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)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|
|
|
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(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 |
|
| | |
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 ☐ | |
| 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
Shares outstanding of the Registrant’s common stock:
| Common Stock, par value $0.01 per share |
| |
| Class |
| Outstanding as of October 27, 2023 |
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
|
|
|
Page No. |
|
|
||
|
|
|
|
| Item 1. |
||
|
|
|
|
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
|
|
|
|
| Item 3. |
||
|
|
|
|
| Item 4. |
||
|
|
|
|
|
|
||
|
|
|
|
| Item 1. |
||
|
|
|
|
| Item 1A. |
||
|
|
|
|
| Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
|
|
|
|
|
| Item 3. |
||
|
|
|
|
| Item 4. |
||
|
|
|
|
| Item 5. |
||
|
|
|
|
| Item 6. |
||
|
|
|
|
|
|
||
AMERICAN SUPERCONDUCTOR CORPORATION
PART I — FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, 2023 |
March 31, 2023 |
|||||||
| 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 |
||||||||
| 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 |
Six Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Revenues |
$ | $ | $ | $ | ||||||||||||
| Cost of revenues |
||||||||||||||||
| Gross margin |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
||||||||||||||||
| Selling, general and administrative |
||||||||||||||||
| Amortization of acquisition-related intangibles |
||||||||||||||||
| Change in fair value of contingent consideration |
( |
) | ( |
) | ||||||||||||
| Restructuring |
( |
) | ( |
) | ||||||||||||
| Total operating expenses |
||||||||||||||||
| Operating loss |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Interest income, net |
||||||||||||||||
| China dissolution |
( |
) | ( |
) | ||||||||||||
| Other income (expense), net |
( |
) | ( |
) | ||||||||||||
| Loss before income tax expense (benefit) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax expense (benefit) |
( |
) | ||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share |
||||||||||||||||
| Basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of common shares outstanding |
||||||||||||||||
| Basic |
||||||||||||||||
| Diluted |
||||||||||||||||
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 |
Six Months Ended |
|||||||||||||||
| September 30, |
September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive (loss) gain, net of tax: |
||||||||||||||||
| China dissolution |
||||||||||||||||
| Foreign currency translation gain |
||||||||||||||||
| Total other comprehensive 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 Six Months Ended September 30, 2023 AND 2022
(In thousands)
| Common Stock |
Additional |
Accumulated Other |
Total |
|||||||||||||||||||||||||
| Number of Shares |
Par Value |
Paid-in Capital |
Treasury Stock |
Comprehensive Income |
Accumulated Deficit |
Stockholders' Equity |
||||||||||||||||||||||
| Balance at March 31, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| Issuance of common stock - restricted shares |
( |
) | ||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
| Issuance of stock for 401(k) match |
1 | — | — | — | ||||||||||||||||||||||||
| Cumulative translation adjustment |
— | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||
| Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| 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, 2023 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
| 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, 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 |
$ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ||||||||||||||||||
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)
| Six Months Ended September 30, |
||||||||
| 2023 |
2022 |
|||||||
| 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 |
||||||||
| Other non-cash items |
( |
) | ||||||
| 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 |
( |
) | ( |
) | ||||
| Change in other assets |
( |
) | ( |
) | ||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
||||||||
| 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 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 September 30, 2023 and 2022 and the financial position at September 30, 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 September 30, 2023, 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 continues to experience 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 continues to take actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from the COVID-19 pandemic or for other reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, 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 unaudited condensed consolidated financial statements for the six months ended September 30, 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 the COVID-19 pandemic 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 six months ended September 30, 2023,
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.
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 are available for purchase 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 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 $
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 September 30, 2023 | Six Months Ended September 30, 2023 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | $ | ||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended September 30, 2022 | Six Months Ended September 30, 2022 | |||||||||||||||
| Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | $ | $ | $ | ||||||||||||
| Services and technology development | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Region: | ||||||||||||||||
| Americas | $ | $ | $ | $ | ||||||||||||
| Asia Pacific | ||||||||||||||||
| EMEA | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
As of September 30, 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 | $ | $ | $ | |||||||||
| 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 September 30, 2023 | $ | $ | $ | |||||||||
| 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 September 30, 2022 | $ | $ | $ | |||||||||
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 September 30, 2023, 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 six months ended September 30, 2023 and 2022:
| Three Months Ended | Six Months Ended | ||||||||||||||||
| Reportable | September 30, | September 30, | |||||||||||||||
| Segment | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Inox Wind Limited | Wind | % | <10% | % | <10% | ||||||||||||
| Fuji Bridex Pte Ltd | Grid | <10% | % | <10% | % | ||||||||||||
| Gray Construction, Inc. | Grid | % | <10% | <10% | <10% | ||||||||||||
| Ascend Performance Materials Ops LLC | Grid | <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 six months ended September 30, 2023 and 2022 (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| 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 less than $
The Company granted
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected life (years) | ||||
| 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 six months ended September 30, 2023,
The following table reconciles the numerators and denominators of the earnings per share calculation for the three and six months ended September 30, 2023 and 2022 (in thousands, except per share data):
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| 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 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
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.
There were no changes to goodwill during the six months ended September 30, 2023 or year ended March 31, 2023.
The Company did identify any triggering events in the three and six months ended September 30, 2023 that would require interim impairment testing of goodwill.
Other Intangibles
Intangible assets at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
| September 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||||
| Gross Amount | Accumulated Amortization | Net Book Value | Gross Amount | Accumulated Amortization | Net Book Value | Estimated Useful Life | ||||||||||||||||||||||
| Backlog | ( | ) | ( | ) | $ | |||||||||||||||||||||||
| Trade name and trademarks | — | — | Indefinite | |||||||||||||||||||||||||
| Customer relationships | ( | ) | ( | ) | ||||||||||||||||||||||||
| Core technology and know-how | ( | ) | ( | ) | ||||||||||||||||||||||||
| Intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $
Expected future amortization expense related to intangible assets is as follows (in thousands):
| Years ending March 31, | Total | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
The Company's intangible assets relate entirely to the Grid business segment operations in the United States.
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 six months ended September 30, 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
The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of September 30, 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) | |||||||||||||
| September 30, 2023: | ||||||||||||||||
| Assets: | ||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities: | ||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
| 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 | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities: | ||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||
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 | $ | |||
| Change in fair value | ||||
| Balance at March 31, 2023 | ||||
| Change in fair value | ||||
| Balance at September 30, 2023 | $ | |||
7. Accounts Receivable
Accounts receivable at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
| September 30, 2023 | March 31, 2023 | |||||||
| Accounts receivable (billed) | $ | $ | ||||||
| Accounts receivable (unbilled) | ||||||||
| Accounts receivable, net | $ | $ | ||||||
8. Inventory
Inventory, net of reserves, at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
| September 30, 2023 | March 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Deferred program costs | ||||||||
| Net inventory | $ | $ | ||||||
The Company recorded inventory write-downs of $
Deferred program costs as of September 30, 2023 and March 31, 2023, primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.
9. Prepaid and Other Current Assets
During fiscal 2022, the Company conducted an analysis as to whether it was entitled to employee retention credits (“ERC”) under the CARES Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021. Based on the analysis, the Company determined that it was entitled to an ERC of approximately $
As accounting for payroll tax credits are not within the scope of ASC 740, Income Taxes, the Company has chosen to account for the ERCs by analogizing to the International Accounting Standards Board IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, an entity recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received. The Company evaluated its eligibility for the ERC and determined that it met all the criteria to claim a refundable tax credit against the employer portion of Social Security taxes for up to
The Company recorded a $
10. Property, Plant and Equipment
The cost and accumulated depreciation of property, plant and equipment at September 30, 2023 and March 31, 2023 are as follows (in thousands):
| September 30, 2023 | March 31, 2023 | |||||||
| Land | $ | $ | ||||||
| Construction in progress - equipment | ||||||||
| Buildings | ||||||||
| Equipment and software | ||||||||
| Finance lease - right of use asset | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Property, plant and equipment, gross | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Depreciation expense was $
11. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at September 30, 2023 and March 31, 2023 consisted of the following (in thousands):
| September 30, 2023 | March 31, 2023 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued inventories in-transit | ||||||||
| Accrued other miscellaneous expenses | ||||||||
| Accrued contract loss | ||||||||
| Advanced deposits | ||||||||
| Accrued compensation | ||||||||
| Income taxes payable | ||||||||
| Accrued product warranty | ||||||||
| Accrued restructuring | ||||||||
| Total | $ | $ | ||||||
The Company generally provides a to year warranty on its products, commencing upon delivery or installation where applicable. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience.
Product warranty activity was as follows (in thousands):
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Balance at beginning of period | $ | $ | $ | $ | ||||||||||||
| Provisions for warranties during the period | ||||||||||||||||
| Settlements during the period | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance at end of period | $ | $ | $ | $ | ||||||||||||
12. Income Taxes
The Company recorded income tax expense of $
Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did identify any uncertain tax positions in the six months ended September 30, 2023 and did have any gross unrecognized tax benefits as of September 30, 2023.
13. Contingent Consideration
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 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. NEPSI is a wholly-owned subsidiary of the Company and is operated by its Grid business unit. The purchase price was $
Contingent Consideration
The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which is expected to require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815, Derivatives and Hedging. As a result, for each period, the fair value of the contingent consideration will be remeasured and the resulting gain or loss will be recognized in operating expenses until the share amount is fixed.
Following is a summary of the key assumptions used in a Monte Carlo simulation to calculate the fair value of the contingent consideration related to the NEPSI Acquisition: