This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for the Company’s business. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends” or similar expressions. These forward-looking statements are subject to a number of risks and uncertainties and actual results could differ materially due to numerous factors, including but not limited to the Company’s ability to do any of the following:

Forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management’s expectations, forecasts and assumptions, and involve a number of judgements, risks and uncertainties, and actual results, developments and business decisions may differ materially from those envisaged by such forward-looking statements. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as my be required under applicable securities laws.

The accompanying notes are an integral part of the ~~previously announced business combination on~~ unaudited condensed consolidatedfinancial statements.

The accompanying notes are an integral part of the unaudited condensed consolidatedfinancial statements.

Holley Inc., a Delaware corporation headquartered in Bowling Green, Kentucky (the “Company” or “Holley”), conducts operations through its wholly-owned subsidiaries. These operating subsidiaries are comprised of Holley Performance Products Inc. (“Holley Performance”), Hot Rod Brands, Inc. (“Hot Rod Brands”), Simpson Safety Solutions, Inc., B&M Racing and Performance Products, Inc., and Speedshop.com, Inc. Investment funds managed by Sentinel Capital Partners hold a controlling interest in Holley.

On July 16, 2021, (the “Closing” and such date, the “Closing Date”) the Company consummated the business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc. (“Merger Sub I”), Empower Merger Sub II LLC (“Merger Sub II”), and Holley Intermediate Holdings, Inc. (“Holley Intermediate”)~~, is filing this Amendment No. 1~~. On the Closing Date, Empower changed its name to ~~its Quarterly Report on~~

~~Making estimates requires management to exercise significant judgment. It is at least reasonably possible that~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the ~~estimate~~United States of America ("U.S. GAAP" or “GAAP”) and applicable rules and regulations of the ~~effect~~U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto for the year ended December 31, 2021, as filed with the SEC on March 15, 2022 in the Company’s annual report on Form 10-K. In management’s opinion, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a ~~condition, situation or set~~normal and recurring nature, that are necessary for a fair presentation of ~~circumstances~~financial results for the interim periods presented. Operating results for any quarter are not necessarily indicative of the results for the full fiscal year.

The Company operates on a calendar year that ~~existed~~ends on December 31, 2022 and 2021. The three and six month periods ended July 3, 2022 and June 27, 2021 each included 13 weeks and 26 weeks, respectively.

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

The following are updates to the significant accounting policies described in our audited consolidated financial statements as of and for the year ended December 31, 2021.

Operating lease right of use (ROU) assets and liabilities are recognized at the commencement date of the ~~financial statements, which management considered in formulating its estimate, could change~~lease based on the present value of lease payments over the lease term. The Company's leases may include options to extend or terminate the lease. These options to extend are included in the ~~near~~lease term ~~due~~when it is reasonably certain that the Company will exercise that option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the ROU assets and liabilities. Variable payments for real estate leases primarily relate to ~~one or more future confirming events. Accordingly,~~common area maintenance, insurance, taxes and utilities. Since the ~~actual results could differ significantly from those e~~

~~We account for the Warrants and FPA~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in ~~accordance with ASC~~thousands, except share data)

~~815-40~~

(unaudited)

~~under which the Warrants and the FPA do~~

If a warrant does not meet the ~~criteria~~conditions for equity classification, ~~and must be recorded~~it is carried in the consolidated balance sheet as ~~liabilities. At March 31, 2021 and December 31, 2020,~~a warrant liability measured at fair value, with subsequent changes in the fair value of the ~~Public~~warrant recorded in the consolidated statements of comprehensive income as a non-operating expense. If a warrant meets both conditions for equity classification, the warrant is initially recorded in additional paid-in capital on the consolidated balance sheet, and the amount initially recorded is not subsequently re-measured at fair value. See Note 7,"Common Stock Warrants,

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) which requires lessees to recognize right-of-use assets, representing their right to use the underlying asset for the lease term, and lease liabilities on the balance sheet for all leases with terms greater than 12 months. The Company adopted the provisions of this guidance effective January 1, 2022, using the ~~Public Warrants’ quoted market price.~~modified retrospective optional transition method. Therefore, the standard was applied beginning January 1, 2022 and prior periods were not restated. The ~~Private Placement Warrants are valued at both dates using a Modified Black Scholes Option Pricing Model. The fair value~~adoption of the ~~FPA at each date has been estimated using an adjusted net assets method (see Note 10).~~

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not ~~experienced losses on this account and management believes the Company is not exposed to significant risks on such account.~~

~~Fair Value of Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed financial statements, primarily due to their short-term nature.

~~Fair Value Measurements~~

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

~~Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;~~

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

~~Derivative Financial Instruments~~

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then
~~re-valued~~
at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or
~~non-current~~
~~based on whether or not~~
~~net-cash~~
~~settlement or conversion of the instrument could be required within 12 months of the balance sheet date.~~

~~Recent Accounting Standards~~

~~Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would~~ have a material effect on the ~~accompanying condensed~~Company's consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (Subtopic 470-20). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. The new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. The Company adopted ASU 2020-06 on January 1, 2022. Adoption of the ASU did not impact the Company's consolidated financial statements.

Accounting Standards Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU requires entities to apply the definition of a performance obligation under ASC Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current U.S. GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No.2021-08 will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. Adoption of the provisions of ASU 2021-08 are effective for the Company's fiscal year beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements.

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HOLLEY INC.

~~NOTE 4. INITIAL PUBLIC OFFERING~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of July 3, 2022, the Company did not adopt any expedients or exceptions under ASU 2020-04. The Company will continue to evaluate the impact of ASU 2020-04 and whether it will apply the optional expedients and exceptions.

2.	BUSINESS COMBINATION AND ACQUISITIONS

BUSINESS COMBINATION

On July 16, 2021, Holley consummated the Business Combination pursuant to the terms of the Merger Agreement, whereby (i) Merger Sub I, a direct wholly owned subsidiary of Empower, merged with and into Holley Intermediate, with Holley Intermediate surviving such merger as a wholly owned subsidiary of Holley (“Merger I”) and (ii) Merger Sub II, a direct wholly owned subsidiary of Empower, merged with and into Holley Intermediate, with Merger Sub II surviving such merger as a wholly owned subsidiary of Holley (“Merger II”).

Pursuant to the ~~Initial Public Offering,~~Merger Agreement, at the Closing, all outstanding shares of Holley Intermediate common stock as of immediately prior to the effective time of Merger I were cancelled and Holley Parent Holdings, LLC, the sole stockholder of Holley Intermediate (the “Holley Stockholder” or “Parent”), received $264,718 in cash and 67,673,884 shares of common stock (at a deemed value of $10.00 per share). The Company’s common stock is listed on the New York Stock Exchange (the "NYSE") under the symbol “HLLY.”

In connection with the Business Combination, a number of subscribers purchased from the Company ~~sold 25,000,000 units, at~~an aggregate of 24,000,000 shares of common stock (the “PIPE”), for a purchase price of $10.00 per ~~unit. Each unit consists~~share, or $240,000 in the aggregate. Per the Merger Agreement, $100,000 of ~~one Class~~ the PIPE proceeds were used to partially pay off Holley’s debt.

Pursuant to the Amended and Restated Forward Purchase Agreement (“A ~~ordinary share and~~

~~one-third~~

&R FPA”), at the Closing, 5,000,000 shares of ~~one redeemable warrant (“public warrant”). Each whole public~~the Company’s common stock and 1,666,667 warrants were issued to certain investors for an aggregate purchase price of $50,000. Pursuant to the A&R FPA, each warrant entitles the holder to purchase one
~~Class A ordinary~~ share of the Company’s common stock at ~~an exercise~~a price of $11.50 per share (the ”Public Warrants”), subject to ~~adjustment (see Note 10).~~

~~NOTE 5. PRIVATE PLACEMENT~~

~~Simultaneously with the closing of the Initial~~certain conditions.

The Company also assumed 8,333,310 Public ~~Offering, the sponsor purchased an aggregate of~~Warrants and 4,666,667 private placement warrants ~~at a price~~(the “Private Warrants”, and together with the Public Warrants, the “Warrants”) upon the Business Combination, all of ~~$1.50 per private placement warrant, for an aggregate~~which were issued in connection with Empower’s initial public offering. Each Warrant represents the right to purchase ~~price~~one share of ~~$7,000,000. Each private placement warrant (“private placement warrant”) is exercisable for one Class A ordinary share~~the Company’s common stock at a price of $11.50 per share, subject to ~~adjustment (see Note 10)~~certain conditions. The Warrants became exercisable on October 9, 2021 (the one-year anniversary of Empower’s initial public offering) and expire on July 16, 2026 (five years after the Closing Date). The ~~proceeds from~~Public Warrants are listed on the ~~sale~~NYSE under the symbol “HLLY WS.”

Additionally, Empower Sponsor Holdings LLC (the "Sponsor") received 2,187,500 shares of the ~~private placement warrants were added to the net proceeds from the Initial Public Offering held~~Company’s common stock, which vest in two equal tranches upon achieving certain market share price milestones as outlined in the ~~trust account. If~~Merger Agreement during the ~~Company does not complete an initial business combination within~~ earn-out period (“the ~~Combination Period,~~“Earn-Out Shares”). The first tranche of Earn-Out Shares vested during the ~~proceeds from~~first quarter of 2022. Upon vesting, the ~~sale~~first tranche of the ~~private placement warrants held~~Earn-Out Shares, or 1,093,750 shares, were issued and a liability of $14,689, representing the fair value of the shares on the date of vesting, was reclassified from liabilities to equity. The remaining tranche of Earn-Out Shares will be forfeited if the applicable conditions are not satisfied before July 16, 2028 (seven years after the Closing Date). The remaining Earn-Out Shares are classified as a liability on the condensed consolidated balance sheet and are remeasured at fair value with changes in the ~~trust account will be used to fund~~post-Business Combination fair value recognized in the ~~redemption~~Company’s condensed consolidated statement of ~~the public shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless.~~

comprehensive income as non-operating expense.

1112

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~~NOTE 6. RELATED PARTY TRANSACTIONS~~

HOLLEY INC.

~~Founder Shares~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~During~~(in thousands, except share data)

(unaudited)

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. This determination was primarily based on current shareholders of Holley having a relative majority of the ~~period ended August 21, 2020, the sponsor paid $25,000 to cover certain offering and formation costs~~voting power of the Company, the operations of Holley prior to the acquisition comprising the only ongoing operations of the Company, and senior management of Holley comprising the majority of the senior management of the Company. Under this method of accounting, Empower was treated as the acquired company for financial reporting. Accordingly, the Business Combination was accounted for as the equivalent of Holley issuing stock for the net assets of Empower, accompanied by a recapitalization. The net assets of Empower are stated at historical cost, with no goodwill or other intangible assets recorded. Reported amounts from operations included herein prior to the Business Combination are those of Holley Intermediate. The shares and corresponding capital amounts and earnings per share, prior to the Business Combination, have been retroactively restated based on shares received by the Holley Stockholder.

ACQUISITIONS

During the 26-weeks ended July 3, 2022, the Company has completed three acquisitions, and during the year ended December 31, 2021, the Company completed eight acquisitions. These acquisitions are expected to enhance the Company's portfolio of products and services in the automotive aftermarket and automotive safety solutions market.

The Company accounts for acquisitions using the acquisition method, and accordingly, the purchase price has been allocated based upon the fair value of the assets acquired and liabilities assumed. The valuation of the assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the Company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date; however, material changes are not expected. Goodwill generated by the acquisitions is primarily attributable to the strong market position of the entities acquired.

Purchase price consideration for ~~7,187,500 shares~~all acquisitions was paid primarily in cash. All acquisitions were for 100 percent of ~~Class B ordinary shares~~the acquired business and are reported in the Consolidated Statements of Cash Flows, net of acquired cash and cash equivalents. Acquisition-related costs, including advisory, legal, accounting, valuation and other costs, are typically expensed in the periods in which the costs are incurred and are recorded in acquisition and restructuring costs. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

During the twenty-six weeks ended July 3, 2022, the Company acquired substantially all the assets of John's Ind., Inc. ("John's"), Southern Kentucky Classics ("SKC"), and Vesta Motorsports USA, Inc., doing business as RaceQuip ("RaceQuip"). These acquisitions were immaterial business combinations. Cash paid for the three acquisitions, net of cash acquired, was $13,778, and was funded with borrowings from the Company's credit facility and cash on hand. The acquisitions resulted in both amortizable and nonamortizable intangibles and goodwill totaling $9,059. The goodwill and intangibles generated as a result of these acquisitions are deductible for income tax purposes. The final allocation of the purchase price to specific assets acquired and liabilities assumed may change in future periods as the fair value estimates of inventory and intangibles are completed.

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

	2022
Accounts receivable	$	959
Inventory		3,481
Property, plant and equipment		275
Other assets		1,132
Tradenames		1,689
Customer relationships		1,512
Goodwill		5,858
Accounts payable		(25	)
Accrued liabilities		(1,103	)
	$	13,778

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

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

In 2021, the Company acquired substantially all the assets of Finspeed, LLC ("Finspeed"), Classic Instruments LLC, ADS Precision Machining, Inc., doing business as Arizona Desert Shocks, Rocket Performance Machine, Inc., doing business as Rocket Racing Wheels, and Speartech Fuel Injections Systems, Inc. These five acquisitions were individually immaterial business combinations that are material in the aggregate. Cash paid for the five immaterial acquisitions, net of cash acquired, was $19,685, and was funded with borrowings from the Company's credit facility and cash on hand. The acquisitions resulted in both amortizable and nonamortizable intangibles and goodwill totaling $13,023. The goodwill and intangibles generated as a result of these acquisitions are deductible for income tax purposes. The final allocation of the purchase price to specific assets acquired and liabilities assumed may change in future periods as the fair value estimates of inventory and intangibles are completed. However, for Finspeed, the measurement period has ended and the final fair value estimates of acquired assets and liabilities is reflected below.

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

	2021 (as initially reported)			Measurement Period Adjustments			2021 (as adjusted)
Cash	$	122					$	122
Accounts receivable		618						618
Inventory		3,975						3,975
Property, plant and equipment		2,274						2,274
Other assets		23						23
Tradenames		2,608						2,608
Customer relationships		2,450						2,450
Goodwill		8,087			(122	)		7,965
Accounts payable		(343	)					(343	)
Accrued liabilities		(129	)		122			(7	)
	$	19,685		$	—		$	19,685

The fair value of the acquired customer relationship intangible assets were estimated using the excess earnings approach. The customer relationship intangible assets are being amortized based on the attrition rate of customers which have an estimated weighted average life of 18 years. The fair value of the acquired tradenames intangible asset was estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life.

The remaining three acquisitions completed during 2021 are described below.

Baer, Inc.

On December 23, 2021, the Company acquired substantially all the assets and liabilities of Baer, Inc., doing business as Baer Brakes. Consideration for the assets acquired was cash payments of $22,170. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill totaling $18,989. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded with borrowings from the Company's credit facility and cash on hand. The determination of the final purchase price allocation to specific assets acquired and liabilities assumed may change in future periods as the fair value estimates of inventory and intangibles are completed.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

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

	December 23, 2021 (as initially reported)			Measurement Period Adjustments			December 23, 2021 (as adjusted)
Accounts receivable	$	627					$	627
Inventory		1,813						1,813
Property, plant and equipment		695						695
Other assets		76						76
Tradenames		4,630						4,630
Customer relationships		6,075						6,075
Goodwill		8,363			(79	)		8,284
Accounts payable		(81	)		79			(2	)
Accrued liabilities		(28	)					(28	)
	$	22,170		$	—		$	22,170

The contractual value of the accounts receivable acquired was $800.

Brothers Mail Order Industries, Inc.

On December 16, 2021, the Company acquired substantially all the assets and liabilities of Brothers Mail Order Industries, Inc., doing business as Brothers Trucks. Consideration for the assets acquired was cash payments of $26,135. The acquisition resulted in non-amortizable intangibles and goodwill totaling $24,835. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded with borrowings from the Company's credit facility and cash on hand. The determination of the final purchase price allocation to specific assets acquired and liabilities assumed may change in future periods as the fair value estimates of inventory and intangibles are completed.

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

	December 16, 2021 (as initially reported)			Measurement Period Adjustments		December 16, 2021 (as adjusted)
Accounts receivable	$	22				$	22
Inventory		1,682					1,682
Property, plant and equipment		20					20
Other assets		13					13
Tradenames		4,975					4,975
Goodwill		19,561			299		19,860
Accounts payable		(34	)				(34	)
Accrued liabilities		(403	)				(403	)
	$	25,836		$	299	$	26,135

The fair value of the acquired tradenames intangible asset was estimated using the relief from royalty method, a form of the income approach. The tradenames were determined to have an indefinite life.

The contractual value of the accounts receivable acquired was $22.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

Advance Engine Management Inc.

On April 14, 2021, the Company acquired substantially all the assets and liabilities of Advance Engine Management Inc. doing business as AEM Performance Electronics. Consideration for the assets acquired was cash payments of $51,243. The acquisition resulted in both amortizable and non-amortizable intangibles and goodwill, totaling $44,486. The goodwill and intangibles generated as a result of this acquisition are deductible for income tax purposes. The purchase price was funded from cash on hand.

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

	April 14, 2021 (as initially reported)			Measurement Period Adjustments			April 14, 2021 (as adjusted)
Accounts receivable	$	3,454		$	(61	)	$	3,393
Inventory		3,892			—			3,892
Property, plant and equipment		1,342			—			1,342
Other assets		493			(91	)		402
Tradenames		10,760			—			10,760
Customer relationships		14,640			—			14,640
Patents		1,970			—			1,970
Technology intangibles		110			—			110
Goodwill		17,426			(420	)		17,006
Accounts payable		(2,032	)		110			(1,922	)
Accrued liabilities		(489	)		139			(350	)
	$	51,566		$	(323	)	$	51,243

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

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

INVENTORY

Inventories of the Company consisted of the following:

	July 3,		December 31,
	2022		2021
Raw materials	$	61,146	$	54,818
Work-in-process		26,334		21,728
Finished goods		127,387		108,494
	$	214,867	$	185,040

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

4.	PROPERTY, PLANT AND EQUIPMENT, NET

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

	July 3,		December 31,
	2022		2021
Land	$	3,426	$	1,330
Buildings and improvements		10,935		10,623
Machinery and equipment		63,367		56,824
Construction in process		12,076		12,859
Total property, plant and equipment		89,804		81,636
Less: accumulated depreciation		33,795		30,141
Property, plant and equipment, net	$	56,009	$	51,495

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

	July 3,		December 31,
	2022		2021
United States	$	54,260	$	49,547
International		1,749		1,948
Total property, plant and equipment, net	$	56,009	$	51,495

5.	GOODWILL AND OTHER INTANGIBLE ASSETS

The following presents changes to goodwill for the period indicated:

	For the twenty-six weeks ended July 3, 2022
Balance at December 31, 2021	$	411,383
John's acquisition		240
SKC acquisition		1,270
RaceQuip acquisition		4,348
Measurement period adjustments*		98
Balance at July 3, 2022	$	417,339

* See Note 2, "Business Combination and Acquisitions - Acquisitions," for further details."

Goodwill represents the premium paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company's business combinations. The measurement period for the valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, not to exceed 12 months. Adjustments in purchase price allocations may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

Intangible assets consisted of the following:

	July 3, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Finite-lived intangible assets:
Customer relationships	$	269,950	$	(38,401	)	$	231,549
Tradenames		13,775		(4,481	)		9,294
Technology		26,676		(10,302	)		16,374
Total finite-lived intangible assets	$	310,401	$	(53,184	)	$	257,217

Indefinite-lived intangible assets:
Tradenames	$	176,903		—		$	176,903

	December 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Finite-lived intangible assets:
Customer relationships	$	268,438	$	(32,662	)	$	235,776
Tradenames		13,775		(4,119	)		9,656
Technology		26,675		(9,080	)		17,595
Total finite-lived intangible assets	$	308,888	$	(45,861	)	$	263,027

Indefinite-lived intangible assets:
Tradenames	$	175,434		—		$	175,434

The following outlines the estimated future amortization expense related to intangible assets held as of July 3, 2022:

2022 (excluding the twenty-six weeks ended July 3, 2022)	$	7,372
2023		14,582
2024		13,769
2025		13,739
2026		13,633
Thereafter		194,122
Total	$	257,217

DEBT

Debt of the Company consisted of the following:

	July 3,			December 31,
	2022			2021
First lien term loan due November 17, 2028	$	652,350		$	630,000
Revolver		0			25,000
Other		3,124			3,812
Less unamortized debt issuance costs		(12,418	)		(13,264	)
		643,056			645,548
Less current portion of long-term debt		(6,300	)		(7,875	)
	$	636,756		$	637,673

On November 18, 2021, the Company entered into a new credit facility with a syndicate of lenders and Wells Fargo Bank, N.A., as administrative agent for the lenders, letter of credit issuer and swing line lender (the ~~“founder shares”~~"Credit Agreement"). The ~~founder shares include an aggregate~~financing consisted of upa seven-year $600,000first lien term loan, a five-year $125,000 revolving credit facility, and a $100,000 delayed draw term loan.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

The proceeds of any delayed draw loans made after closing were available to ~~937,500 shares~~the Company to finance acquisitions. As of July 3, 2022, the Company had drawn $57,000 under the delayed draw term loan. Availability under the delayed draw term loan expired in May 2022.

The revolving credit facility includes a letter of credit facility in the amount of $10,000, pursuant to which letters of credit may be issued as long as revolving loans may be advanced and subject to ~~forfeiture by~~availability under the ~~sponsor~~revolving credit facility. The Company had $1,236 in outstanding letters of credit at July 3, 2022.

Proceeds from the new credit facility were used to repay in full the Company’s obligations under its existing first lien and second lien notes and to pay $13,413 in original issue discount and issuance costs related to the ~~extent that~~refinancing.

The first lien term loan is to be repaid in quarterly payments of $1,575through September 30, 2028 with the ~~underwriters’ over-allotment~~balance due upon maturity on November 17, 2028. Beginning with the fiscal year ending on December 31, 2022, the Company is not exercised in full or in part, so that the number of founder shares will collectively represent 20% of the Company’s issued and outstanding shares upon the completion of the Initial Public Offering. On November 23, 2020, the underwriters’ electionrequired to ~~exercise their over-allotment option expired unexercised, resulting~~make a payment based on its available free cash flow (as defined in the ~~forfeiture~~Credit Agreement). Any such payments offset future mandatory quarterly payments.

Amounts outstanding under the new credit facility will accrue interest at a rate equal to either the London Interbank Offering Rate ("LIBOR") or base rate, at the Company's election, plus a specified margin. In the case of ~~937,500 shares. Accordingly,~~revolving credit loans and letter of credit fees, the specified margin is based on the Company's Total Leverage Ratio, as ~~of November 23, 2020, there~~defined in the Credit Agreement. Commitment fees payable under the revolving credit facility are ~~6,250,000 founder shares issued and outstanding.~~

HOLLEY INC.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL ~~CONDITION AND RESULTS OF OPERATIONS~~

STATEMENTS

~~References~~ (in ~~this report (the “Quarterly Report”) to “we,” “us,” “our” or~~thousands, except share data)

(unaudited)

As of July 3, 2022 and December 31, 2021, the ~~“Company” refer to Empower Ltd. References to our “management” or our “management team” refer to our officers~~Company has accounts receivable, accounts payable and ~~directors, and references~~accrued expenses for which the carrying value approximates fair value due to the ~~“sponsor” refer to Empower Sponsor Holdings LLC.~~short-term nature of these instruments. The ~~following discussion and analysis~~carrying value of the Company’s ~~financial~~long-term debt approximates fair value as the rates used approximate the market rates currently available to the Company. Fair value measurements used in the impairment reviews of goodwill and intangible assets are Level 3 measurements.

The reconciliation of changes in Level 3 during the 26-week period ended July 3, 2022 is as follows:

	For the twenty-six weeks ended July 3, 2022
	Private Warrants			Earn-Out Liability			Total
Balance at December 31, 2021	$	21,793		$	26,596		$	48,389
Liabilities reclassed to equity		0			(14,689	)		(14,689	)
Losses included in earnings		(7,653	)		(1,853	)		(9,506	)
Balance at July 3, 2022	$	14,140		$	10,054		$	24,194

REVENUE

The principal activity from which the Company generates its revenue is the manufacturing and distribution of after-market automotive parts for its customers, comprised of resellers and end users. The Company recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customer obtains control of the product upon title transfer and not as the product is manufactured or developed. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e., estimated rebates, co-op advertising, etc.).

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

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

The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 365 days. The Company elected the practical expedient to disregard the possible existence of a significant financing component related to payment on contracts, as the Company expects that customers will pay for the products within one year. The Company has evaluated the terms of our arrangements and determined that they do not contain significant financing components. Additionally, as all contracts with customers have an expected duration of one year or less, the Company has elected the practical expedient to exclude disclosure of information regarding the aggregate amount and future timing of performance obligations that are unsatisfied or partially satisfied as of the end of the reporting period. The Company provides limited warranties on most of its products against certain manufacturing and other defects. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 16 for more information.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

The following table summarizes total revenue by product category. The Company's product category definitions have been revised by management in 2022. The prior-year period has been revised to conform with the current presentation. There is no change to total sales.

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Electronic systems	$	71,060	$	87,195	$	157,206	$	157,934
Mechanical systems		44,206		42,042		90,048		78,131
Exhaust		18,037		23,042		37,369		43,342
Accessories		28,353		22,508		57,099		39,941
Safety		17,764		18,254		37,753		34,025
Total sales	$	179,420	$	193,041	$	379,475	$	353,373

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

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
United States	$	173,514	$	187,993	$	369,573	$	345,570
Italy		5,906		5,048		9,902		7,803
Total sales	$	179,420	$	193,041	$	379,475	$	353,373

10.

INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.

	For the thirteen weeks ended						For the twenty-six weeks ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Income tax expense	$	3,023		$	5,790		$	10,211		$	10,556
Effective tax rates		6.9	%		20.0	%		15.1	%		33.4	%

For the 13-week period ended July 3, 2022, the Company's effective tax rate of 6.9% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the Private Warrants and the earn-out liability recognized during the period. For the 13-week period ended June 27, 2021, the Company’s effective tax rate was 20.0%.

For the 26-week period ended July 3, 2022, the Company's effective tax rate of 15.1% differed from the 21% federal statutory rate primarily due to permanent differences related to changes in fair value of the Private Warrants and the earn-out liability recognized during the period. For the 26-week period ended June 27, 2021, the Company’s effective tax rate of 33.4% differed from the 21% federal statutory rate primarily due a permanent difference resulting from the change in fair value of an earn-out liability related to the 2020 acquisition of Simpson Performance Products ("Simpson") recognized during the period.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

11.

EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted earnings per share:

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022			June 27, 2021
Numerator:
Net income - basic	$	40,563	$	23,098	$	57,421		$	21,042
Less: fair value adjustment for warrants		0		0		(20,941	)		0
Net income - diluted	$	40,563	$	23,098	$	36,480		$	21,042
Denominator:
Weighted average common shares outstanding - basic		116,931,623		67,673,884		116,398,177			67,673,884
Dilutive effect of potential common shares from RSUs		182,930		0		177,642			0
Dilutive effect of potential common shares from warrants		0		0		768,156			0
Weighted average common shares outstanding - diluted		117,114,553		67,673,884		117,343,975			67,673,884
Earnings per share:
Basic	$	0.35	$	0.34	$	0.49		$	0.31
Diluted	$	0.35	$	0.34	$	0.31		$	0.31

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. Warrants to purchase shares of common stock having an exercise price greater than the average share market price for the thirteen weeks ended July 3, 2022 are excluded from the calculation of diluted earnings per share.

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Anti-dilutive shares excluded from calculation of diluted EPS:
Warrants		14,633,311		0		0		0
Stock options		1,960,708		0		1,960,708		0
Restricted stock units		220,051		0		220,051		0
Earn-out shares		1,093,750		0		1,093,750		0
Total anti-dilutive shares		17,907,820		0		3,274,509		0

12.

BENEFIT PLANS

The Company has a defined benefit pension plan (the “Plan”) for its employees. On January 28, 2022, the Company approved the termination of the Plan, effective March 31, 2022. Distribution of the Plan's assets, pursuant to the termination, will not be made until the Plan termination satisfies all regulatory requirements, which is expected to be completed by the fourth quarter of 2022. Plan participants will receive their full accrued benefits from the Plan's assets by electing either lump sum distributions or annuity contracts with a qualifying third-party annuity provider. The resulting settlement effect of the Plan termination will be determined based on prevailing market conditions, the lump sum offer participation rate of eligible participants, the actual lump sum distributions, and annuity purchase rates at the date of distribution. The Company estimates that the settlement charge will be in the range of $400 - $550.

The following summarizes the components of net periodic benefit cost for the Plan:

	For the thirteen weeks ended						For the twenty-six weeks ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Components of expense:
Service cost	$	27		$	36		$	54		$	36
Interest cost		32			38			64			38
Expected return on plan assets		(52	)		(61	)		(104	)		(61	)
Amortization of net loss		0			5			0			5
Net periodic benefit cost	$	7		$	18		$	14		$	18

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

The Company made matching contributions totaling $1,156 and $526 to our 401(k) plan during the 13-week periods ended July 3, 2022 and June 27, 2021, respectively. The Company made matching contributions totaling $1,844 and $1,000 to our 401(k) plan during the 26-week periods ended July 3, 2022 and June 27, 2021, respectively.

The Company made 0 contributions and contributions of $98 to the Plan during the 13-week periods ended July 3, 2022 and June 27, 2021, respectively. The Company made contributions of $150 and $117 to the Plan during the 26-week periods ended July 3, 2022 and June 27, 2021, respectively.

13.

EQUITY-BASED COMPENSATION PLANS

In 2021, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”), which provides for the grant of restricted stock awards, incentive and nonqualified stock options, and other share based awards to employees, directors and non-employees. The 2021 Plan authorized 8,850,000 shares of the Company’s common stock to be available for award grants. As of July 3, 2022, 5,951,568 shares of common stock remained available for future issuance under the 2021 Plan.

Equity-based compensation expense included the following components:

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Stock options	$	652	$	0	$	1,205	$	0
Restricted stock units		1,350		0		2,533		0
Profit interest units		1,481		131		2,907		262

All equity-based compensation expense is recorded in selling, general and administrative costs in the condensed consolidated statements of comprehensive income.

Stock Options

Stock option grants have an exercise price at least equal to the market value of the underlying common stock on the date of grant, have ten-year terms, and vest ratably over three years of continued employment. In general, vested options expire if not exercised at termination of service. On February 15, 2022 and May 6, 2022, the Company granted 548,001 and 44,055 options to purchase shares of the Company’s common stock to key employees, respectively. These stock options had weighted-average grant date fair values of $4.68 per share and $4.32per share, respectively, which values were estimated as of their respective grant dates using a Black-Scholes option pricing model with the following assumptions:

	Granted Feb. 15, 2022			Granted May 6, 2022
Weighted-average expected term		6.0			6.0
Expected volatility		36.0	%		40.0	%
Expected dividend	$	0		$	0
Risk-free interest rate		1.98	%		3.06	%

The expected term has been estimated using a simplified method, which calculates the expected term as the mid-point between the vesting date and the contractual life of the awards since the Company does not have an extended history of actual exercises. The expected dividend yield is assumed to be zero since the Company has never paid dividends and does not have current plans to pay any dividends. The risk-free interest rate is based on yields of U.S. Treasury securities with maturities similar to the expected term of the options. Expected volatility is based on an evenly weighted blend of implied volatility and historical volatility of publicly-traded peer companies since the Company has limited historical volatility.

Compensation expense for stock options is recorded based on straight-line amortization of the grant date fair value over the requisite service period. As of July 3, 2022, there was $5,986 of unrecognized compensation cost related to unvested stock options that is expected to be recognized over a remaining weighted-average period of 2.3 years.

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

Restricted Stock Units

Restricted stock units (“RSUs”) vest ratably over one to three years of continued employment. The fair value of a RSU at the grant date is equal to the market price of the Company’s common stock on the grant date. On February 15, 2022 and May 6, 2022, the Company granted 228,180 and 16,767 RSUs, respectively to key employees with grant date fair values of $12.29 per unit and $9.95 per unit, respectively. Additionally, on May 11, 2022, 55,920 RSUs were granted to members of Holley's Board of Directors with a grant date fair value of $8.53 per unit. Compensation expense for RSUs is recorded based on amortization of the grant date fair market value over the period the restrictions lapse. As of July 3, 2022, there was $7,630 of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a remaining weighted average period of 2.2 years.

Profit Interest Units

The Holley Stockholder has authorized an incentive pool of 41.4 million units of Parent, which are designated as PIUs, that its management has the right to grant to certain employees of the Company. As of July 3, 2022, no units are available for grant. The PIU's are a special type of limited liability company equity unit that allows the recipient to potentially participate in a future increase in the value of the Company. PIUs are issued for no consideration and generally provide for vesting over the requisite service period, subject to the recipient remaining an employee of the Company through each vesting date.

As of July 3, 2022, there was $6,578 of unrecognized compensation cost related to unvested time-based PIUs that is expected to be recognized over a remaining weighted-average period of 1.2 years.

14.

LEASE COMMITMENTS

On January 1, 2022, the Company adopted ASC 842 using the modified retrospective optional transition method provided by ASU 2018-11. The effect of applying this guidance resulted in an increase in noncurrent assets for right-of-use assets of $33.9 million and an increase in liabilities for associated lease obligations of $34.6 million, most of which were classified as noncurrent. The adoption of the standard did not result in a cumulative-effect adjustment to the opening balance of retained earnings.

Under the transition option elected by the Company, ASC 842 is applied only to the most current period and reporting for comparative periods presented in the financial statements continues to be in accordance with Topic 840, including disclosures. Upon adoption, the Company elected the following practical expedients related to ASC 842:

•

not reassess whether any expired or existing contracts are or contain leases, not reassess the lease classification for any expired or existing leases, and not reassess initial direct costs for any existing leases;

•

to account for the lease and non-lease components as a single lease component for all of the Company's leases; and

•

to apply accounting similar to Topic 840 to leases that meet the definition of short-term leases.

The Company leases retail stores, manufacturing, distribution, engineering, and research and development facilities, office space, equipment, and automobiles under operating lease agreements. Leases have remaining lease terms of one to 14 years, inclusive of renewal options that the Company is reasonably certain to exercise.

The following table summarizes operating lease assets and obligations:

	July 3, 2022
Assets:
Operating right of use assets	$	32,762
Liabilities:
Current operating lease liabilities	$	5,006
Long-term lease liabilities		28,225
Total lease liabilities	$	33,231

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

The following summarizes the components of operating lease expense and provides supplemental cash flow information for operating leases:

	For the thirteen weeks ended		For the twenty-six weeks ended
	July 3, 2022		July 3, 2022
Components of lease expense:
Operating lease expense	$	1,482	$	3,901
Short-term lease expense		642		1,250
Variable lease expense		327		414
Total lease expense	$	2,451	$	5,565
Supplemental cash flow information related to leases:
Cash paid for amounts included in measurement of operating lease liabilities	$	1,821	$	3,581
Right of use assets obtained in exchange for new operating lease liabilities		13,491		13,769
Decapitalization of right-of-use assets upon lease termination and/or modification		12,178		12,178

Information associated with the measurement of operating lease obligations as of July 3, 2022 is as follows:

Weighted average remaining lease term (in years)			8.0
Weighted average discount rate			5.67	%

The following table summarizes the maturities of the Company's operating lease liabilities as of July 3, 2022:

2022 (excluding the twenty-six weeks ended July 3, 2022)	$	3,718
2023		6,830
2024		5,583
2025		3,867
2026		3,660
Thereafter		18,318
Total lease payments		41,976
Less imputed interest		(8,745	)
Present value of lease liabilities	$	33,231

For the 13-week and 26-week periods ended June 27, 2021, total rent expense under operating leases approximated $1,979 and $3,672.

In accordance with ASC 840, Leases, the aggregate minimum non-cancelable annual lease payments under operating leases in effect on December 31, 2021 were as follows:

2022	$	8,517
2023		6,320
2024		4,766
2025		2,995
2026		2,813
Thereafter		8,546
Total minimum lease commitments	$	33,957

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HOLLEY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share data)

(unaudited)

15.

ACQUISITION, RESTRUCTURING AND MANAGEMENT FEE COSTS

The following table summarizes the Company's total acquisition, restructuring and management fee costs:

	For the thirteen weeks ended				For the twenty-six weeks ended
	July 3, 2022		June 27, 2021		July 3, 2022		June 27, 2021
Acquisitions ⁽¹⁾	$	1,372	$	2,172	$	1,621	$	3,211
Restructuring ⁽²⁾		319		504		360		1,125
Management fees ⁽³⁾		0		1,658		0		2,539
Earn out adjustment ⁽⁴⁾		0		0		0		17,173
Total acquisition, restructuring and management fees	$	1,691	$	4,334	$	1,981	$	24,048

(1)

Includes professional fees for legal, accounting, consulting, administrative, and other professional services directly attributable to potential acquisitions.

(2)

Includes costs incurred as part of the restructuring of operations including professional and consulting services.

(3)

Includes acquisition costs and management fees paid to Sentinel Capital Partners.

(4)

A fair value adjustment to the contingent consideration payable from the Simpson acquisition.

16.

COMMITMENTS AND CONTINGENCIES

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

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the ~~notes related thereto which~~nature of the product. The accrued product warranty costs are ~~included elsewhere in this Quarterly Report. Certain information contained~~based primarily on historical experience of actual warranty claims and are recorded at the time of the sale.

The following table provides the changes in the ~~discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.~~

Company's accrual for product warranties, which is classified as a component of accrued liabilities in the condensed consolidated balance sheets.

	For the thirteen weeks ended						For the twenty-six weeks ended
	July 3, 2022			June 27, 2021			July 3, 2022			June 27, 2021
Beginning balance	$	3,816		$	2,867		$	3,994		$	3,989
Accrued for current year warranty claims		446			2,479			3,034			3,436
Settlement of warranty claims		(1,937	)		(2,418	)		(4,703	)		(4,497	)
Ending balance	$	2,325		$	2,928		$	2,325		$	2,928

~~Special Note Regarding Forward-Looking Statements~~28

~~This Quarterly Report includes “forward-looking statements” within the meaning~~

Table of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in thisContents

~~Form 10-Q~~

~~including, without limitation, statements in this “Management’s~~

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

Unless the ~~Company’s~~context requires otherwise, references to “Holley,”“we,”“us,”“our” and “the Company” in this section are to the business and operations of Holley Inc. The following discussion and analysis should be read in conjunction with Holley’s condensed consolidated financial ~~position, business strategy, potential business combinations~~statements and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intendedrelated notes thereto included in this Quarterly Report on Form 10-Q. In addition to ~~identify such forward-looking statements. Such~~historical information, this discussion contains forward-looking statements ~~relate to future events or future performance, but reflect management’s current beliefs, based on information currently available~~that involve risks, uncertainties, and ~~are subject to risks and uncertainties. A number of factors~~assumptions that could cause ~~actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including risks related to the impact of the~~

~~COVID-19~~

~~global pandemic, including the actions of governments, businesses and individuals in response to the situation. For information identifying important factors that could cause~~Holley’s actual results to differ materially from ~~those anticipated~~management’s expectations. Factors that could cause such differences are discussed herein and under the caption, “Cautionary Note Regarding Forward-Looking Statements.”

Overview

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

Innovation is at the ~~Risk~~ core of our business and growth strategy with approximately 35% of our 2021 sales coming from products introduced by us into the market since 2016. We have a history of developing innovative products, including new products in existing product families, product line expansions, and accessories, as well as products that bring us into new categories. We have thoughtfully expanded our product portfolio over time to adapt to consumer needs.

In addition, we have historically used strategic acquisitions to (i) expand our brand portfolio, (ii) enter new product categories and consumer segments, (iii) increase direct-to-consumer (“DTC”) scale and connection, (iv) expand share in current product categories and (v) realize value-enhancing revenue and cost synergies. While we believe our business is positioned for continued organic growth, we intend to continue evaluating opportunities for strategic acquisitions that would complement our current business and expand our addressable target market.

Factors ~~section~~Affecting our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below, under the ~~Company’s annual report~~caption, "Cautionary Note Regarding Forward-Looking Statements," in this Quarterly Report on Form

~~10-K/A~~

10-Q, under the caption, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on ~~February 4, 2022. The Company’s securities~~March 15, 2022, and in our subsequent filings ~~can be accessed on~~with the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether asSEC.

Business Combination

On July 16, 2021 we consummated a ~~result of new information, future events or otherwise.~~

~~Overview~~

~~We are a blank check company incorporated in the Cayman Islands on August 19, 2020 formed for the purpose of effecting our initial~~ business combination ~~We intend~~(“Business Combination”) pursuant to effectuate our initial business combination using cash derived from the proceeds of the Initial Public Offering and the sale of the private placement warrants, our shares, debt or a combination of cash, shares and debt.

~~We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you~~ that ~~our plans to complete our initial business combination will be successful.~~

~~Proposed Business Combination~~

~~On March 11, 2021, the Company entered into an~~certain Agreement and Plan of Merger ~~with~~dated March 11, 2021 (the “Merger Agreement”), by and among Empower Ltd., (“Empower”), Empower Merger Sub I Inc., a direct wholly owned subsidiary of Empower (“Merger Sub I”), Empower Merger Sub II LLC, a direct wholly owned subsidiary of Empower (“Merger Sub II”), and Holley Intermediate Holdings, Inc., ("Holley Intermediate").

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

The Business Combination was accounted for as ~~further described in this Quarterly Report.~~

~~Results~~a reverse recapitalization. Holley Intermediate was deemed the accounting acquirer with Holley Inc. as the successor registrant. As such, Empower was treated as the acquired company for financial reporting purposes, and financial statements for periods prior to the Business Combination are those of ~~Operations~~

Holley Intermediate.

As a result of the Business Combination, Holley Inc. listed on the NYSE, which required us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from inception through March 31, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, searching for a business combinationincurred and ~~activities in connection with the proposed acquisition of Holley. We do not expect to generate any operating revenues until after the completion of our initial business combination. We~~ expect to continue to ~~generate~~incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees.

~~non-operating~~

~~income~~

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Acquisitions

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

In 2021 Holley completed eight acquisitions. The most significant acquisitions impacting the comparability of our operating results were:

●

Advance Engine Management Inc.: On April 14, 2021 Holley acquired Advance Engine Management Inc., doing business as AEM Performance Electronics, a developer and supplier of electronic control and monitoring systems for performance automotive applications. This acquisition increases Holley’s penetration into the import and other sport compact cars submarket.

●

Brothers Mail Order Industries, Inc.: On December 16, 2021, Holley acquired Brothers Mail Order Industries, Inc., doing business as Brothers Trucks, a distributor of classic and custom vehicle restoration parts serving the Chevrolet and GMC truck aftermarket. This acquisition increases Holley's offerings in truck and SUV appearance items.

●

Baer, Inc.: On December 23, 2021, Holley acquired Baer, Inc., doing business as Baer Brakes, a developer and supplier of brakes and brake systems. This acquisition moves Holley closer to its goal of providing complete vehicle solutions by adding a new product category and brake system expertise.

The acquisitions have all been accounted for in accordance with FASB ASC Topic 805, Business Combinations, and the operations of the acquired entities are included in our historical results for the periods following the closing of the acquisition. See Note 1, “Description of the Business, Basis of Presentation, and Summary of Significant Accounting Policies,” and Note 2, “Business Combination and Acquisitions,” in the ~~form~~Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company’s acquisitions and investments.

COVID-19 Update

COVID-19 has adversely impacted global supply chain and general economic conditions. The Company has continued to experience disruptions and higher costs in manufacturing, supply chain, logistical operations, and shortages of ~~interest income~~certain Company products in distribution channels. The full extent of the impact of the COVID-19 pandemic on ~~marketable securities held after~~ the ~~Initial Public Offering. We expect~~Company's business and operational and financial performance and condition is currently uncertain and will depend on many factors outside the Company's control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the utilization and effectiveness of treatments and vaccines, the imposition of effective public safety and other protective measures, the further impact of COVID-19 on the global economy and demand for the Company's products and services. During the second quarter of 2022, we continued to experience supply chain headwinds, including microchip shortages and other supply chain challenges that ~~we will~~prevented us from building and shipping many of our most popular products, which has had, and may continue to have, a negative impact on product availability. Should the ongoing COVID-19 pandemic, including any variants of COVID-19, not improve or worsen, or if the Company's attempt to mitigate its impact on its supply chain, operations and costs is not successful, the Company's business, results of operations, financial condition and prospects may be adversely affected.

Key Components of Results of Operations

Net Sales

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

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Cost of Goods Sold

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

Selling, General, and Administrative

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

Acquisition and Restructuring Costs

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

Related Party Acquisition and Management Fee Costs

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

Interest Expense

Interest expense consists of interest due ~~diligence expenses~~on the indebtedness under our credit facilities. Interest is based on LIBOR or the prime rate, plus the applicable margin rate. As of July 3, 2022, $652.4 million was outstanding under the Company's Credit Agreement.

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Results of Operations

13-Week Period Ended July 3, 2022 Compared With 13-Week Period Ended June 27, 2021

The table below presents Holley’s results of operations for the 13-week periods ended July 3, 2022 and June 27, 2021 (dollars in ~~connection~~thousands):

	For the thirteen weeks ended
	July 3, 2022			June 27, 2021		Change ($)			Change (%)
Net sales	$	179,420		$	193,041	$	(13,621	)		(7.1	%)
Cost of goods sold		104,132			111,841		(7,709	)		(6.9	%)
Gross profit		75,288			81,200		(5,912	)		(7.3	%)
Selling, general, and administrative		36,269			26,190		10,079			38.5	%
Research and development costs		8,196			7,065		1,131			16.0	%
Amortization of intangible assets		3,662			3,502		160			4.6	%
Acquisition and restructuring costs		1,691			2,676		(985	)		(36.8	%)
Related party acquisition and management fee costs		—			1,658		(1,658	)		(100.0	%)
Other expense		325			47		278			591.5	%
Operating income		25,145			40,062		(14,917	)		(37.2	%)
Change in fair value of warrant liability		(23,168	)		—		(23,168	)		n/a
Change in fair value of earn-out liability		(4,234	)		—		(4,234	)		n/a
Interest expense		8,961			11,174		(2,213	)		(19.8	%)
Income before income taxes		43,586			28,888		14,698			50.9	%
Income tax expense		3,023			5,790		(2,767	)		(47.8	%)
Net income		40,563			23,098		17,465			75.6	%
Foreign currency translation adjustment		501			35		466			nm
Total comprehensive income	$	41,064		$	23,133	$	17,931			77.5	%

Net Sales

Net sales for the 13-week period ended July 3, 2022decreased $13.6 million, or 7.1%, to $179.4 million, as compared to $193.0 million for the 13-week period ended June 27, 2021. Non-comparable sales associated with ~~searching~~acquisitions contributed $9.4 million, or 4.8% of year-over-year growth. The remaining comparable sales decreased by $23.0 million, or 11.9%, compared to the prior year quarter, offsetting the impact from the acquisitions. The decline in comparable sales was primarily driven by microchip shortages and other supply chain challenges that prevented us from building and shipping many of our most popular products, destocking from our resellers in response to the current economic environment as well as softening consumer demand, which resulted in a decrease of $37.0 million due to lower unit volume net of improved price realization of $14.0 million compared to the prior year period. Major categories driving the comparable year-over-year results include a decline of $16.3 million in electronic system sales (18.7% category decline), a decline of $1.1 million in mechanical system sales (2.6% category decline), and a decline of $0.5 million in safety product sales (2.7% category decline).

Cost of Goods Sold

Cost of goods sold for the 13-week period ended July 3, 2022 decreased$7.7 million, or 6.9%, to $104.1 million, as compared to $111.8 million for the 13-week period ended June 27, 2021. The decrease in cost of goods sold during the 13-week period ended July 3, 2022 was in line with a corresponding decrease in product sales during such period.

Gross Profit and ~~completing,~~Gross Margin

Gross profit for the 13-week period ended July 3, 2022 decreased $5.9 million, or 7.3%, to $75.3 million, as compared to $81.2 million for the 13-week period ended June 27, 2021. The decrease in gross profit was driven by the decrease in sales. Gross margin for the 13-week period ended July 3, 2022 of 42.0% was stable compared to a gross margin of 42.1% for the 13-week period ended June 27, 2021.

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Selling, General and Administrative

Selling, general and administrative costs for the 13-week period ended July 3, 2022 increased $10.1 million, or 38.5%, to $36.3 million, as compared to $26.2 million for the 13-week period ended June 27, 2021. When expressed as a percentage of sales, selling, general and administrative costs increased to 20.2% of sales for the 13-week period ended July 3, 2022, as compared to 13.6% of sales in 2021. Recent acquisitions accounted for $1.4 million of the increase in selling, general and administrative costs. The increase in costs was also driven by a $3.4 million increase in compensation expense related to equity awards, a $2.3 million increase in personnel costs, reflecting company growth and the additional requirements of becoming a public company, and a $1.4 million increase in outbound shipping and handling costs related to domestic supply chain pressures.

Research and Development Costs

Research and development costs for the 13-week period ended July 3, 2022 increased $1.1 million, or 16.0%, to $8.2 million, as compared to $7.1 million for the 13-week period ended June 27, 2021. The increase in research and development costs was primarily due to headcount investments as we continue to pursue product innovation and new products.

Amortization of Intangible Assets

Amortization of intangible assets for the 13-week period ended July 3, 2022 increased $0.2 million, or 4.6%, to $3.7 million, as compared to $3.5 million for the 13-week period ended June 27, 2021 due to recent acquisitions.

Acquisition and Restructuring Costs

Acquisition and restructuring costs for the 13-week period ended July 3, 2022 decreased $1.0 million, or 36.8%, to $1.7 million, as compared to $2.7 million for the 13-week period ended June 27, 2021.

Related Party Acquisition and Management Fee Costs

Upon the Closing of the Business Combination, the management services agreement with our ~~initial business combination.~~

private equity sponsor was terminated. Related party acquisition and management fee costs for the 13-week period ended June 27, 2021 were $1.7 million.

Operating Income

As a result of factors described above, operating income for the 13-week period ended July 3, 2022 decreased $14.9 million, or 37.2%, to $25.2 million, as compared to $40.1 million for the 13-week period ended June 27, 2021.

Change in Fair Value of Warrant Liability

For the ~~three months~~13-week period ended ~~March 31, 2021,~~July 3, 2022 we ~~had~~recognized a ~~net loss~~gain of ~~$3,017,488, which consisted of formation and operating costs of $2,937,356, and a~~$23.2 million from the change in fair value of the warrant liability. The warrant liability reflects the fair value of ~~$436,667 which are offset by~~the warrants issued in connection with the Business Combination.

Change in Fair Value of Earn-Out Liability

For the 13-week period ended July 3, 2022 we recognized a gain onof $4.2 million from the change in ~~FPA~~fair value of the earn-out liability. The earn-out liability reflects the fair value of ~~$300,000,~~the earn-out shares resulting from the Business Combination.

Interest Expense

Interest expense for the 13-week period ended July 3, 2022 decreased $2.2 million, or 19.8%, to $9.0 million, as compared to $11.2 million for the 13-week period ended June 27, 2021. The decrease was primarily due to a lower effective interest ~~earned~~rate combined with the favorable impact of the $100 million paydown on ~~marketable securities held~~our second lien note in July 2021.

Income before Income Taxes

As a result of factors described above, we recognized $43.6 million of income before income taxes for the ~~trust account of $52,169 and an unrealized gain on marketable securities held in~~13-week period ended July 3, 2022, as compared to $28.9 million for the ~~trust account of $4,366.~~

13-week period ended June 27, 2021.

1933

Income tax expense for the 13-week period ended July 3, 2022 decreased $2.8 million to $3.0 million, as compared to $5.8 million for the 13-week period ended June 27, 2021. The effective tax rate for the 13-week period ended July 3, 2022 was 6.9%. The difference between the effective tax rate and the federal statutory rate in 2022 was primarily due to permanent differences resulting from the change in fair value of the warrant and earn-out liabilities. The effective tax rate for the 13-week period ended June 27, 2021 was 20.0%. The difference between the effective tax rate and the federal statutory rate in 2021 was primarily due to permanent differences.

As a result of factors described above, we recognized net income of $40.6 million for the 13-week period ended July 3, 2022, as compared to$23.1 million for the 13-week period ended June 27, 2021. Additionally, we recognized total comprehensive income of $41.1 million for the 13-week period ended July 3, 2022, as compared to $23.1 million for the 13-week period ended June 27, 2021. Comprehensive income includes the effect of foreign currency translation adjustments.

26-week period ended July 3, 2022 Compared With 26-week period ended June 27, 2021

The table below presents Holley’s results of operations for the 26-week periods ended July 3, 2022 and June 27, 2021 (dollars in thousands):

Net sales for the 26-week period ended July 3, 2022 increased $26.1 million, or 7.4%, to $379.5 million, as compared to $353.4 million for the 26-week period ended June 27, 2021. Non-comparable sales associated with acquisitions contributed $27.4 million, or 7.8% of total year-over-year growth. The remaining comparable sales for the year-to-date period decreased by $1.3 million, or 0.4%. The comparable sales reflect a decrease of $32.0 million due to lower unit volume net of improved price realization of $30.7 million compared to the prior year period. Major categories driving the comparable year-over-year results include a decrease in electronic system sales of $5.6 million (3.5% category decline), mechanical system growth of $4.0 million (5.1% category growth), and safety product growth of $3.7 million (11.0% category growth).

Cost of goods sold for the 26-week period ended July 3, 2022 increased $15.0 million, or 7.3%, to $221.5 million, as compared to $206.5 million for the 26-week period ended June 27, 2021. The increase in cost of goods sold during the 26-week period ended July 3, 2022 was in line with a corresponding increase in product sales during such period.

Concurrent with the execution of the Merger Agreement, the Company entered into Subscription Agreements with PIPE Investors pursuant to which, among other things, the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the PIPE Investors an aggregate of 24 million shares of Domesticated Company Common Stock, at a per share price of $10.00 for an aggregate purchase price of $240,000,000, concurrent with the consummation of the Business Combination, on the terms and subject to the conditions set forth therein. The Subscription Agreement contains customary representations and warranties of the Company, on the one hand, and each PIPE Investor, on the other hand, and customary conditions to closing, including the consummation of the transactions contemplated by the Merger Agreement. Each Subscription Agreement provides that the Company will grant the PIPE Investors certain customary registration rights.

Concurrent with the execution of the Merger Agreement, the Company amended and restated the FPA, whereby, among other things, Empower Funding will purchase 5,000,000 units of the Company at a per unit price of $10.00 concurrent with the consummation of the Business Combination. The allocation of the forward purchase securities among the ultimate MidOcean funds that will be funding the forward purchase will be determined by MidOcean, in its sole discretion, at the time of a Business Combination. If the sale of the forward purchase units fails to close, for any reason, the Company may lack sufficient funds to consummate a Business Combination. The forward purchase shares and forward purchase warrants underlying the units of the Company to be sold pursuant to the A&R FPA will be identical to the Class A ordinary shares included in the units sold in the Initial Public Offering, except that they will be subject to certain registration rights.

~~Critical Accounting Policies~~

~~The preparation of condensed financial statements and related disclosures in conformity~~accordance with accounting principles generally accepted in the United States (“GAAP”) and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of ~~America~~financial performance under GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing Holley’s financial performance. These metrics should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP.

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The following unaudited table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the 13-week and 26-week periods ended July 3, 2022 and June 27, 2021 (dollars in thousands):

	For the thirteen weeks ended					For the twenty-six weeks ended
	July 3, 2022			June 27, 2021		July 3, 2022			June 27, 2021
Net income	$	40,563		$	23,098	$	57,421		$	21,042
Adjustments:
Depreciation		2,523			2,201		4,663			4,453
Amortization of intangible assets		3,662			3,502		7,323			6,838
Interest expense		8,961			11,174		16,352			21,245
Income tax expense		3,023			5,790		10,211			10,556
EBITDA		58,732			45,765		95,970			64,134
Acquisition and restructuring costs		1,691			2,676		1,981			21,509
Change in fair value of warrant liability		(23,168	)		—		(20,941	)		—
Change in fair value of earn-out liability		(4,234	)		—		(1,853	)		—
Equity-based compensation expense		3,483			131		6,645			262
Related party acquisition and management fee costs		—			1,658		—			2,539
Notable items		378			3,862		884			9,575
Other expense (income)		325			47		547			(86	)
Adjusted EBITDA	$	37,207		$	54,139	$	83,233		$	97,933

Liquidity and Capital Resources

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

As of July 3, 2022, the Company had cash of $30.6 million and availability of $123.8 million under its revolving credit facility. The Company has a senior secured revolving credit facility with $125 million in borrowing capacity. As of July 3, 2022, the Company had $1.2 million of letters of credit outstanding under the revolving credit facility.

The Company is obligated under various operating leases for facilities, equipment and automobiles with estimated lease payments of approximately $4.4 million, including short term leases, due during the remainder of fiscal year 2022. See Note 14, "Lease Commitments" in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information related to the Company’s lease obligations.

Holley's capital expenditures are primarily related to ongoing maintenance and improvements, including investments related to upgrading and maintaining our information technology systems, tooling for new products, vehicles for product development, and machinery and equipment for operations. We expect capital expenditures in the range of $14 million to $16 million in fiscal year 2022.

See Note 6, "Debt" in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for further detail of our credit facility and the timing of principal maturities. As of July 3, 2022, based on the then current weighted average interest rate of 5.2%, expected interest payments associated with outstanding debt totaled approximately $17.1 million for the remainder of fiscal year 2022.

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

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Cash Flows

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

26-week period ended July 3, 2022 Compared With 26-week period ended June 27, 2021

	For the twenty-six weeks ended
	July 3, 2022			June 27, 2021
Cash flows from operating activities	$	20,831		$	46,397
Cash flows used in investing activities		(23,442	)		(60,867	)
Cash flows used in financing activities		(2,716	)		(1,539	)
Effect of foreign currency rate fluctuations on cash		(443	)		—
Net decrease in cash and cash equivalents	$	(5,770	)	$	(16,009	)

Operating Activities. Cash provided by operating activities for the 26-week period ended July 3, 2022 was $20.8 million compared to $46.4 million for the 26-week period ended June 27, 2021. Significant components of the year-over-year change in cash provided by operating activities included negative fluctuations from inventories and accounts payable of $28.8 million and $11.8 million, respectively. Offsetting these decreases were increases in cash provided by accounts receivable and prepaids and other current assets of $6.1 million and $6.1 million, respectively. The changes in inventory, accounts payable and accounts receivable reflect the fluctuations in sales during 2022 while accounts payable and accounts receivable are also impacted by the timing of payments.

Investing Activities. Cash used in investing activities for the 26-week period ended July 3, 2022 was $23.4 million, which included $9.4 million relating to capital expenditures and $14.0 million relating to acquisitions. During the 26-week period ended June 27, 2021, cash used in investing activities was $60.9 million which included $54.0 million relating to acquisitions and $6.8 million due to capital expenditures.

Financing Activities. Cash used in financing activities for the 26-week period ended July 3, 2022 was $2.7 million due to net principal payments on long-term debt. Cash used in financing activities for the 26-week period ended June 27, 2021 reflected principal payments on long-term debt.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires ~~management~~us to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, sales, expenses and ~~liabilities, disclosure~~related disclosures. We evaluate our estimates, judgements and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. For a discussion of ~~contingent assets and liabilities at~~our critical accounting estimates, refer to the ~~date~~section entitled “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 15, 2022. For further information see also Note 1, “Description of the ~~condensed financial statements,~~Business, Basis of Presentation, and ~~income and expenses during~~Summary of Significant Accounting Policies” in the ~~periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.~~

~~Warrant and FPA Liabilities~~

~~We account for the Warrants and the FPA in accordance with the guidance contained in ASC~~

~~815-40-15-7D~~

and 7F under which the Warrants and the forward purchase agreement do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the Warrants and the FPA as liabilities at their fair value and adjust the Warrants and the FPA to fair value at each reporting period. This liability is subject to

~~re-measurement~~

at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The Private Warrants are valued using a Modified Black Scholes Option Pricing Model. For periods where no observable traded price was available, the Public Warrants are valued using a Monte Carlo simulation. For periods subsequentNotes to the ~~detachment~~Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

For a discussion of Holley’s new or recently adopted accounting pronouncements, see Note 1, “Description of the ~~Public Warrants from~~Business, Basis of Presentation, and Summary of Significant Accounting Policies,” in the ~~Units,~~Notes to the ~~Public Warrant quoted market price was used as the fair value as of each relevant date. The fair value of the FPA has been estimated using an adjusted net assets method.~~

Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

~~Class A Ordinary Shares Subject to Redemption~~38

We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our balance sheet.

~~Net Loss Per Ordinary Share~~

~~Net income (loss) per ordinary share is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding for the period. The Company applies the~~

~~two-class~~

method in calculating income (loss) per ordinary share. Accretion associated with the redeemable Class A ordinary shares is excluded from income (loss) per ordinary share as the redemption value approximates fair value.

~~Recent Accounting Standards~~

~~In August 2020, the FASB issued ASU~~

~~No. 2020-06,~~

~~“Debt—Debt with Conversion and Other Options (Subtopic~~

~~470-20)~~

~~and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic~~

~~815-40):~~

~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU~~

~~2020-06”),~~

~~which simplifies accounting for convertible instruments by removing major separation~~

Delaware		87-1727560
~~Delaware~~		~~87-1727560~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~1801 Russellville Road, Bowling Green,~~ KY		~~42101~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~


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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐

~~Non-accelerated~~ ~~filer~~ ☒	Smaller reporting company	☒
	~~Smaller reporting company~~	☒

		Emerging growth company	☒

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.	5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	29

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	39

Item 4. Controls and Procedures	39


PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	40

Item 1A. Risk Factors.	40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	40

Item 3. Defaults Upon Senior Securities.	40

Item 4. Mine Safety Disclosures	40

Item 5. Other Information.	40

Item 6. Exhibits.	41

SIGNATURE	42

	As of
	July 3, 2022		December 31, 2021
ASSETS
Cash and cash equivalents	$	30,555	$	36,325
Accounts receivable, less allowance for credit losses of $1,269 and $1,387, respectively		58,222		51,390
Inventory		214,867		185,040
Prepaids and other current assets		16,881		18,962
Total current assets		320,525		291,717
Property, plant, and equipment, net		56,009		51,495
Goodwill		417,339		411,383
Other intangibles assets, net		434,120		438,461
Right-of-use assets		32,762		0
Total assets	$	1,260,755	$	1,193,056
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	39,648	$	45,708
Accrued interest		3,843		3,359
Accrued liabilities		41,051		34,853
Current portion of long-term debt		6,300		7,875
Total current liabilities		90,842		91,795
Long-term debt, net of current portion		636,756		637,673
Warrant liability		40,352		61,293
Earn-out liability		10,054		26,596
Deferred taxes		68,955		70,045
Other noncurrent liabilities		29,429		1,167
Total liabilities		876,388		888,569
Commitments and contingencies (Refer to Note 16 - Commitments and Contingencies)
Stockholders' equity:
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding as of July 3, 2022 and December 31, 2021		0		0
Common stock, $0.0001 par value, 550,000,000 shares authorized, 116,932,722 and 115,805,639 shares issued and outstanding as of July 3, 2022 and December 31, 2021, respectively		12		12
Additional paid-in capital		351,422		329,705
Accumulated other comprehensive gain (loss)		486		(256	)
Retained earnings (accumulated deficit)		32,447		(24,974	)
Total stockholders' equity		384,367		304,487
Total liabilities and stockholders' equity	$	1,260,755	$	1,193,056

	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Gain (Loss)			Retained Earnings (Accumulated Deficit)			Total
Balance at December 31, 2020		100	$	—	$	238,890		$	(674	)	$	2,165		$	240,381
Retroactive application of recapitalization		67,673,784		7		(7	)		—			—			—
Adjusted balance at December 31, 2020		67,673,884		7		238,883			(674	)		2,165			240,381
Net loss		—		0		0			0			(2,056	)		(2,056	)
Equity compensation		—		0		131			0			0			131
Foreign currency translation		—		0		0			(16	)		0			(16	)
Balance at March 28, 2021		67,673,884		7		239,014			(690	)		109			238,440
Net income		—		0		0			0			23,098			23,098
Equity compensation		—		0		131			0			0			131
Foreign currency translation		—		0		0			35			0			35
Balance at June 27, 2021		67,673,884	$	7	$	239,145		$	(655	)	$	23,207		$	261,704

Balance at December 31, 2021		115,805,639	$	12	$	329,705		$	(256	)	$	(24,974	)	$	304,487
Net income		—		0		0			0			16,858			16,858
Equity compensation		—		0		3,162			0			0			3,162
Foreign currency translation		—		0		0			241			0			241
Issuance of earn-out shares		1,093,750		0		14,689			0			0			14,689
Balance at April 3, 2022		116,899,389		12		347,556			(15	)		(8,116	)		339,437
Net income		—		0		0			0			40,563			40,563
Equity compensation		—		0		3,483			0			0			3,483
Warrants exercised		33,333		0		383			0			0			383
Foreign currency translation		—		0		0			501			0			501
Balance at July 3, 2022		116,932,722	$	12	$	351,422		$	486		$	32,447		$	384,367


	~~Page~~
~~Part I. Financial Information~~
~~Item 1. Financial Statements (Unaudited)(As Restated)~~
~~Condensed Balance Sheets as of March 31, 2021 and December 31, 2020~~		1
~~Condensed Statement of Operations for the Three Months Ended March 31, 2021~~		2
~~Condensed Statement of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2021~~		3
~~Condensed Statement of Cash Flows for the Three Months Ended March 31, 2021~~		4
~~Notes to Condensed Financial Statements~~		5
~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		19
~~Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk~~		22
~~Item 4. Controls and Procedures~~		22
~~Part II. Other Information~~
~~Item 1. Legal Proceedings~~		23
~~Item 1A. Risk Factors~~		23
~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~		23
~~Item 3. Defaults Upon Senior Securities~~		23
~~Item 4. Mine Safety Disclosures~~		23
~~Item 5. Other Information~~		23
~~Item 6. Exhibits~~		23
~~Part III. Signatures~~		25


	March 31, 2021			December 31, 2020
	(unaudited)
ASSETS
Current Assets
Cash	$	1,026,938		$	1,080,629
Prepaid expenses		319,334			379,166

Total Current Assets		1,346,272			1,459,795
Cash and marketable securities held in trust account		250,109,441			250,052,906

Total Assets	$	251,455,713		$	251,512,701

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities—accrued expenses	$	2,997,706		$	173,873
Warrant liability		15,526,667			15,090,000
Forward purchase agreement liability		1,750,000			2,050,000
Deferred underwriting fee payable		8,750,000			8,750,000

Total Liabilities		29,024,373			26,063,873

Commitments		0			0
Class A ordinary shares subject to possible redemption, 25,000,000 shares, at redemption value		250,109,441			250,052,906
Shareholders’ Deficit
Preference shares, $0.0001 par value; 5,000,000 shares authorized; NaN issued and outstanding		0—			0—
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 0 shares issued and outstanding (excluding 25,000,000 shares subject to possible redemption)		0			0
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 6,250,000 shares issued and outstanding		625			625
Additional paid-in capital		0			0
Accumulated deficit		(27,678,726	)		(24,604,703	)

Total Shareholders’ Deficit		(27,678,101	)		(24,604,078	)

Total Liabilities and Shareholders’ Deficit	$	251,455,713		$	251,512,701


	Three months ended March 31, 2021
Formation and operating costs	$	2,937,356

Loss from operations		(2,937,356	)
Other income (expenses):
Interest earned on marketable securities held in trust account		52,169
Unrealized gain on marketable securities held in trust account		4,366
Change in fair value of warrant liability		(436,667	)
Change in fair value of forward purchase agreement liability		300,000

		80,132

Net loss	$	(3,017,488	)

Weighted average Class A ordinary shares outstanding		25,000,000

Basic and diluted net loss per Class A ordinary share	$	(0.10	)

Weighted average Class B ordinary shares outstanding		6,250,000

Basic and diluted net loss per Class B ordinary share	$	(0.10	)


	Class B Ordinary Shares				Additional Paid-in		Accumulated			Total Shareholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance – December 31, 2020 (Restated)		6,250,000	$	625	$	0	$	(24,604,703	)	$	(24,604,078	)
Accretion for Class A ordinary shares subject to possible redemption amount		—		—		—		(56,535	)		(56,535	)
Net loss		—		—		—		(3,017,488	)		(3,017,488	)

Balance – March 31, 2021		6,250,000	$	625	$	0	$	(27,678,726	)	$	(27,678,101	)


	Three months ended March 31, 2021
Cash Flows from Operating Activities:
Net loss	$	(3,017,488	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest earned on marketable securities held in trust account		(52,169	)
Unrealized gain on marketable securities held in trust account		(4,366	)
Change in fair value of warrant liability		436,667
Change in fair value of forward purchase agreement liability		(300,000	)
Changes in operating assets and liabilities:
Prepaid expenses		59,832
Accrued expenses		2,823,833

Net cash used in operating activities		(53,691	)

Net Change in Cash		(53,691	)
Cash – Beginning		1,080,629

Cash – Ending	$	1,026,938

Non-Cash Investing and Financing Activities:
Accretion of Class A ordinary shares subject to possible redemption	$	(56,535	)


	As Previously Reported			Adjustment			As Restated
Balance Sheet as of March 31, 2021
Ordinary shares subject to possible redemption	$	217,431,332		$	32,678,109		$	250,109,441
Ordinary Shares	$	327		$	(327	)	$	—
Additional paid-in capital	$	12,460,438		$	(12,460,438	)	$	—
Accumulated deficit	$	(7,461,382	)	$	(20,217,344	)	$	(27,678,726	)
Total Shareholders’ Equity (Deficit)	$	5,000,008		$	(32,678,109	)	$	(27,678,101	)
Condensed Statement of Changes in Shareholders’ Equity (Deficit) for the Three Months Ended March 31, 2021
Change in value of Ordinary shares of subject to redemption	$	3,017,488		$	(3,017,488	)	$	—
Accretion for Class A Ordinary shares to redemption amount	$	—		$	(56,535	)	$	(56,535	)
Total Shareholders’ Equity (Deficit)	$	5,000,008		$	(32,678,109	)	$	(27,678,101	)
Statement of Cash Flows for the three months ended March 31, 2021
Change in value of ordinary shares subject to possible redemption	$	(3,017,488	)	$	3,074,023		$	56,535


	As Previously Reported			Adjustment			As Restated
Statement of Operations for the Three Months Ended March 31, 2021
Weighted average Class A ordinary shares outstanding		22,040,218			2,959,782			25,000,000
Basic and diluted net loss per Class A ordinary share	$	—		$	(0.10	)	$	(0.10	)
Weighted average Class B ordinary shares outstanding		9,209,782			(2,959,782	)		6,250,000
Basic and diluted net loss per Class B ordinary share	$	(0.33	)	$	0.23		$	(0.10	)


Gross proceeds	$	250,000,000
Less:
Proceeds allocated to Public Warrants	$	(8,500,000	)
Class A ordinary shares issuance costs	$	(13,732,278	)
Plus:
Accretion of carrying value to redemption value	$	22,341,719

Ordinary shares subject to possible redemption	$	250,109,441


	Three Months Ended March 31, 2021
	Class A			Class B
Basic and diluted net loss per ordinary share
Numerator:
Allocation of net loss, as adjusted	$	(2,413,990	)	$	(603,498	)
Denominator:
Basic and diluted weighted average shares outstanding		25,000,000			6,250,000

Basic and diluted net loss per ordinary share	$	(0.10	)	$	(0.10	)

2022 (excluding the twenty-six weeks ended July 3, 2022)	$	3,563	$	867
2023		7,132		1,782
2024		7,140		1,690
2025		7,335		1,909
2026		6,300		1,980
Thereafter		624,004		4,190
	$	655,474	$	12,418


~~Level 1:~~		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

~~Level 2:~~		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

~~Level 3:~~		~~Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.~~


Description	Level		March 31, 2021		December 31, 2020
Assets:
Cash and marketable securities held in trust account		1	$	250,109,441	$	250,052,906
Liabilities:
Warrant liability – public warrants		1		9,833,333		9,583,333
Warrant liability – private placement warrants		3		5,693,334		5,506,667
Forward purchase agreement liability		3		1,750,000		2,050,000

	Fair Value Measured as of July 3, 2022
	Level 1		Level 2		Level 3		Total
Liabilities included in:
Warrant liability (Public)	$	26,212	$	—	$	—	$	26,212
Warrant liability (Private)		—		—		14,140		14,140
Earn-out liability		—		—		10,054		10,054
Total fair value	$	26,212	$	—	$	24,194	$	50,406

	Fair Value Measured as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Liabilities included in:
Warrant liability (Public)	$	39,500	$	—	$	—	$	39,500
Warrant liability (Private)		—		—		21,793		21,793
Earn-out liability		—		—		26,596		26,596
Total fair value	$	39,500	$	—	$	48,389	$	87,889


	Private Placement		Public		Warrant Liabilities
Fair value as of December 31, 2020	$	5,506,667	$	9,583,333	$	15,090,000
Change in valuation inputs or other assumptions		186,667		250,000		436,667

Fair value as of March 31, 2021	$	5,693,334	$	9,833,333	$	15,526,667


	FPA Liability
Fair value, December 31, 2020	$	2,0500,000
Recognized gain on change in fair value (1)		(300,000	)

Fair value, March 31, 2021	$	1,750,000


Input	March 31, 2021			December 31, 2020
Risk-free interest rate		0.98	%		0.51	%
Trading days per year		252			252
Expected volatility		17.4	%		16.5	%
Exercise price	$	11.50		$	11.50
Stock Price	$	9.98		$	10.01


Exhibit ~~Number~~ No.		Description

2.1		Agreement and Plan of Merger, dated as of March 11, 2021, by and among Empower Ltd., Empower Merger Sub I Inc., Empower Merger Sub II LLC and Holley Intermediate Holdings, Inc. (incorporated ~~herein~~ by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the ~~Registrant’s Form~~ ~~8-K~~ ~~filed by the Registrant~~SEC on March 12, ~~2021 (File~~ ~~No. 001-39599))~~2021).

~~10.1~~ 3.1		~~Sponsor Agreement,~~Certificate of Incorporation of the Company, dated ~~as of March 11,~~July 16, 2021 ~~by and among Empower Ltd., Empower Sponsor Holdings LLC, and Holley Parent Holdings, LLC~~ (incorporated ~~herein~~ by reference to Exhibit ~~2.1~~3.1 of the Company’s Current Report on Form 8-K, filed with the ~~Registrant’s Form~~ ~~8-K~~ ~~filed by the Registrant~~SEC on ~~March 12, 2021 (File~~ ~~No. 001-39599))~~July 21, 2021).

~~10.2~~ 3.2		~~Amended and Restated Forward Purchase Agreement,~~Bylaws of the Company, dated ~~as of March 11,~~July 16, 2021 ~~by and between Empower Ltd. and Empower Funding LLC~~ (incorporated ~~herein~~ by reference to Exhibit ~~10.2~~3.2 of the Company’s Current Report on Form 8-K, filed with the ~~Registrant’s Form~~ ~~8-K~~ ~~filed by the Registrant~~SEC on ~~March 12, 2021 (File~~ ~~No. 001-39599))~~July 21, 2021).


~~Exhibit~~ ~~Number~~ 31.1		~~Description~~ Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act

~~10.3~~ 31.2		~~Lock-up~~ ~~Agreement, dated as of March 11, 2021, by and between Empower Ltd. and Holley Parent Holdings, LLC (incorporated herein by reference to Exhibit 10.3 filed with the Registrant’s Form~~ ~~8-K~~ ~~filed by the Registrant on March 12, 2021 (File~~ ~~No. 001-39599)).~~

~~10.4~~		~~Form of Subscription Agreement (incorporated herein by reference to Exhibit 10.4 filed with the Registrant’s Form~~ ~~8-K~~ ~~filed by the Registrant on March 12, 2021 (File~~ ~~No. 001-39599)).~~

31.1*		Certification of ~~Principal Executive Officer Pursuant to Securities Exchange Act Rules~~ ~~13a-14(a),~~ ~~as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

31.2*		~~Certification of Principal~~Chief Financial Officer Pursuant to ~~Securities~~Rules 13a-14(a) and 15d-14(a) of the Exchange Act ~~Rules~~ ~~13a-14(a),~~ ~~as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1** 32.1		Certification of ~~Principal~~Chief Executive Officer ~~Pursuant~~pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. ~~Section~~ 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2** 32.2		Certification of ~~Principal~~Chief Financial Officer ~~Pursuant~~pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. ~~Section~~ 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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		Holley Inc.
	~~HOLLEY INC. (F/K/A EMPOWER LTD.)~~

~~Date: February 4, 2022~~		~~/s/ Thomas W. Tomlinson~~
	~~Name:~~	~~Thomas W. Tomlinson~~
	~~Title:~~	~~Chief Executive Officer~~
		~~(Principal Executive Officer)~~

~~Date: February 4, 2022~~		/s/ Dominic Bardos
	~~Name:~~	Dominic Bardos
	~~Title:~~	Chief Financial Officer (Duly Authorized Officer)
		~~(Principal Financial and Accounting Officer)~~
August 11, 2022