restated)		(Restated)
Operating income for reportable segments	Operating income for reportable segments	$	25,386	$	31,109		Operating income for reportable segments	$	25,407	$	31,513
Adjustment for:	Adjustment for:						Adjustment for:
Amortization of intangible assets	Amortization of intangible assets	4,146		3,197			Amortization of intangible assets	4,146		3,197
Impairment and other charges	Impairment and other charges	0		0			Impairment and other charges	—		—
Corporate expenses	Corporate expenses	15,028		16,997			Corporate expenses	15,028		16,997
Income (loss) from operations	Income (loss) from operations	$	6,212	$	10,915		Income (loss) from operations	$	6,233	$	11,319
Interest expense	Interest expense	5,243		4,377			Interest expense	5,243		4,377
Other (income) expense, net	Other (income) expense, net	(430)		(834)			Other (income) expense, net	(430)		(834)
Income (loss) before income taxes	Income (loss) before income taxes	$	1,399	$	7,372		Income (loss) before income taxes	$	1,420	$	7,776

NOTE 1213 - SUBSEQUENT EVENTS

On April 30, 2021, the Company completed the acquisition of Carter & Verplanck, LLC (“CVI”), a distributor of products and services exclusively focused on serving the water and wastewater markets. The acquisition of CVI was funded with cash on hand as well as issuing DXP's common ~~stock.~~stock and is subject to normal transaction adjustments for a transaction of this size and nature, including working capital true-ups.

1116

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management discussion and analysis ("MD&A") of the financial condition and results of operations of DXP Enterprises, Inc. together with its subsidiaries (collectively "DXP," "Company," "us," "we," or "our") for the three months ended March 31, 2021 should be read in conjunction with our previous Annual Report on Form ~~10-K~~10-K/A and our Quarterly Reports on Form ~~10-Q,~~10-Q/A, and the consolidated financial statements and notes thereto included in such reports. The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP").

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form ~~10-Q~~10-Q/A (this "Report") contains statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include without limitation those about the Company’s expectations regarding the impact of the COVID-19 pandemic and the impact of low commodity prices of oil and gas; the Company’s business, the Company’s future profitability, cash flow, liquidity, and growth. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "estimates", "will", "should", "could", "would", "suspect", "potential", "current", "achieve", "plans" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. Any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and actual results may vary materially from those discussed in the forward-looking statements or historical performance as a result of various factors. These factors include the effectiveness of management's strategies and decisions, our ability to implement our internal growth and acquisition growth strategies, general economic and business conditions specific to our primary customers, changes in government regulations, our ability to effectively integrate businesses we may acquire, new or modified statutory or regulatory requirements, availability of materials and labor, inability to obtain or delay in obtaining government or third-party approvals and permits, non-performance by third parties of their contractual obligations, unforeseen hazards such as weather conditions, acts or war or terrorist acts and the governmental or military response thereto, cyber-attacks adversely affecting our operations, other geological, operating and economic considerations and declining prices and market conditions, including reduced oil and gas prices and supply or demand for maintenance, repair and operating products, equipment and service, decreases in oil and natural gas prices, decreases in oil and natural gas industry expenditure levels, which may result from decreased oil and natural gas prices or other factors, economic risks related to the impact of COVID-19, our ability to manage changes and the continued health or availability of management personnel, and our ability to obtain financing on favorable terms or amend our credit facilities as needed. This Report identifies other factors that could cause such differences. We cannot assure that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in "Risk Factors", in our Annual Report on Form ~~10-K~~10-K//A filed with the Securities and Exchange Commission on ~~March 18,~~October 22, 2021. We assume no obligation and do not intend to update these forward-looking statements. Unless the context otherwise requires, references in this Report to the "Company", "DXP", "we" or "our" shall mean DXP Enterprises, Inc., a Texas corporation, together with its subsidiaries.

CURRENT MARKET CONDITIONS AND OUTLOOK

General

The pandemic continued to have a significant impact on our business in the first quarter of 2021. The marketplace broadly, and the Company specifically, continued to operate with certain modifications to balance re-opening with employee and customer safety. However, most of the markets in which we operate continued to normalize in the quarter and re-open. This improved the outlook of the manufacturing and construction customers that support our traditional branch and onsite business. Although the rate of improvement remains gradual and the overall activity level remains below pre-pandemic levels, DXP is seeing a modest improvement from monthly lows experienced in July of 2020.

COVID-19 Pandemic Impact

The COVID-19 pandemic has impacted and is likely to continue impacting our businesses and operations as well as the operations of our customers and suppliers. From a customer perspective, business re-openings, production and related activity throughout the quarter varied based on geography, industry and regional COVID-19 pandemic conditions. The Company's major operational facilities and infrastructure (i.e., distribution centers, branches, and on-site logistic partners) are remaining operational with limited disruptions, while adhering to strict safety and social-distancing protocols. In addition, the Company has

prioritized maintaining all facilities safe for customers and employees to work and interact. Many of our employees, depending on local conditions and regulations, have returned to a work-from-office environment, and we expect that trend to continue in the near term.

To date, the Company has been able to absorb the pandemic impact with minimal workforce reductions or furloughs, which positions the Company for accelerated growth post-pandemic. The oil and gas industry continues to be impacted by the COVID-19 pandemic, but there are signs that the world is beginning to re-open and that overall economic and demand recovery is building. Demand for oil has increased globally as oil inventories were down in March 2021 near their five-year averages, and the Organization of Petroleum Exporting Countries and the expanded alliance, collectively known as OPEC+, actions continued to support commodity prices. We see these as positive signs for our businesses tied to capital budgets and oil markets in general.

As of the end of the first quarter of 2021, we have remained undrawn on our $135 million bank revolver; and it remains available for use in the event a need arises. In response to easing restrictions and the continued vaccination efforts, we continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and shareholders. While we are unable to determine or predict the nature, duration, or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity, or capital resources, we believe that we have remained nimble and are poised to remain opportunistic during the recovery.

1318

RESULTS OF OPERATIONS

(in thousands, except percentages and per share data)

DXP is organized into three business segments: Service Centers ("SC"), Supply Chain Services ("SCS") and Innovative Pumping Solutions ("IPS"). The Service Centers are engaged in providing maintenance, repair and operating ("MRO") products, equipment and integrated services, including technical expertise and logistics capabilities, to industrial customers with the ability to provide same day delivery. The Service Centers provide a wide range of MRO products and services in the rotating equipment, bearing, power transmission, hose, fluid power, metal working, industrial supply and safety product and service categories. The SCS segment provides a wide range of MRO products and manages all or part of our customer's supply chain function, and inventory management. The IPS segment fabricates and assembles integrated pump system packages custom made to customer specifications, remanufactures pumps and manufactures branded private label pumps.


											Three Months Ended March 31,
		Three Months Ended March 31,									2021		%		2020		%
		2021		%		2020		%			(Restated)				(Restated)
Sales	Sales	$	245,616	100.0	%	$	300,983	100.0	%	Sales	$	245,587	100.0	%	$	300,983	100.0	%
Cost of sales	Cost of sales	174,007		70.8	%	216,998		72.1	%	Cost of sales	173,957		70.8	%	217,869		72.4	%
Gross profit	Gross profit	$	71,609	29.2	%	$	83,985	27.9	%	Gross profit	$	71,630	29.2	%	$	83,114	27.6	%
Selling, general and administrative expenses	Selling, general and administrative expenses	65,397		26.6	%	73,070		24.3	%	Selling, general and administrative expenses	65,397		26.6	%	71,795		23.9	%
Impairment and other charges		—		—	%	—		—	%
Income (loss) from operations	Income (loss) from operations	$	6,212	2.5	%	$	10,915	3.6	%	Income (loss) from operations	$	6,233	2.5	%	$	11,319	3.8	%
Other (income) expense, net	Other (income) expense, net	(430)		(0.2)	%	(834)		(0.3)	%	Other (income) expense, net	(430)		(0.2)	%	(834)		(0.3)	%
Interest expense	Interest expense	5,243		2.1	%	4,377		1.5	%	Interest expense	5,243		2.1	%	4,377		1.5	%
Income (loss) before income taxes	Income (loss) before income taxes	$	1,399	0.6	%	$	7,372	2.4	%	Income (loss) before income taxes	$	1,420	0.6	%	$	7,776	2.6	%
Provision for income taxes (benefit)	Provision for income taxes (benefit)	1,271		0.5	%	1,724		0.6	%	Provision for income taxes (benefit)	1,261		0.5	%	1,786		0.6	%
Net income (loss)	Net income (loss)	$	128	0.1	%	$	5,648	1.8	%	Net income (loss)	$	159	0.1	%	$	5,990	2.0	%
Net income (loss) attributable to noncontrolling interest	Net income (loss) attributable to noncontrolling interest	(212)		—		(62)		—		Net income (loss) attributable to noncontrolling interest	(212)		(0.1)	%	(62)		—
Net income attributable to DXP Enterprises, Inc.	Net income attributable to DXP Enterprises, Inc.	$	340	0.1	%	$	5,710	1.8	%	Net income attributable to DXP Enterprises, Inc.	$	371	0.2	%	$	6,052	2.0	%
Per share amounts attributable to DXP Enterprises, Inc.	Per share amounts attributable to DXP Enterprises, Inc.									Per share amounts attributable to DXP Enterprises, Inc.
Basic earnings (loss) per share	Basic earnings (loss) per share	0.02				$	0.32			Basic earnings (loss) per share	0.02				$	0.34
Diluted earnings (loss) per share	Diluted earnings (loss) per share	0.02				$	0.31			Diluted earnings (loss) per share	0.02				$	0.32

Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020

SALES. Sales for the three months ended March 31, 2021 decreased $55.4 million, or 18.4%, to approximately $245.6 million from $301.0 million for the prior year's corresponding period. Sales from businesses acquired in December 2020 accounted for $28.4 million of the sales for the three months ended March 31, 2021. This overall sales decrease is the result of a decrease in sales in our IPS and SCS segments of $46.8 million and $12.4 million, partially offset by an increase in sales of $3.8 million in our SC segment. The fluctuations in sales are further explained in our business segment discussions below.

Three Months Ended March 31,
2021 2020 Change Change%
Sales by Business Segment (in thousands, except change%)
Service Centers $ 186,398 $ 182,585 $ 3,813 2.1 %
Innovative Pumping Solutions 23,245 70,021 (46,776) (66.8) %
Supply Chain Services 35,973 48,377 (12,404) (25.6) %
Total DXP Sales $ 245,616 $ 300,983 $ (55,367) (18.4) %


	Three Months Ended March 31,
	2021		2020		Change		Change%
	(Restated)		(Restated)
Sales by Business Segment	(in thousands, except change%)
Service Centers	$	186,369	$	182,585	$	3,784	2.1	%
Innovative Pumping Solutions	23,245		70,021		(46,776)		(66.8)	%
Supply Chain Services	35,973		48,377		(12,404)		(25.6)	%
Total DXP Sales	$	245,587	$	300,983	$	(55,396)	(18.4)	%

1419

Service Centers segment. Sales for the Service Centers segment increased by approximately $3.8 million, or 2.1% for the three months ended March 31, 2021 compared to the prior year's corresponding period. Excluding $28.4 million of first quarter 2021 Service Centers segment sales from businesses acquired in December 2020, Service Centers segment sales for the first quarter decreased $24.6 million, or 13.5% from the prior year's corresponding period. This sales decrease is primarily the result of decreased sales of metal working, safety supply products and bearings to customers engaged in the OEM oil and gas markets in connection with decreased capital spending by oil and gas producers as well as the negative economic impacts of the COVID-19 pandemic.

Innovative Pumping Solutions segment. Sales for the IPS segment decreased by $46.8 million, or 66.8% for the three months ended March 31, 2021 compared to the prior year's corresponding period. This decrease was primarily the result of a decrease in the capital spending by oil and gas producers and related businesses stemming from a decrease in U.S. crude oil production due to the negative economic impacts of the COVID-19 pandemic.

Supply Chain Services segment. Sales for the SCS segment decreased by $12.4 million, or 25.6%, for the three months ended March 31, 2021, compared to the prior year's corresponding period. The decline in sales is primarily related to decreased sales to customers in the aerospace and oil and gas industries due to the negative economic impacts of the COVID-19 pandemic.

GROSS PROFIT. Gross profit as a percentage of sales for the three months ended March 31, 2021 increased by approximately ~~125~~155 basis points from the prior year's corresponding period. Excluding the impact of the businesses acquired in December 2020, gross profit as a percentage of sales increased by approximately ~~105~~135 basis points. The increase in the gross profit percentage excluding the businesses acquired is primarily the result of an approximate 616 basis point increase in the gross profit percentage in our IPS segment, a 52102 basis point increase in the gross profit percentage in our SC segment and a 22 basis point increase in the gross profit percentage in our SCS segment.

Innovative Pumping Solutions segment. As a percentage of sales, the first quarter gross profit percentage for the IPS segment increased approximately 616 basis points from the prior year's corresponding period. The increase in gross profit percentage is due to a mix shift (higher margin international work and domestic water and wastewater projects) as well as the shipment of negative gross profit percentage work completing in 2020. Gross profit dollars decreased $12.1 million primarily as a result of a decrease in utilization as a result of significantly reduced capital expenditure budgets by our customers associated with the negative economic impacts of the COVID-19 pandemic.

Service Centers segment. As a percentage of sales, the first quarter gross profit percentage for the Service Centers increased approximately 71121 basis points and increased approximately 52102 basis points, adjusting for the businesses acquired, from the prior year's corresponding period. This was primarily as a result of sales mix and price increases from vendors. Gross profit for the Service Centers segment excluding businesses acquired decreased ~~$6.3~~$5.4 million, or ~~11.9%~~10.4%, during the first quarter of 2021 compared to the prior year’s corresponding period. The decrease in gross profit is primarily the result of the decline in sales due to the items discussed above.

Supply Chain Services segment. Gross profit as a percentage of sales for the SCS segment increased approximately 22 basis points compared to the prior year's corresponding period. Gross profit for the first quarter of 2020 decreased $2.7 million or 24.9% compared to the prior year's corresponding period, primarily the result of the decline in sales due to the items discussed above.

SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). Selling, general and administrative expense for the three months ended March 31, 2021 decreased by approximately ~~$7.7~~$6.4 million, or ~~10.5%~~8.9%, to $65.4 million from ~~$73.1~~$71.8 million for the prior year's corresponding period. Selling, general and administrative expense from businesses acquired accounted for $4.9 million. Excluding expenses from businesses acquired in December 2020, SG&A for the quarter decreased by ~~$12.6~~$11.3 million, or ~~17.2%~~15.7%. The overall decrease in SG&A is primarily the result of decreased payroll, incentive compensation and related taxes and 401(k) expenses as a result of decreased business activity and cost reduction actions associated with the COVID-19 pandemic and depressed demand in oil and gas markets.

OPERATING INCOME. Operating income for the first quarter of 2021 decreased by ~~$4.7~~$5.1 million to $6.2 million, from ~~$10.9~~$11.3 million in the prior year's corresponding period. This decrease in operating income is primarily related to the above mentioned decrease in sales.

INTEREST EXPENSE. Interest expense for the first quarter of 2021 increased $0.9 million compared with the prior year's corresponding period primarily due to a higher principal balance for the three months ended March 31, 2021 compared to the

prior year's corresponding period as a result of the Company entering into a new term loan in December 2020 partially offset by lower LIBOR rates for the three months ended March 31, 2021.

INCOME TAXES. Our effective tax rate from continuing operations was ~~a tax expense of 90.9~~88.8 percent for the three months ended March 31, 2021 compared to ~~a tax expense of~~ 23.3 percent for the three months ended March 31, 2020. Compared to the U.S. statutory rate for three months ended March 31, 2021, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded due to tax authorities’ aggressive auditing of research and development tax credits. The effective tax was decreased by research and development tax credits and other credits. Compared to the U.S. statutory rate for three months ended March 31, 2020, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions which required an increase in reserves. The effective tax rate was partially offset by research and development tax credits and other tax credits.

LIQUIDITY AND CAPITAL RESOURCES

General Overview

As of March 31, 2021, we had cash and restricted cash ~~equivalents~~ of $127.5 million and credit facility availability of $131.2 million. We have a $135.0 million asset-based loan facility, offset by letters of credit of $3.8 million, that is due to mature in August 2022, under which we had no borrowings outstanding as of March 31, 2021 and a Term Loan B with $329.2 million in borrowings.

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of financing. As a distributor of MRO products and services and fabricator of custom pumps and packages, working capital can fluctuate as a result of changes in inventory levels, accounts receivable and costs in excess of billings for project work. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing equipment and safety services equipment. We also require cash to pay our lease obligations and to service our debt.

The following table summarizes our net cash flows generated by or used in operating activities, net cash provided by or used in investing activities and net cash used in financing activities for the periods presented (in thousands):


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2021		2020
Net Cash Provided by (Used in):	Net Cash Provided by (Used in):					Net Cash Provided by (Used in):	(Restated)
Operating Activities	Operating Activities	$	10,552	$	(1,612)	Operating Activities	$	8,577	$	(1,612)
Investing Activities	Investing Activities	617		(17,388)		Investing Activities	617		(17,388)
Financing Activities	Financing Activities	(1,365)		(742)		Financing Activities	(1,365)		(742)
Effect of Foreign Currency	Effect of Foreign Currency	204		(1,730)		Effect of Foreign Currency	204		(1,730)
Net Change in Cash	Net Change in Cash	$	10,008	$	(21,472)	Net Change in Cash	$	8,033	$	(21,472)

Operating Activities

The Company generated ~~$10.6~~$8.6 million of cash in operating activities during the three months ended March 31, 2021 compared to $1.6 million use of cash during the prior year's corresponding period. The ~~$12.2~~$10.2 million increase in the amount of cash provided between the two periods was primarily driven by the collections of receivables associated with trade accounts receivables and reductions in long-term project work which resulted in lower costs in-excess of billings.

Investing Activities

For the three months ended March 31, 2021, net cash provided by investing activities was $0.6 million compared to $17.4 million use of cash during the prior year’s corresponding period. This $18.0 million increase was primarily driven by the purchase of PSI and Turbo in the first quarter of 2020. For the three months ended March 31, 2021, purchases of property and equipment decreased to approximately $0.7 million compared to $3.2 million in 2020 primarily due to reduced capital spending as a result of company-wide cost cutting measures in response to the COVID-19 pandemic. The current quarter also benefited from the sale of a corporate asset totaling $1.3 million.

Financing Activities

For the three months ended March 31, 2021, net cash used in financing activities was $1.4 million, compared to net cash used in financing activities of $0.7 million during the prior year’s corresponding period. The activity in the period was primarily attributed to Term Loan B required prepayments of $0.8 million in 2021 compared to $0.6 million in 2020 and tax withholding payments for employee stock awards of $0.5 million in 2021 compared to $0.1 million in 2020.

On March 17, 2020, the Company entered into an Increase Agreement (the "Increase Agreement") that provided for a $135.0 million asset-backed revolving line of credit (the "ABL Revolver"), a $50.0 million increase from the $85.0 million available under the original revolver. During the three months ended March 31, 2021, the amount available to be borrowed under our credit facility decreased to $131.2 million compared to $131.9 million at December 31, 2020.

We believe this is adequate funding to support working capital needs within the business.

Funding Commitments

We intend to pursue additional acquisition targets, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be determined with certainty. We continue to expect to fund future acquisitions primarily with cash flows from operations and borrowings, including the undrawn portion of the credit facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that additional financing for acquisitions will be available at terms acceptable to us.

We believe our cash generated from operations will meet our normal working capital needs during the next twelve months. However, we may require additional debt outside of our credit facilities or equity financing to fund potential acquisitions. Such additional financings may include additional bank debt or the public or private sale of debt or equity securities. In connection with any such financing, we may issue securities that substantially dilute the interests of our shareholders.

DISCUSSION OF SIGNIFICANT ACCOUNTING AND BUSINESS POLICIES

Critical accounting and business policies are those that are both most important to the portrayal of a company's financial position and results of operations, and require management's subjective or complex judgments. These policies have been discussed with the Audit Committee of the Board of Directors of DXP.

The Company's condensed financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The accompanying Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries and its variable interest entity ("VIE"). The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on substantially the same basis as our annual Consolidated Financial Statements and should be read in conjunction with our annual report on Form ~~10-K~~10-K/A for the year ended December 31, 2020. For a more complete discussion of our significant accounting policies and business practices, refer to the consolidated annual report on Form ~~10-K~~10-K/A filed with the Securities and Exchange Commission on ~~March 18,~~October 22, 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of results expected for the full fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 3 - Recent Accounting Pronouncements to the Condensed Consolidated Financial Statements for information regarding recent accounting pronouncements.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For quantitative and qualitative disclosures about market risk, see Item 7A, 'Quantitative and Qualitative Disclosures About Market Risk,' of our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, 2020. Our exposures to market risk have not changed materially since December 31, 2020.

1822

ITEM 4: CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934 is reported, processed, and summarized within the time periods specified in the SEC’s rules and forms. As of March 31, 2021, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer ~~have~~had concluded that our disclosure controls and procedures were effective, as of March 31, 2021.However, subsequent to that assessment,management identified a material weakness in our internal controls as we did not have adequate internal controls that ensure timely clearing of aged accounts payables arising from three-way match exceptions for items ordered through purchase orders. In connection with the correction associated with aged accounts payable, management identified a material weakness in the design of the Company’s controls around journal entries, specifically requiring review and approval by senior management with the requisite experience, authority and competence to determine the proper conclusion. In addition, management identified a material weakness around business combination accounting, specifically as it relates to the identification of all agreements and their impact on the transaction and future consideration and disclosure. Consequently, management re-evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2021 and has concluded that our disclosure controls and procedures were not effective as of that date because of such material weaknesses.

Remediation Plan and Status for Material Weakness

In response to the identified material weakness, our management, with the oversight of the Audit Committee of our Board of Directors, has dedicated significant resources, including the involvement of outside advisors, and efforts to improve our internal control over financial reporting and has taken immediate action to remediate the material weaknesses identified. Certain remedial actions have been completed including ongoing involvement of outside advisors, reassessment of application controls within our accounts payable procure-to-pay platform and training programs around the issuance of purchase orders. The Company will further enhance these controls over the remainder of 2021.

Changes in Internal Control over Financial Reporting

There ~~are~~were no changes in ~~our~~the Company’s internal control over financial reporting that occurred during the ~~three months ended March 31,~~first quarter of 2021 that have materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

Inherent Limitations of Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors as previously disclosed in “Part I. Item 1A. Risk Factors” in our annual report on Form ~~10-K~~10-K/A for the year end December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

A summary of our purchases of DXP Enterprises, Inc. common stock during the first quarter of fiscal year 2021 is as

follows:


		Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs

	Jan 1 - Jan 31	17,443	$	22.23	—	$	—
	Feb 1 - Feb 28	835	$	24.61	—	$	—
	Mar 1 - Mar 31	3,578	$	30.45	—	$	—
	Total	21,856	$	23.67	—	$	—

(1)	Represents shares employees elected to have withheld to satisfy their tax liabilities related to restricted stock vested. When this settlement method is elected by the employee, the Company repurchases the shares withheld upon vesting of the award

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. MINE SAFETY DISCLOSURES.

None.

ITEM 5. OTHER INFORMATION.

None.

2024

ITEM 6. EXHIBITS.


3.1			Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form on Form S-8, filed with the Commission on August 20, 1998. File No. :333-61953).


3.2			Bylaws of DXP Enterprises, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on May 10, 2018 (File No. 000-21513)., as amended on July 27, 2011.


3.3			Amendment to Section 3.4 of the Bylaws of DXP Enterprises, Inc., effective January 1, ~~2022~~. 2022. Bylaws, as amended on April 23, 201 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 000-21513 : 21860170 , filed with the Commission on April 27, 2021).
* 10.1			Form of Indemnification Agreement between DXP Enterprises, Inc. and each of its directors.
* 22.1			Subsidiary Guarantors of Guaranteed Securities
* 31.1			Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended.


* 31.2			Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and rule 15d-14(a) of the Securities Exchange Act, as amended.


* 32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


* 32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*101			The following financial information from the Company’s Quarterly Report on Form ~~10-Q~~10-Q/A for the quarter ended March 31, 2021, formatted in Inline eXtensible Business Reporting Language (iXBRL), (i) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income, (ii) Unaudited Condensed Consolidated Balance Sheets, (iii) Unaudited Condensed Consolidated Statements of Cash Flows, (iv) Unaudited Condensed Consolidated Statements of Equity, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.
*104			The cover page from the Company’s Quarterly Report on Form ~~10-Q~~10-Q/A for the quarter ended March 31, 2021 formatted in Inline XBRL.

Exhibits designated by the symbol * are filed or furnished with this Quarterly Report on Form ~~10-Q.~~10-Q/A. All exhibits not so designated are incorporated by reference to a prior filing with the Commission as indicated.

2125

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.

DXP ENTERPRISES, INC.

(Registrant)

By: /s/ Kent Yee

Kent Yee

Senior Vice President and Chief Financial Officer

(Duly Authorized Signatory and Principal Financial Officer)

Dated: ~~May 10,~~November 3, 2021

2226