UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
| | 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:
American Superconductor Corporation
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
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(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 |
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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.
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).
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 ☐ |
| | Smaller reporting company |
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| 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
Shares outstanding of the Registrant’s common stock:
| Common Stock, par value $0.01 per share |
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| Class |
| Outstanding as of January 30, 2023 |
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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AMERICAN SUPERCONDUCTOR CORPORATION
PART I — FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, 2022 | March 31, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Restricted cash | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Restricted cash | ||||||||
| Deferred tax assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Lease liability, current portion | ||||||||
| Debt, current portion | ||||||||
| Contingent consideration | ||||||||
| Deferred revenue, current portion | ||||||||
| Total current liabilities | $ | |||||||
| Deferred revenue, long-term portion | ||||||||
| Lease liability, long-term portion | ||||||||
| Deferred tax liabilities | ||||||||
| Debt, long-term portion | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 16) | ||||||||
| Stockholders' equity: | ||||||||
| Common stock | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended |
Nine Months Ended |
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| December 31, |
December 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
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| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues |
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| Gross margin |
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| Operating expenses: |
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| Research and development |
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| Selling, general and administrative |
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| Amortization of acquisition-related intangibles |
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| Change in fair value of contingent consideration |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total operating expenses |
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| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income, net |
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| China dissolution |
( |
) | ||||||||||||||
| Other income (expense), net |
( |
) | ( |
) | ||||||||||||
| Loss before income tax expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense (benefit) |
( |
) | ||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of common shares outstanding |
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| Basic |
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| Diluted |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| December 31, |
December 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive (loss) gain, net of tax: |
||||||||||||||||
| China dissolution |
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| Foreign currency translation (loss) gain |
( |
) | ( |
) | ( |
) | ||||||||||
| Total other comprehensive (loss) gain, net of tax |
( |
) | ( |
) | ||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE and NINE MONTHS ENDED December 31, 2022 AND 2021
(In thousands)
| Common Stock |
Additional |
Accumulated Other |
Total |
|||||||||||||||||||||||||
| Number of Shares |
Par Value |
Paid-in Capital |
Treasury Stock |
Comprehensive Loss |
Accumulated Deficit |
Stockholders' Equity |
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| Balance at March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock - restricted shares, net of forfeited shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
| Issuance of stock for 401(k) match |
— | — | — | — | ||||||||||||||||||||||||
| Cumulative translation adjustment |
— | — | — | — | — | |||||||||||||||||||||||
| Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Balance at June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock - ESPP |
||||||||||||||||||||||||||||
| Issuance of common stock - restricted shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||
| Issuance of stock for 401(k) match |
||||||||||||||||||||||||||||
| Cumulative translation adjustment |
— | |||||||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at September 30, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| Issuance of common stock - restricted shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||
| Issuance of stock for 401(k) match |
||||||||||||||||||||||||||||
| Cumulative translation adjustment |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at December 31, 2022 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| Common Stock |
Additional |
Accumulated Other | Total |
|||||||||||||||||||||||||
| Number of Shares | Par Value | Paid-in Capital | Treasury Stock | Comprehensive Loss | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||
| Balance at March 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock - bonus payout |
||||||||||||||||||||||||||||
| Issuance of common stock - restricted shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||
| Issuance of stock for 401(k) match |
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| Neeltran acquisition |
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| Repurchase of treasury stock |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Cumulative translation adjustment |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at June 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock - ESPP |
||||||||||||||||||||||||||||
| Issuance of common stock - bonus payout |
||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||
| Issuance of stock for 401(k) match |
||||||||||||||||||||||||||||
| Cumulative translation adjustment |
— | |||||||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at September 30, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
| Issuance of common stock - restricted shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | |||||||||||||||||||||||||||
| Issuance of stock for 401(k) match |
||||||||||||||||||||||||||||
| Cumulative translation adjustment |
— | |||||||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| Nine Months Ended December 31, |
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| 2022 |
2021 |
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| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operations: |
||||||||
| Depreciation and amortization |
||||||||
| Stock-based compensation expense |
||||||||
| Provision for excess and obsolete inventory |
||||||||
| Deferred income taxes |
( |
) | ||||||
| Change in fair value of contingent consideration |
( |
) | ( |
) | ||||
| China dissolution |
||||||||
| Non-cash interest income |
( |
) | ||||||
| Other non-cash items |
||||||||
| Unrealized foreign exchange loss on cash and cash equivalents |
( |
) | ( |
) | ||||
| Changes in operating asset and liability accounts: |
||||||||
| Accounts receivable |
( |
) | ||||||
| Inventory |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets |
( |
) | ||||||
| Accounts payable and accrued expenses |
( |
) | ||||||
| Deferred revenue |
||||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
| Cash paid for acquisition, net of cash acquired |
( |
) | ||||||
| Proceeds from the maturity of marketable securities |
||||||||
| Change in other assets |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| Repurchase of treasury stock |
( |
) | ||||||
| Repayment of debt |
( |
) | ( |
) | ||||
| Proceeds from exercise of employee stock options and ESPP |
||||||||
| Net cash provided by financing activities |
||||||||
| Effect of exchange rate changes on cash |
( |
) | ||||||
| Net decrease in cash, cash equivalents and restricted cash |
( |
) | ( |
) | ||||
| Cash, cash equivalents and restricted cash at beginning of period |
||||||||
| Cash, cash equivalents and restricted cash at end of period |
$ | $ | ||||||
| Supplemental schedule of cash flow information: |
||||||||
| Cash paid for income taxes, net of refunds |
$ | $ | ||||||
| Non-cash investing and financing activities |
||||||||
| Issuance of common stock in connection with the purchase of Neeltran, Inc. |
$ | |||||||
| Issuance of common stock to settle liabilities |
$ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
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. 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, 2022 and 2021 and the financial position at December 31, 2022; 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, 2022, and notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2022 filed with the SEC on June 1, 2022.
Liquidity
The Company has historically experienced recurring operating losses and as of December 31, 2022, the Company had an accumulated deficit of $
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 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.
The Company is experiencing substantial 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. Changes in macroeconomic conditions arising from the COVID-19 pandemic or for other reasons, such as the ongoing war between Russia and Ukraine, inflation, 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.
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
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 financial statements for the nine months ended December 31, 2022. 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 the COVID-19 pandemic and other sources of instability, including the war between Russia and Ukraine, 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. Acquisitions
2021 Acquisition of Neeltran
On May 6, 2021, the Company entered into a Purchase and Sale Agreement (the "Real Property Purchase Agreement") and a Stock Purchase Agreement (the "Neeltran Stock Purchase Agreement") with the selling equity holders named therein. Also on May 6, 2021, pursuant to the terms of the Real Property Purchase Agreement, the Company's wholly-owned Connecticut limited liability company, AMSC Husky LLC ("AMSC Husky"), purchased the real property that serves as Neeltran's headquarters for $
Pursuant to the terms of the Neeltran Stock Purchase Agreement, the Company purchased all of the issued and outstanding shares of capital stock of Neeltran, Inc., a Connecticut corporation ("Neeltran") and Neeltran International, Inc., a Connecticut corporation ("International") for $
Additionally, the Company paid approximately $
| Cash payment | $ | |||
| Issuance of shares of Company's common stock | ||||
| Debt payment to third party lenders on behalf of sellers | ||||
| Total consideration | $ |
The Neeltran Acquisition completed by the Company during the fiscal year ended March 31, 2022 has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations. The Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the date of Neeltran Acquisition. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill. As Neeltran was previously a private company, the adoption of Accounting Standards Codification 842 ("ASC 842") was completed as part of the Neeltran Acquisition. See Note 15, "Leases" for further details. Neeltran had previously adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") as part of prior year audited financial statements.
The following table summarizes the allocation of the purchase price based on the estimated fair value of the assets acquired and liabilities assumed in connection with the Neeltran Acquisition (in millions):
| Cash and short-term investments |
$ | |||
| Net working capital (excluding inventory and deferred revenue) |
( |
) | ||
| Inventory |
||||
| Property, plant and equipment |
||||
| Deferred revenue |
( |
) | ||
| Deferred tax liability |
( |
) | ||
| Net tangible assets/(liabilities) |
||||
| Backlog |
||||
| Trade names and trademarks |
||||
| Customer relationships |
||||
| Net identifiable intangible assets/(liabilities) |
||||
| Goodwill |
||||
| Total purchase consideration |
$ |
Backlog of $
Customer relationships of $
Trade names and trademarks of $
The goodwill represents the value associated with the acquired workforce and expected synergies related to the business combinations of the two companies. Goodwill resulting from the Neeltran Acquisition was assigned to the Company's Grid business segment. Goodwill recognized in the Neeltran Acquisition is not deductible for tax purposes. The Company has finalized its purchase price allocation for the Neeltran Acquisition, and there were no changes to the net assets and goodwill recorded by the Company as of May 6, 2021.
Unaudited Pro Forma Operating Results
| Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Shares - basic |
||||||||||||||||
| Shares - diluted |
||||||||||||||||
The pro forma amounts include the historical operating results of the Company, and Neeltran, with appropriate adjustments that give effect to acquisition related costs, income taxes, intangible amortization resulting from the Neeltran Acquisition and certain conforming accounting policies of the Company. The pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Neeltran Acquisition and related transactions had been completed at the beginning of the applicable periods presented. In addition, the pro forma amounts are not necessarily indicative of operating results in future periods.
Acquisition of NEPSI
On October 1, 2020 (the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein. Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding (i) shares of capital stock of Northeast Power Systems, Inc., a New York corporation ("NEPSI"), and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI's headquarters (the "NEPSI Acquisition"). NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems. Prior to the NEPSI Acquisition, the Company had purchased $
Pursuant to the NEPSI Stock Purchase Agreement, the Company acquired all of the issued and outstanding shares of NEPSI, and membership interest in the realty entity, for which the Company paid $
The NEPSI Acquisition completed by the Company during the fiscal year ended March 31, 2021 has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations. The Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the date of NEPSI Acquisition. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill. As NEPSI was previously a private company, the adoption of ASC 606 was completed as part of the NEPSI Acquisition. See Note 3, "Revenue Recognition" for further details. There were no leases acquired and the NEPSI Acquisition had no impact to the Company's reporting under ASC 842.
The total purchase price of approximately $
| Cash payment | $ | |||
| Issuance of shares of Company’s common stock | ||||
| Contingent consideration | ||||
| Total consideration | $ |
Total consideration consists of (a) cash of $
The fair value of the contingent consideration was determined using a Monte Carlo model and is accounted for as a derivative liability which is revalued at the fair value determined 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 or (income). See Note 13, "Contingent Consideration" for further details and a summary of key assumptions used to determine fair value in each period.
The following table summarizes the allocation of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed and related deferred income taxes in connection with the NEPSI Acquisition (in millions):
| Net working capital (excluding inventory and deferred revenue) |
$ | |||
| Inventory |
||||
| Property, plant and equipment |
||||
| Deferred revenue |
( |
) | ||
| Deferred tax liability |
( |
) | ||
| Net tangible assets/(liabilities) |
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| Backlog |
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| Trade names and trademarks |
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| Customer relationships |
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| Net identifiable intangible assets/(liabilities) |
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| Goodwill |
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| Total purchase consideration |
$ |
Inventory includes a $
Backlog of $
Customer relationships of $
Trade names and trademarks of $
Goodwill represents the value associated with the acquired workforce and expected synergies related to the business combination of the two companies. Goodwill resulting from the NEPSI Acquisition was assigned to the Company’s Grid business segment. Goodwill recognized in the NEPSI Acquisition is not deductible for tax purposes. The $
3. 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 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, 2022,
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.
The Company's equipment and system product line includes certain contracts which do not meet the requirements of an exchange transaction and therefore do not fall within the scope of ASC 606. As these non-exchange transaction contracts are considered grant revenue and do not fall within any specific accounting literature, the Company follows guidance within ASC 606 by analogy to recognize grant revenue over time. The Company recorded
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 represent 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 a reasonable profit margin cannot be assured throughout the entire contract, 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 reassessed 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.
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 to years, and extended service-type warranties at the customer's option for an additional term ranging up to 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 monitors costs to meet our obligations on our 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 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 $
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 to days from delivery.
The following tables disaggregate the Company’s revenue by product line and by shipment destination (in thousands):
| Three Months Ended December 31, 2022 | Nine Months Ended December 31, 2022 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | |||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended December 31, 2021 | Nine Months Ended December 31, 2021 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | $ | ||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of December 31, 2022, and 2021, 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 8, “Accounts Receivable” and Note 9, “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, 2022 | $ | $ | $ | |||||||||
| Increases for costs incurred to fulfill performance obligations | — | — | ||||||||||
| Increase (decrease) due to customer billings | ( | ) | — | |||||||||
| Decrease due to cost recognition on completed performance obligations | — | ( | ) | — | ||||||||
| Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | — | ( | ) | |||||||||
| Other changes and FX impact | — | ( | ) | ( | ) | |||||||
| Ending balance as of December 31, 2022 | $ | $ | $ | |||||||||
| Unbilled Accounts Receivable | Deferred Program Costs | Contract Liabilities | ||||||||||
| Beginning balance as of March 31, 2021 | $ | $ | $ | |||||||||
| Increases for costs incurred to fulfill performance obligations | — | — | ||||||||||
| Increase for balance acquired | — | |||||||||||
| Increase (decrease) due to customer billings | ( | ) | — | |||||||||
| Decrease due to cost recognition on completed performance obligations | — | ( | ) | — | ||||||||
| Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | — | ( | ) | |||||||||
| Other changes and FX impact | — | ( | ) | |||||||||
| Ending balance as of December 31, 2021 | $ | $ | $ | |||||||||
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, 2022, the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next months of approximately $
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, 2022 and 2021:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| Reportable | December 31, | December 31, | |||||||||||||||
| Segment | 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Inox Wind Limited | Wind | % | <10% | <10% | <10% | ||||||||||||
| Fuji Bridex Pte Ltd | Grid | <10% | % | % | % | ||||||||||||
4. 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, 2022 and 2021 (in thousands):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Cost of revenues | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company issued
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 $
The Company granted
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Expected volatility | N/A | N/A | % | N/A | ||||||||||||
| Risk-free interest rate | N/A | N/A | % | N/A | ||||||||||||
| Expected life (years) | N/A | N/A | N/A | |||||||||||||
| Dividend yield | N/A | N/A | None | N/A | ||||||||||||
5. 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, 2022, and 2021,
The following table reconciles the numerators and denominators of the earnings per share calculation for the three and nine months ended December 31, 2022 and 2021 (in thousands, except per share data):
| Three Months Ended December 31, | Nine Months Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted-average shares of common stock outstanding | ||||||||||||||||
| Weighted-average shares subject to repurchase | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Shares used in per-share calculation ― basic | ||||||||||||||||
| Shares used in per-share calculation ― diluted | ||||||||||||||||
| Net loss per share ― basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share ― diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
6. 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. The Company's goodwill balance relates to the Neeltran Acquisition in fiscal 2021, the NEPSI Acquisition in fiscal 2020, and the acquisition of Infinia Technology Corporation in fiscal 2017 and is reported in the Grid business segment. Goodwill is not amortized but reviewed for impairment. Goodwill is reviewed annually and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.
The following table provides a roll forward of the changes in the Company's Grid business segment goodwill balance:
| Goodwill | ||||
| March 31, 2021 | $ | |||
| Neeltran Acquisition | ||||
| March 31, 2022 | $ | |||
| Less impairment loss | ||||
| December 31, 2022 | $ | |||
The Company did not identify any triggering events in the three and nine months ended December 31, 2022 that would require interim impairment testing of goodwill.
Other Intangibles
Intangible assets at December 31, 2022 and March 31, 2022 consisted of the following (in thousands):