10-Q 1 amsc20231231_10q.htm FORM 10-Q amsc20231231_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 


 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2023

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____.

Commission File Number: 0-19672

 


American Superconductor Corporation

(Exact name of registrant as specified in its charter)

 


 

Delaware

04-2959321

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

114 East Main St. Ayer, Massachusetts

01432

(Address of principal executive offices)

(Zip Code)

 

(978) 842-3000

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock,
$0.01 par value per share

AMSC

Nasdaq Global Select Market

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  ☐

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

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company 

 

Emerging growth company

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

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

Shares outstanding of the Registrant’s common stock:

 

Common Stock, par value $0.01 per share

 

30,736,347

Class

 

Outstanding as of January 19, 2024

 



 

 

 

 
 

AMERICAN SUPERCONDUCTOR CORPORATION

INDEX

 

 

 

Page No.

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

Item 4.

Controls and Procedures

35

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

36

 

 

 

Item 1A.

Risk Factors

36

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

Item 3.

Defaults Upon Senior Securities

36

 

 

 

Item 4.

Mine Safety Disclosure

36

 

 

 

Item 5.

Other Information

36

 

 

 

Item 6.

Exhibits

37

 

 

 

Signature

 

38

 

2

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

  

December 31, 2023

  

March 31, 2023

 

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $23,979  $23,360 

Accounts receivable, net

  24,721   30,665 

Inventory, net

  44,197   36,986 

Prepaid expenses and other current assets

  6,635   13,429 

Restricted cash

  667   1,733 

Total current assets

  100,199   106,173 
         

Property, plant and equipment, net

  11,205   12,309 

Intangibles, net

  6,907   8,527 

Right-of-use assets

  2,401   2,857 

Goodwill

  43,471   43,471 

Restricted cash

  379   582 

Deferred tax assets

  1,141   1,114 

Other assets

  640   528 

Total assets

 $166,343  $175,561 
         

LIABILITIES AND STOCKHOLDERS' EQUITY

        
         

Current liabilities:

        

Accounts payable and accrued expenses

 $23,002  $38,383 

Lease liability, current portion

  680   808 

Debt, current portion

  41   75 

Contingent consideration

  1,230   1,270 

Deferred revenue, current portion

  52,598   43,572 

Total current liabilities

 $77,551  $84,108 
         

Deferred revenue, long-term portion

  7,145   7,188 

Lease liability, long-term portion

  1,861   2,184 

Deferred tax liabilities

  235   243 

Debt, long-term portion

     15 

Other liabilities

  26   26 

Total liabilities

  86,818   93,764 
         

Commitments and Contingencies (Note 16)

          
         

Stockholders' equity:

        

Common stock

  311   299 

Additional paid-in capital

  1,146,405   1,139,113 

Treasury stock

  (3,639)  (3,639)

Accumulated other comprehensive income

  1,527   1,571 

Accumulated deficit

  (1,065,079)  (1,055,547)

Total stockholders' equity

  79,525   81,797 

Total liabilities and stockholders' equity

 $166,343  $175,561 

 

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

 

3

 

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, except per share data)

 

  

Three Months Ended

  

Nine Months Ended

 
  

December 31,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Revenues

 $39,353  $23,881  $103,611  $74,241 
                 

Cost of revenues

  29,369   23,364   78,759   69,533 
                 

Gross margin

  9,984   517   24,852   4,708 
                 

Operating expenses:

                

Research and development

  2,199   2,083   5,693   7,076 

Selling, general and administrative

  7,833   7,173   23,648   22,084 

Amortization of acquisition-related intangibles

  538   690   1,614   2,058 

Change in fair value of contingent consideration

  852   (220)  3,052   (340)

Restructuring

        (14)   

Total operating expenses

  11,422   9,726   33,993   30,878 
                 

Operating loss

  (1,438)  (9,209)  (9,141)  (26,170)
                 

Interest income, net

  150   42   518   112 

China dissolution

           (1,921)

Other expense, net

  (298)  (287)  (618)  (48)

Loss before income tax expense

  (1,586)  (9,454)  (9,241)  (28,027)
                 

Income tax expense

  63   127   291   144 
                 

Net loss

 $(1,649) $(9,581) $(9,532) $(28,171)
                 

Net loss per common share

                

Basic

 $(0.06) $(0.34) $(0.33) $(1.01)

Diluted

 $(0.06) $(0.34) $(0.33) $(1.01)
                 

Weighted average number of common shares outstanding

                

Basic

  29,092   27,954   28,728   27,794 

Diluted

  29,092   27,954   28,728   27,794 

 

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

 

4

 

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 

(In thousands)

 

  

Three Months Ended

  

Nine Months Ended

 
  

December 31,

  

December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Net loss

 $(1,649) $(9,581) $(9,532) $(28,171)

Other comprehensive (loss) gain, net of tax:

                

China dissolution

           1,921 

Foreign currency translation loss

  (106)  (195)  (44)  (27)

Total other comprehensive (loss) gain, net of tax

  (106)  (195)  (44)  1,894 

Comprehensive loss

 $(1,755) $(9,776)  (9,576) $(26,277)

 

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

 

5

 

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE Three and Nine Months Ended December 31, 2023 AND 2022

 

(In thousands)

 

  

Common Stock

  

Additional

      

Accumulated Other

      

Total

 
  

Number of Shares

  

Par Value

  

Paid-in Capital

  

Treasury Stock

  

Comprehensive Income (Loss)

  

Accumulated Deficit

  

Stockholders' Equity

 

Balance at March 31, 2023

  29,937  $299  $1,139,113  $(3,639) $1,571  $(1,055,547) $81,797 

Issuance of common stock – restricted shares

  699   7   (7)            

Stock-based compensation expense

        1,357            1,357 

Issuance of common stock for 401(k) match

  33   1   163            164 

Cumulative translation adjustment

              (2)     (2)

Net loss

                 (5,398)  (5,398)

Balance at June 30, 2023

  30,669  $307  $1,140,626  $(3,639) $1,569  $(1,060,945) $77,918 

Issuance of common stock – ESPP

  21      136            136 

Issuance of common stock - restricted shares

  9                  - 

Stock-based compensation expense

        1,111            1,111 

Issuance of common stock for 401(k) match

  17      150            150 

Cumulative translation adjustment

              64      64 

Net loss

                 (2,485)  (2,485)

Balance at September 30, 2023

  30,716  $307  $1,142,023  $(3,639) $1,633  $(1,063,430) $76,894 

Stock-based compensation expense

  -      1,140            1,140 

Issuance of common stock for 401(k) match

  18      154            154 

Issuance of common stock for contingent consideration

  400   4   3,088            3,092 

Cumulative translation adjustment

              (106)     (106)

Net loss

                 (1,649)  (1,649)

Balance at December 31, 2023

  31,134  $311  $1,146,405  $(3,639) $1,527  $(1,065,079) $79,525 

 

6

 

  

Common Stock

  

Additional

      Accumulated Other      

Total

 
  Number of Shares  Par Value  Paid-in Capital  Treasury Stock  Comprehensive Income (Loss)  Accumulated Deficit  Stockholders' Equity 

Balance at March 31, 2022

  28,920  $289  $1,133,536  $(3,639) $(291) $(1,020,506) $109,389 

Issuance of common stock – restricted shares, net of forfeited shares

  (9)                  

Stock-based compensation expense

        1,033            1,033 

Issuance of common stock for 401(k) match

  28      138            138 

Cumulative translation adjustment

              63      63 

Net loss

                 (8,710)  (8,710)

Balance at June 30, 2022

  28,939  $289  $1,134,707  $(3,639) $(228) $(1,029,216) $101,913 

Issuance of common stock – ESPP

  34      127            127 

Issuance of common stock – restricted shares

  331   3   (3)            

Stock-based compensation expense

        1,019            1,019 

Issuance of common stock for 401(k) match

  33   1   178            179 

Cumulative translation adjustment

              2,026      2,026 

Net loss

                 (9,881)  (9,881)

Balance at September 30, 2022

  29,337  $293  $1,136,028  $(3,639) $1,798  $(1,039,097) $95,383 

Issuance of common stock – restricted shares

  550   6   (6)            

Stock-based compensation expense

        1,440            1,440 

Issuance of common stock for 401(k) match

  41      160            160 

Cumulative translation adjustment

              (195)     (195)

Net loss

                 (9,581)  (9,581)

Balance at December 31, 2022

  29,928  $299  $1,137,622  $(3,639) $1,603  $(1,048,678) $87,207 

 

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

 

7

 

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands)

 

  

Nine Months Ended December 31,

 
  

2023

  

2022

 

Cash flows from operating activities:

        

Net loss

 $(9,532) $(28,171)

Adjustments to reconcile net loss to net cash used in operations:

        

Depreciation and amortization

  3,360   4,104 

Stock-based compensation expense

  3,608   3,492 

Provision for excess and obsolete inventory

  1,536   1,247 

Deferred income taxes

  3   65 

Change in fair value of contingent consideration

  3,052   (340)

China dissolution

     1,921 

Other non-cash items

  495   185 

Unrealized foreign exchange loss on cash and cash equivalents

  (1)  (3)

Changes in operating asset and liability accounts:

        

Accounts receivable

  5,945   2,738 

Inventory

  (8,737)  (16,324)

Prepaid expenses and other assets

  7,139   (165)

Accounts payable and accrued expenses

  (15,859)  2,565 

Deferred revenue

  8,894   11,619 

Net cash used in operating activities

  (97)  (17,067)
         

Cash flows from investing activities:

        

Purchase of property, plant and equipment

  (635)  (970)

Change in other assets

  (8)  (194)

Net cash used in investing activities

  (643)  (1,164)
         

Cash flows from financing activities:

        

Repayment of debt

  (49)  (56)

Proceeds from exercise of employee stock options and ESPP

  136   127 

Net cash provided by financing activities

  87   71 
         

Effect of exchange rate changes on cash

  3   25 
         

Net decrease in cash, cash equivalents and restricted cash

  (650)  (18,135)

Cash, cash equivalents and restricted cash at beginning of period

  25,675   49,486 

Cash, cash equivalents and restricted cash at end of period

 $25,025  $31,351 
         

Supplemental schedule of cash flow information:

        

Cash paid for income taxes, net of refunds

 $263  $280 

Non-cash investing and financing activities

        

Issuance of common stock to settle contingent consideration

 $3,092  $ 

Issuance of common stock to settle liabilities

 $467  $476 

 

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

 

8

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Nature of the Business and Operations and Liquidity

 

Nature of the Business and Operations

 

American Superconductor Corporation (together with its subsidiaries, “AMSC®” or the “Company”) was founded on April 9, 1987. The Company is a leading system provider of megawatt-scale power resiliency solutions that orchestrate the rhythm and harmony of power on the grid™ and that protect and expand the capability of the Navy’s fleet. The Company’s system level products leverage its proprietary “smart materials” and “smart software and controls” to provide enhanced resiliency and improved performance of megawatt-scale power flow.

 

These unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q. Certain prior period amounts were reclassified to conform to the presentation in the current period. The going concern basis of presentation assumes that the Company will continue operations and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those instructions. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods ended  December 31, 2023 and 2022 and the financial position at December 31, 2023; however, these results are not necessarily indicative of results which may be expected for the full year. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended  March 31, 2023, and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended  March 31, 2023 filed with the SEC on May 31, 2023.

 

Liquidity

 

The Company has historically experienced recurring operating losses and as of December 31, 2023, the Company had an accumulated deficit of $1,065.1 million. In addition, the Company has historically experienced recurring negative operating cash flows. At December 31, 2023, the Company had cash and cash equivalents of $24.0 million. Cash used in operations for the nine months ended  December 31, 2023 was $0.1 million.

 

In February 2021, the Company filed a shelf registration statement on Form S-3 that will expire in February 2024 (the “Form S-3”). The Form S-3 allows the Company to offer and sell from time-to-time up to $250 million of common stock, debt securities, warrants or units comprised of any combination of these securities. The Form S-3 is intended to provide the Company flexibility to conduct registered sales of the Company's securities, subject to market conditions, in order to fund the Company's future capital needs. The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

 

In recent periods, the Company has experienced inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company’s cost of revenues and decreased gross margin. While the impact of inflation has been challenging, the Company has taken actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, inflation, COVID-19, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions, could have a material adverse effect on the Company’s business, financial condition and results of operation.

 

9

 

From time-to-time the Company  may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately 5% of the global workforce. This restructuring is expected to incur $1.0 million of cash expenses, of which $0.9 million has been paid as of December 31, 2023 and the remaining $0.1 million is expected to be paid by March 31, 2024, and to result in annualized cost savings of approximately $5.0 million, beginning in fiscal 2023.

 

The Company believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the unaudited condensed consolidated financial statements for the nine months ended December 31, 2023. The Company’s liquidity is highly dependent on its ability to increase revenues, its ability to control its operating costs, and its ability to raise additional capital, if necessary. The impact of COVID-19 and other sources of instability, including the wars between Russia and Ukraine and Israel and Hamas, on the global financing markets may reduce the Company's ability to raise additional capital, if necessary, which could negatively impact the Company's liquidity.  There can be no assurance that the Company will be able to continue to raise additional capital, on favorable terms or at all, from other sources or execute on any other means of improving liquidity described above.

 

2. Revenue Recognition

 

The Company’s revenues in its Grid business segment are derived primarily through enabling the transmission and distribution of power, providing planning services that allow it to identify power grid needs and risks, and developing ship protection systems for the U.S. Navy. The Company’s revenues in its Wind business segment are derived primarily through supplying advanced power electronics and control systems, licensing its highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606. For its customer contracts, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) control of goods or services is transferred to the customer. In the three and nine months ended December 31, 202385% and 80% of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time. In the three and nine months ended December 31, 2022, 87% and 80% of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

 

In the Company's equipment and system product line, each contract with a customer summarizes each product sold to a customer, which typically represents distinct performance obligations. A contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s product sales transfer control to the customer in line with the contracted delivery terms and revenue is recorded at the point in time when title and risk transfer to the customer, which is primarily upon delivery, as the Company has determined that this is the point in time that control transfers to the customer.

 

In the Company's service and technology development product line, there are several different types of transactions, and each begins with a contract with a customer that summarizes each product sold to a customer, which typically represents distinct performance obligations. The technology development transactions are primarily for activities that have no alternative use and for which a profit can be expected throughout the life of the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract then the revenue is recognized at a point in time. Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach. The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts. The transaction prices on these contracts are allocated based on an adjusted market approach which is re-assessed annually for reasonableness. The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are not deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists. The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts. The transaction prices of these agreements are calculated based on an adjusted market approach as specified in the contract. The Company reports royalty revenue for usage-based royalties when the sales have occurred. In circumstances when collectability is not assured and a contract does not exist under ASC 606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are no further remaining performance obligations.

 

10

 

The Company's service contracts can include a purchase order from a customer for specific goods in which each item is a distinct performance obligation satisfied at a point in time at which control of the goods is transferred to the customer.  This transfer occurs based on the contracted delivery terms or when the requested service work has been completed. The transaction price for these goods is allocated based on the adjusted market approach considering similar transactions under similar circumstances. Service contracts are also derived from ongoing maintenance contracts and extended service-type warranty contracts. In these transactions, the Company is contracted to provide an ongoing service over a specified period of time. As the customer is consuming the benefits as the service is being provided, the revenue is recognized over time ratably.

 

The Company’s policy is not to accept volume discounts, product returns, or rebates and allowances within its contracts. In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.

 

The Company provides assurance-type warranties on all product sales for a term of typically one to three years, and extended service-type warranties are available for purchase at the customer's option for an additional term ranging up to four additional years. The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure. For all extended service-type warranties, the Company recognizes the revenue ratably over time during the effective period of the services.

 

The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with revenue-producing activities. The Company has elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized. The Company has elected to recognize incremental costs of obtaining a contract as expense when incurred except in contracts where the amortization period would exceed twelve months; in such cases the long-term amount will be assessed for materiality. The Company has elected not to adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is twelve months or less.  The Company has elected to recognize revenue based on the As invoiced practical expedient if there is a right to consideration from a customer in an amount that corresponds directly with the value of the Company's performance.

 

The Company monitors costs to meet its obligations on its customer contracts. When it is evident that there is a loss expected on a contract, a contract loss is accrued in the period. Several long-term contracts that were acquired from Neeltran, Inc. (“Neeltran”) were impacted by higher than planned costs due to required design changes and inflation on material costs, resulting in an increase to the contract loss accrual of $1.6 million and $3.2 million in the three and nine months ended  December 31, 2022, respectively, which negatively impacted the Company's gross margins. The contract loss accrual decreased by $2.5 million and $3.4 million in each of the three and nine months ended December 31, 2023, respectively, as projects have been completed.

 

The Company’s contracts with customers do not typically include extended payment terms and may include milestone billing over the life of the contract. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from delivery.  

 

11

 

The following tables disaggregate the Company’s revenue by product line and by shipment destination (in thousands):

 

  

Three Months Ended December 31, 2023

  

Nine Months Ended December 31, 2023

 

Product Line:

 

Grid

  

Wind

  

Grid

  

Wind

 

Equipment and systems

 $31,210  $4,983  $81,181  $13,844 

Services and technology development

  2,393   767   6,673   1,913 

Total

 $33,603  $5,750  $87,854  $15,757 
                 

Region:

                

Americas

 $26,782  $45  $74,640  $102 

Asia Pacific

  3,704   5,660   8,832   15,587 

EMEA

  3,117   45   4,382   68 

Total

 $33,603  $5,750  $87,854  $15,757 

  

  

Three Months Ended December 31, 2022

  

Nine Months Ended December 31, 2022

 

Product Line:

 

Grid

  

Wind

  

Grid

  

Wind

 

Equipment and systems

 $19,475  $2,842  $61,680  $6,144 

Services and technology development

  1,334   230   4,657   1,760 

Total

 $20,809  $3,072  $66,337  $7,904 
                 

Region:

                

Americas

 $17,010  $19  $51,934  $19 

Asia Pacific

  1,760   3,053   10,615   7,815 

EMEA

  2,039      3,788   70 

Total

 $20,809  $3,072  $66,337  $7,904 

 

As of December 31, 2023, and 2022, the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations. The Company's accounts receivable balance is made up entirely of customer contract related balances. Changes in the Company’s contract assets, which are included in “Unbilled accounts receivable” and “Deferred program costs” (see Note 7, “Accounts Receivable” and Note 8, “Inventory” for a reconciliation to the condensed consolidated balance sheets) and "Contract liabilities", which are included in the current portion and long-term portion of "Deferred revenue" in the Company’s condensed consolidated balance sheets, are as follows (in thousands):

 

  

Unbilled Accounts Receivable

  

Deferred Program Costs

  

Contract Liabilities

 

Beginning balance as of March 31, 2023

 $9,958  $2,136  $50,760 

Increases for costs incurred to fulfill performance obligations

     2,714    

Increase (decrease) due to customer billings

  (18,354)     55,018 

Decrease due to cost recognition on completed performance obligations

     (3,518)   

Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations

  12,969      (46,190)

Other changes and FX impact

  15   5   155 

Ending balance as of December 31, 2023

 $4,588  $1,337  $59,743 

 

  

Unbilled Accounts Receivable

  

Deferred Program Costs

  

Contract Liabilities

 

Beginning balance as of March 31, 2022

 $6,492  $858  $30,034 

Increases for costs incurred to fulfill performance obligations

     909    

Increase (decrease) due to customer billings

  (11,723)     48,013 

Decrease due to cost recognition on completed performance obligations

     (791)   

Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations

  9,544      (36,452)

Other changes and FX impact

     (15)  (180)

Ending balance as of December 31, 2022

 $4,313  $961  $41,415 

 

12

 

The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations may vary significantly each reporting period based on the timing of major new contractual commitments. As of December 31, 2023, the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $137.2 million. There are also approximately $30.2 million of outstanding performance obligations to be recognized over a period of thirteen to sixty months. The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated. 

 

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three and nine months ended December 31, 2023 and 2022:

 

   

Three Months Ended

  

Nine Months Ended

 
 

Reportable

 

December 31,

  

December 31,

 
 

Segment

 

2023

  

2022

  

2023

  

2022

 

Inox Wind Limited

Wind

  11%  11%  12% 

<10%

 

Fuji Bridex Pte Ltd

Grid

 

<10%

  

<10%

  

<10%

   10%

 

 

3. Stock-Based Compensation

 

The Company accounts for its stock-based compensation at fair value. The following table summarizes stock-based compensation expense by financial statement line item for the three and nine months ended  December 31, 2023 and 2022 (in thousands):

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Cost of revenues

 $62  $89  $230  $195 

Research and development

  158   214   469   570 

Selling, general and administrative

  920   1,137   2,909   2,727 

Total

 $1,140  $1,440  $3,608  $3,492 

  

The Company issued no shares and 681,500 shares of restricted stock during the three and nine months ended December 31, 2023, respectively. The Company issued no shares of immediately vested common stock during the three months ended December 31, 2023 and 53,675 shares of immediately vested common stock during the nine months ended December 31, 2023. The Company issued 550,000 shares of restricted stock and no shares of immediately vested common stock during the three months ended  December 31, 2022 and 888,500 shares of restricted stock and 25,806 shares of immediately vested common stock during the nine months ended December 31, 2022. These restricted stock awards generally vest over 2-3 years. Awards for restricted stock include both time-based and performance-based awards. For options and restricted stock awards that vest upon the passage of time, expense is being recorded over the vesting period. Performance-based awards are expensed over the requisite service period based on probability of achievement.

 

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested stock options was less than $0.1 million as of December 31, 2023. This expense will be recognized over a weighted average of approximately 0.4 years. The total unrecognized compensation cost for unvested outstanding restricted stock was $5.8 million as of  December 31, 2023. This expense will be recognized over a weighted-average expense period of approximately 1.7 years.

 

13

 

The Company granted no stock options during the three and nine months ended  December 31, 2023. The Company granted no stock options in the three months ended  December 31, 2022, and 20,564 stock options during the nine months ended  December 31, 2022. The stock options granted during the nine months ended December 31, 2022 will vest in equal annual installments over 2 years. The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the nine months ended December 31, 2022 are as follows:

 

Expected volatility

  71.40%

Risk-free interest rate

  3.10%

Expected life (years)

  6.14 

Dividend yield

 

None

 

 

 

4. Computation of Net Loss per Common Share

 

Basic net loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Where applicable, diluted EPS is computed by dividing the net loss by the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period, calculated using the treasury stock method. Common equivalent shares include the effect of restricted stock, exercise of stock options and warrants and contingently issuable shares. Stock options and warrants that are out-of-the-money with exercise prices greater than the average market price of the underlying common shares and shares of performance-based restricted stock where the contingency was not met are excluded from the computation of diluted EPS as the effect of their inclusion would be anti-dilutive. For each of the three and nine months ended December 31, 2023, 0.3 million shares were not included in the calculation of diluted EPS. Of these, 0.3 million relate to shares associated with the contingent consideration derivative liability for which the contingency has not yet been met, and less than 0.1 million relate to outstanding stock options as they were considered anti-dilutiveFor each of the three and nine months ended December 31, 20221.1 million shares were not included in the calculation of diluted EPS. Of these, 1.0 million relate to shares associated with the contingent consideration derivative liability for which the contingency has not yet been met, and 0.1 million relate to outstanding stock options as they were considered anti-dilutive. 

 

The following table reconciles the numerators and denominators of the earnings per share calculation for the three and nine months ended  December 31, 2023 and 2022 (in thousands, except per share data):

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Numerator:

                

Net loss

 $(1,649) $(9,581) $(9,532) $(28,171)

Denominator:

                

Weighted-average shares of common stock outstanding

  30,547   29,354   30,180   28,884 

Weighted-average shares subject to repurchase

  (1,455)  (1,400)  (1,452)  (1,090)

Shares used in per-share calculation ― basic

  29,092   27,954   28,728   27,794 

Shares used in per-share calculation ― diluted

  29,092   27,954   28,728   27,794 

Net loss per share ― basic

 $(0.06) $(0.34) $(0.33) $(1.01)

Net loss per share ― diluted

 $(0.06) $(0.34) $(0.33) $(1.01)

 

 

5. Goodwill and Other Intangibles

 

Goodwill

 

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized but reviewed for impairment. Goodwill is reviewed annually on February 28th and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.

 

14

 

There were no changes to goodwill during the nine months ended  December 31, 2023 or year ended March 31, 2023.

 

The Company did not identify any triggering events in the three and nine months ended  December 31, 2023 that would require interim impairment testing of goodwill.

 

Other Intangibles

 

Intangible assets at  December 31, 2023 and  March 31, 2023 consisted of the following (in thousands):

 

  

December 31, 2023

  

March 31, 2023

     
  

Gross Amount

  

Accumulated Amortization

  

Net Book Value

  

Gross Amount

  

Accumulated Amortization

  

Net Book Value

  

Estimated Useful Life

 

Backlog

  681   (681)     681   (675) $6   2 

Trade name and trademarks

  1,800      1,800   1,800      1,800  

Indefinite

 

Customer relationships

  9,600   (6,232)  3,368   9,600   (4,980)  4,620   7 

Core technology and know-how

  5,970   (4,231)  1,739   5,970   (3,869)  2,101   5-10 

Intangible assets

 $18,051  $(11,144) $6,907  $18,051  $(9,524) $8,527     

 

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $0.5 million and $1.6 million, in the three and nine months ended  December 31, 2023, respectively, and $0.7 million and $2.1 million in the three and nine months ended December 31, 2022, respectively. Additionally, the Company recorded no intangible amortization related to backlog that is reported in cost of revenues in the three months ended  December 31, 2023 and less than $0.1 million in the nine months ended  December 31, 2023. The Company recorded less than $0.1 million related to backlog that is reported in cost of revenues in the three and nine months ended  December 31, 2022, respectively.

 

Expected future amortization expense related to intangible assets is as follows (in thousands):

 

Years ending March 31,

 

Total

 

2024

  538 

2025

  1,648 

2026

  1,221 

2027

  1,085 

2028

  543 

Thereafter

  72 

Total

 $5,107 

 

The Company's intangible assets relate entirely to the Grid business segment operations in the United States.

 

15

 
 

6. Fair Value Measurements

 

A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:

 

Level 1 

-

Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

 

 

Level 2 

-

Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

 

 

Level 3 

-

Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

 

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments. The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the nine months ended December 31, 2023.

 

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

Valuation Techniques

 

Cash Equivalents

 

Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments, are measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificates of deposits and money market accounts.

 

Contingent Consideration

 

Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of Northeast Power Systems, Inc ("NEPSI") that provides that the selling stockholders may receive up to an additional 300,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives over varying periods of up to four years following the NEPSI Acquisition Date. See Note 13, "Contingent Consideration" for further discussion. The Company relied on a Monte Carlo method to determine the fair value of the contingent consideration on the closing of the acquisition of NEPSI and continues to revalue the fair value of the contingent consideration using the same method at each subsequent balance sheet date until the contingencies are resolved and the shares to be issued are determined, with the change in fair value recorded in the current period operating loss.

 

16

 

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of  December 31, 2023 and  March 31, 2023 (in thousands):

 

  

Total Carrying Value

  

Quoted Prices in Active Markets (Level 1)

  

Significant Other Observable Inputs (Level 2)

  

Significant Unobservable Inputs (Level 3)

 

December 31, 2023:

                

Assets:

                

Cash equivalents

 $9,936  $9,936  $  $ 

Derivative liabilities:

                

Contingent consideration

 $1,230  $  $  $1,230 

 

  Total Carrying Value  Quoted Prices in Active Markets (Level 1)  Significant Other Observable Inputs (Level 2)  Significant Unobservable Inputs (Level 3) 

March 31, 2023:

                

Assets:

                

Cash equivalents

 $7,913  $7,913  $  $ 

Derivative liabilities:

                

Contingent consideration

 $1,270  $  $  $1,270 

 

The table below reflects the activity for the Company’s contingent consideration derivative liability measured at fair value on a recurring basis (in thousands):

 

  

Acquisition Contingent Consideration

 

Balance at March 31, 2022

 $1,200 

Change in fair value

  70 

Balance at March 31, 2023

  1,270 

Settlement of contingent consideration

  (3,092)

Change in fair value

  3,052 

Balance at December 31, 2023

 $1,230 

 

 

7. Accounts Receivable

 

Accounts receivable at  December 31, 2023 and  March 31, 2023 consisted of the following (in thousands):

 

  

December 31, 2023

  

March 31, 2023

 

Accounts receivable (billed)

 $20,133  $