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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  $20,707 

Accounts receivable (unbilled)

  4,588   9,958 

Accounts receivable, net

 $24,721  $30,665 

 

17

 
 

8. Inventory

 

Inventory, net of reserves, at  December 31, 2023 and  March 31, 2023 consisted of the following (in thousands):

 

  

December 31, 2023

  

March 31, 2023

 

Raw materials

 $21,197  $16,654 

Work-in-process

  16,571   15,200 

Finished goods

  5,092   2,996 

Deferred program costs

  1,337   2,136 

Net inventory

 $44,197  $36,986 

 

The Company recorded inventory write-downs of $0.5 million and $0.2 million for the three months ended December 31, 2023 and 2022, respectively. The Company recorded inventory write-downs of $1.5 million and $1.2 million for the nine months ended  December 31, 2023 and 2022, respectively. These write-downs were based on the Company's evaluation of its inventory on hand for excess quantities and obsolescence.

 

Deferred program costs as of  December 31, 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 $3.3 million related to payroll taxes paid in the first and second quarters of 2021 and the first quarter of 2020.  The Company determined it met all the criteria required under the gross receipts test of the applicable Internal Revenue Service regulations related to ERCs.

 

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 70% of the qualified wages the Company paid to  employees for the three month periods ended March 31, 2021 and June 30, 2021 and for up to 50%  of the qualified wages the Company paid to employees for the three month period ended March 31, 2020. 

 

The Company recorded a $3.3 million receivable in Prepaid expenses and other current assets and a benefit of $1.8 million to Cost of revenues, $0.8 million to SG&A and $0.7 million to Research and development in the fiscal year ended March 31, 2023 for the ERC that is expected to be received based on the amended filings. During the nine months ended December 31, 2023, the Company received $3.0 million for the initial claims that were processed. The remaining balance is expected to be received during the remainder of fiscal 2023.

 

18

 

10. Property, Plant and Equipment

 

The cost and accumulated depreciation of property, plant and equipment at  December 31, 2023 and  March 31, 2023 are as follows (in thousands):

 

  

December 31, 2023

  

March 31, 2023

 

Land

 $980  $980 

Construction in progress - equipment

  245   748 

Buildings

  5,416   5,416 

Equipment and software

  44,203   43,156 

Finance lease - right of use asset

     1 

Furniture and fixtures

  1,537   1,535 

Leasehold improvements

  6,897   6,815 

Property, plant and equipment, gross

  59,278   58,651 

Less accumulated depreciation

  (48,073)  (46,342)

Property, plant and equipment, net

 $11,205  $12,309 

 

Depreciation expense was $0.6 million and $0.6 million for the three months ended December 31, 2023 and 2022, respectively. Depreciation expense was $1.7 million and $2.0 million for the nine months ended  December 31, 2023 and 2022, respectively.

 

11. Accounts Payable and Accrued Expenses

 

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

 

  

December 31, 2023

  

March 31, 2023

 

Accounts payable

 $5,867  $13,935 

Accrued inventories in-transit

  928   2,267 

Accrued other miscellaneous expenses

  4,363   3,870 

Accrued contract loss

  55   3,464 

Advanced deposits

  1,948   5,653 

Accrued compensation

  7,385   5,430 

Income taxes payable

  322   409 

Accrued product warranty

  2,031   2,638 

Accrued restructuring

  103   717 

Total

 $23,002  $38,383 

 

The Company generally provides a one to three 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.

 

19

 

Product warranty activity was as follows (in thousands):

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Balance at beginning of period

 $1,892  $2,053  $2,638  $2,066 

Provisions for warranties during the period

  360   535   1,212   1,191 

Settlements during the period

  (221)  (592)  (1,819)  (1,261)

Balance at end of period

 $2,031  $1,996  $2,031  $1,996 

 

 

12. Income Taxes

 

The Company recorded income tax expense of $0.1 million and $0.3 million in the three and nine months ended December 31, 2023, respectively. The Company recorded an income tax expense of $0.1 million in each of the three and nine months ended December 31, 2022, respectively.

 

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 not identify any uncertain tax positions in the nine months ended  December 31, 2023 and did not have any gross unrecognized tax benefits as of December 31, 2023.

 

 

13. Contingent Consideration

 

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 $26.0 million in cash and 873,657 restricted shares of common stock of the Company. As part of the transaction, the selling stockholders  may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up to four years following closing of the NEPSI Acquisition.  NEPSI has recognized revenues in excess of $75.0 million during the three years after the NEPSI Acquisition Date. As a result, the Company issued 399,999 shares of common stock of the Company and cash in lieu of a fractional share of common stock to the selling stockholders during the quarter ended  December 31, 2023, following certification of the achievement of specified earnout revenue objectives.

 

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.

 

20

 

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:

 

   December 31,   September 30,   June 30,         

Fiscal Year 2023

  2023   2023   2023         

Revenue risk premium

  5.70%  5.30%  5.20%        

Revenue volatility

  24.8%  27.5%  23%        

Stock Price

 $11.14  $7.55  $6.26         

Payment delay (days)

  80   80   80         

Fair value (millions)

 $1.2  $3.5  $2.6         
                     
  

March 31,

  

December 31,

  

September 30,

  

June 30,

  

March 31,

 

Fiscal Year 2022

 

2023

  

2022

  

2022

  

2022

  

2022

 

Revenue risk premium

  5.30%  5.30%  5.20%  6.60%  6.50%

Revenue volatility

  25%  25%  25%  30%  33%

Stock Price

 $4.91  $3.68  $4.38  $5.18  $7.61 

Payment delay (days)

  80   80   80   80   80 

Fair value (millions)

 $1.3  $0.9  $1.1  $1.4  $1.2 

 

 During the three and nine months ended December 31, 2023 the Company issued 399,999 shares and cash in lieu of a fractional share of common stock related to the achievement of specified revenue objectives at a fair value of $3.1 million. One specified revenue objective, which would have earned the selling stockholders 300,000 shares of Company common stock, was not achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by September 30, 2024. The Company recorded losses of $0.9 million and $3.1 million resulting from the increases in the fair value of the contingent consideration in the three and nine months ended  December 31, 2023, respectively.

 

14. Debt

 

  As part of the acquisition of Neeltran, the Company identified four equipment financing agreements that Neeltran had entered into prior to the acquisition of Neeltran on May 6, 2021. The current debt balance is less than $0.1 million as of December 31, 2023 and was $0.1 million as of March 31, 2023.

 

15. Leases

 

The Company determines whether a contract is or contains a lease at inception of a contract. The Company defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means that the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

 

The discount rate was calculated using an incremental borrowing rate based on an assessment prepared by the Company through the use of Company credit ratings, consideration of its lease populations potential risk to its total capital structure, and a market rate for a collateralized loan for its risk profile, calculated by a third party. 

 

Operating Leases

 

All significant lease arrangements are recognized at lease commencement.  Operating lease right–of-use assets and lease liabilities are recognized at commencement. The operating lease right-of-use asset includes any lease payments related to initial direct cost and prepayments and excludes any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.  The Company enters into a variety of operating lease agreements through the normal course of its business, but primarily real estate leases to support its operations. The real estate lease agreements generally provide for fixed minimum rental payments and the payment of real estate taxes and insurance. Many of these real estate leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for varying periods up to five years or to terminate the lease. Only renewal options or termination rights that the Company believed were likely to be exercised were included in the lease calculations.

 

The Company also enters into leases for vehicles, IT equipment and service agreements, and other leases related to its manufacturing operations that are also included in the right-of-use assets and lease liability accounts if they are for a term of longer than twelve months. However, many of these leases are either short-term in nature or immaterial. The Company has made the policy election to exclude short-term leases from the condensed consolidated balance sheet. 

 

21

 

Finance Leases

 

As of December 31, 2023, the right-of-use asset related to the finance lease, net of accumulated amortization is $0.0 million, and is included in the property and equipment, net on the Company's condensed consolidated balance sheet.

 

Finance lease right-of-use assets and lease liabilities are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease right-of-use assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease right-of-use assets and interest accretion on finance lease liabilities are recorded to depreciation expense and interest expense, respectively in the Company's condensed consolidated statement of operations.

 

Supplemental balance sheet information related to leases at  December 31, 2023, and  March 31, 2023 are as follows (in thousands):

 

  

December 31, 2023

  

March 31, 2023

 

Leases:

        

Right-of-use assets - Financing

 $-   1 

Right-of-use assets - Operating

  2,401   2,857 

Total right-of-use assets

  2,401   2,858 
         

Lease liabilities - ST Financing

 $-   1 

Lease liabilities - ST Operating

  680   807 

Lease liabilities - LT Operating

  1,861   2,184 

Total lease liabilities

 $2,541   2,992 
         

Weighted-average remaining lease term

  3.5 years   3.95 years 

Weighted-average discount rate

  8.68%  6.46%

 

The costs related to the Company's finance lease are not material. The costs related to the Company's operating leases for the three and nine months ended December 31, 2023 and 2022 are as follows (in thousands):

 

  

Three Months Ended

  

Nine Months Ended

 
  

December 31, 2023

  

December 31, 2023

 

Operating Leases:

        

Operating lease costs - fixed

 $303  $817 

Operating lease costs - variable

  39   119 

Short-term lease costs

  37   111 

Total lease costs

 $379  $1,047 

 

  

Three Months Ended

  

Nine Months Ended

 
  

December 31, 2022

  

December 31, 2022

 

Operating Leases:

        

Operating lease costs - fixed

 $256  $765 

Operating lease costs - variable

  41   118 

Short-term lease costs

  30   92 

Total lease costs

 $327  $975 

 

22

 

The Company’s estimated minimum future lease obligations under the Company's leases are as follows (in thousands): 

 

  

Leases

 

Year ending March 31,

    

2024

 $234 

2025

  841 

2026

  793 

2027

  646 

2028

  392 

Thereafter

  15 

Total minimum lease payments

  2,921 

Less: interest

  (380)

Present value of lease liabilities

  2,541 

 

 

16. Commitments and Contingencies

 

Legal Contingencies

 

From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the condensed consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.

 

Other

 

The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds. The Company is required to deposit an amount equivalent to some or all the face amount of the performance bonds into an escrow account until the termination of the bond. When the performance conditions are met, amounts deposited as collateral for the performance bonds are returned to the Company. In addition, the Company has various contractual arrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis.

 

As of December 31, 2023, the Company had $0.4 million of restricted cash included in long-term assets and $0.7 million of restricted cash included in current assets. As of March 31, 2023, the Company had $0.6 million of restricted cash included in long term assets and $1.7 million of restricted cash included in current assets. These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts and long-term projects or collateral deposits. These deposits are held in interest bearing accounts.

 

 

17. Restructuring

 

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”) and ASC Topic 712, CompensationNonretirement Postemployment Benefits (“ASC 712”). In accounting for these obligations, the Company is required to make assumptions related to the amounts of employee severance, benefits, and related costs and the time period over which leased facilities will remain vacant, sublease terms, sublease rates and discount rates. Estimates and assumptions are based on the best information available at the time the obligation arises. These estimates are reviewed and revised as facts and circumstances dictate; changes in these estimates could have a material effect on the amount accrued on the condensed consolidated balance sheet.

 

On  January 24, 2023, the Company approved a plan to reduce its global workforce by approximately 5%, effective as of such date. The purpose of the workforce reduction was to reduce operating expenses to better align with the Company’s current revenues. In fiscal 2022, the Company recorded restructuring charges of $1.0 million as a result of this reduction in force, which was comprised of severance pay. All amounts related to these restructuring activities are expected to be paid by  March 31, 2024.

 

23

 

The following table presents restructuring charges and cash payments during the nine months ended  December 31, 2023 and year ended March 31, 2023 (in thousands):

 

  

Severance pay

 
  

and benefits

 

Accrued restructuring balance at April 1, 2023

 $717 

Charges to operations

  (14)

Cash payments

  (600)

Accrued restructuring balance at December 31, 2023

 $103 

 

  

Severance pay

 
  

and benefits

 

Accrued restructuring balance at April 1, 2022

 $ 

Charges to operations

  1,048 

Cash payments

  (331)

Accrued restructuring balance at March 31, 2023

 $717 



All restructuring charges discussed above are included within restructuring in the Company’s condensed consolidated statements of operations. The Company includes accrued restructuring within accounts payable and accrued expenses in the condensed consolidated balance sheets.  The Company's restructuring charges relate primarily to the Grid business segment operations in the United States.

   
 

18. Business Segments

 

The Company reports its financial results in two reportable business segments: Grid and Wind. In accordance with ASC 280, Segment Reporting, we aggregate four operating segments into one reporting segment for financial reporting purposes due to their similar operating and financial characteristics. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources.

 

Through the Company’s power grid offerings, the Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through its transmission planning services, power electronics, and superconductor-based systems. The sales process is enabled by transmission planning services that allow it to identify power grid congestion, poor power quality and other risks, which helps the Company determine how its solutions can improve network performance. These services often lead to sales of grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems.  The Company also sells ship protection products to the U.S. Navy through its Grid business segment.

 

Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field highly competitive wind turbines through its advanced power electronics and control system products, engineered designs, and support services. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of 2 megawatts ("MWs") and higher. The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.

 

24

 

The operating results for the two business segments are as follows (in thousands):

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Revenues:

                

Grid

 $33,603  $20,809  $87,854  $66,337 

Wind

  5,750   3,072   15,757   7,904 

Total

 $39,353  $23,881  $103,611  $74,241 

 

  

Three Months Ended December 31,

  

Nine Months Ended December 31,

 
  

2023

  

2022

  

2023

  

2022

 

Operating income (loss):

                

Grid

 $268  $(7,064) $(2,383) $(20,840)

Wind

  286   (924)  (112)  (2,178)

Unallocated corporate expenses

  (1,992)  (1,221)  (6,646)  (3,152)

Total

 $(1,438) $(9,209) $(9,141) $(26,170)

 

The accounting policies of the business segments are the same as those for the consolidated Company. The Company’s business segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment revenues and segment operating loss. The disaggregated financial results of the segments reflect allocation of certain functional expense categories consistent with the basis and manner in which Company management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. In addition, certain corporate expenses which the Company does not believe are specifically attributable or allocable to either of the two business segments have been excluded from the segment operating loss.

 

Unallocated corporate expenses consisted of net losses of $0.9 million and $3.1 million resulting from the increases in the fair value of contingent consideration in the three and nine months ended  December 31, 2023, respectively. There are 300,000 shares remaining for potential issuance upon the achievement of the last specified revenue objective under the NEPSI Stock Purchase Agreement by September 30, 2024. Unallocated corporate expenses consisted of a gain on contingent consideration of $0.2 million and $0.3 million in the three and nine months ended December 31, 2022, respectively. Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $1.1 million and $1.4 million in the three months ended  December 31, 2023 and 2022, respectively, and $3.6 million and $3.5 million in the nine months ended  December 31, 2023 and 2022, respectively.

 

Total assets for the two business segments as of  December 31, 2023 and  March 31, 2023, are as follows (in thousands):

 

  

December 31, 2023

  

March 31, 2023

 

Grid

 $128,395  $135,296 

Wind

  12,933   14,361 

Corporate assets

  25,015   25,904 

Total

 $166,343  $175,561 

  

25

 
 

19. Recent Accounting Pronouncements

 

In  June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the release of ASU 2019-10 in  November 2019, the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after  December 15, 2022.  As of  April 1, 2023, the Company has adopted ASU 2016-13 and noted no material impact on its condensed consolidated financial statements.

 

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. Following the release of ASU 2021-08 in October 2021, the effective date was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, the Company has adopted ASU 2021-08 and noted no material impact on its condensed consolidated financial statements.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.

 

 

20. Subsequent Events

 

The Company has performed an evaluation of subsequent events through the time of filing this Quarterly Report on Form 10-Q with the SEC and has determined that there are no such events to report.  

   

26

   
 

AMERICAN SUPERCONDUCTOR CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that relate to future events or conditions, including without limitation, the statements in Part II, “Item 1A. Risk Factors” and in Part I under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, our prospective results of operations or financial position, the benefits of our acquisitions of Northeast Power Systems, Inc. ("NEPSI") and Neeltran, Inc. ("Neeltran"), contingent payments related to the NEPSI acquisition, changes in macroeconomic and market conditions, including increasing inflation and impacts from COVID-19, sourcing, production disruption, material delays and global supply chain disruptions and adoption of accounting changes may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of our common stock or cause actual results to differ materially from those indicated by such forward-looking statements. These important factors include but are not limited to: We have a history of operating losses, which may continue in the future. Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter; We have a history of negative operating cash flows, and we may require additional financing in the future, which may not be available to us; We may be required to issue performance bonds or provide letters of credit, which restricts our ability to access any cash used as collateral for the bonds or letters of credit; Changes in exchange rates could adversely affect our results of operations; If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and may lead investors and other users to lose confidence in our financial data; We may not realize all of the sales expected from our backlog of orders and contracts; Our contracts with the U.S. government are subject to audit, modification or termination by the U.S. government and include certain other provisions in favor of the government. The continued funding of such contracts remains subject to annual congressional appropriation, which, if not approved, could reduce our revenue and lower or eliminate our profit; COVID-19 has adversely impacted our business, financial condition and results of operations and other future pandemics or health crises may have similar impacts;  Changes in U.S. government defense spending could negatively impact our financial position, results of operations, liquidity and overall business; We rely upon third-party suppliers for the components and subassemblies of many of our Grid and Wind products, making us vulnerable to supply shortages and price fluctuations, which could harm our business; Uncertainty surrounding our prospects and financial condition may have an adverse effect on our customer and supplier relationships; We have not manufactured our Amperium wire in commercial quantities, and a failure to manufacture our Amperium wire in commercial quantities at acceptable cost and quality levels would substantially limit our future revenue and profit potential; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; A significant portion of our Wind segment revenues are derived from a single customer. If this customer's business is negatively affected, it could adversely impact our business; Our success in addressing the wind energy market is dependent on the manufacturers that license our designs; Our business and operations would be adversely impacted in the event of a failure or security breach of our or any critical third parties information technology infrastructure and networks; Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data, may adversely impact our business and financial results; Many of our revenue opportunities are dependent upon subcontractors and other business collaborators; If we fail to implement our business strategy successfully, our financial performance could be harmed; Problems with product quality or product performance may cause us to incur warranty expenses and may damage our market reputation and prevent us from achieving increased sales and market share; Many of our customers outside of the United States may be either directly or indirectly related to governmental entities, and we could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws outside the United States; We have had limited success marketing and selling our superconductor products and system-level solutions, and our failure to more broadly market and sell our products and solutions could lower our revenue and cash flow; We may acquire additional complementary businesses or technologies, which may require us to incur substantial costs for which we may never realize the anticipated benefits; We or third parties on whom we depend may be adversely affected by natural disasters, including events resulting from climate change, and our business continuity and disaster recovery plans may not adequately protect us or our value chain from such events; Adverse changes in domestic and global economic conditions could adversely affect our operating results; Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Adverse changes in domestic and global economic conditions could adversely affect our operating results; We have operations in, and depend on sales in, emerging markets, including India, and global conditions could negatively affect our operating results or limit our ability to expand our operations outside of these markets. Changes in India's political, social, regulatory and economic environment may affect our financial performance; Our products face competition, which could limit our ability to acquire or retain customers; Our products face competition, which could limit our ability to acquire or retain customers; Industry consolidation could result in more powerful competitors and fewer customers; Our products face competition, which could limit our ability to acquire or retain customers; Industry consolidation could result in more powerful competitors and fewer customers; Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy; Lower prices for other fuel sources may reduce the demand for wind energy development, which could have a material adverse effect on our ability to grow our Wind business;  We may be unable to adequately prevent disclosure of trade secrets and other proprietary information; Our patents may not provide meaningful protection for our technology, which could result in us losing some or all of our market position; There are a number of technological challenges that must be successfully addressed before our superconductor products can gain widespread commercial acceptance, and our inability to address such technological challenges could adversely affect our ability to acquire customers for our products; Third parties have or may acquire patents that cover the materials, processes and technologies we use or may use in the future to manufacture our Amperium products, and our success depends on our ability to license such patents or other proprietary rights; Our technology and products could infringe intellectual property rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages and disrupt our business; We face risks related to our legal proceedings; We face risks related to our common stock; and the other important factors discussed under the caption "Risk Factors" in Part 1. Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, and our other reports filed with the SEC.  These important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Any such forward-looking statements represent management’s estimates as of the date of this Quarterly Report on Form 10-Q. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.   

 

27

 

American Superconductor®, Amperium®, AMSC®, D-VAR®, PowerModule™, D-VAR VVO®, PQ-IVR®, SeaTitan®, Gridtec™ Solutions, Windtec™ Solutions, Smarter, Cleaner...Better Energy™, Orchestrate the Rhythm and Harmony of Power on the Grid™, actiVAR®, armorVAR™, NEPSI™ and Neeltran™ and SafetyLOCK™ are trademarks or registered trademarks of American Superconductor Corporation or our subsidiaries. We reserve all of our rights with respect to our trademarks or registered trademarks regardless of whether they are so designated in this Quarterly Report on Form 10-Q by an ® or ™ symbol. All other brand names, product names, trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

 

Executive Overview

 

We are a leading system provider of megawatt-scale power resiliency solutions that Orchestrate the Rhythm and Harmony of Power on the Grid™, and protect and expand the capability of our Navy's fleet. Our solutions enhance the performance of the power grid, protect our Navy’s fleet, and lower the cost of wind power.  In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems. In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics and control system products, engineering, and support services. Our power grid and wind products and services provide exceptional reliability, security, efficiency and affordability to our customers.

 

Our power system solutions help to improve energy efficiency, alleviate power grid capacity constraints, improve system resiliency, and increase the adoption of renewable energy generation. Demand for our solutions is driven by the growing needs for modernized smart grids that improve power reliability, security and quality, the U.S. Navy's effort to upgrade in-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy. Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state, and national levels, including renewable portfolio standards, tax incentives and international treaties.  

 

We manufacture products using two proprietary core technologies: PowerModule™ programmable power electronic converters and our Amperium® high temperature superconductor (“HTS”) wires. These technologies and our system-level solutions are protected by a broad and deep intellectual property portfolio consisting of hundreds of patents and licenses worldwide.

 

We operate our business under two market-facing business units: Grid and Wind. We believe this market-centric structure enables us to more effectively anticipate and meet the needs of power generation project developers, the Navy's ship protection systems, electric utilities and wind turbine manufacturers.

 

 

Grid. Through our Gridtec™ Solutions, our Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability. We provide transmission planning services that allow us to identify power grid congestion, poor power quality, and other risks, which help us determine how our solutions can improve network performance. These services often lead to sales of our grid interconnection solutions for wind farms and solar power plants, power quality systems and transmission and distribution cable systems.  We also sell ship protection products to the U.S. Navy through our Grid business segment.

 

 

Wind. Through our Windtec™ Solutions, our Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. We supply advanced power electronics and control systems, license our highly engineered wind turbine designs, and provide extensive customer support services to wind turbine manufacturers. Our design portfolio includes a broad range of drivetrains and power ratings of 2 megawatts ("MWs") and higher. We provide a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.

 

Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are referring to the fiscal year that began on April 1 of that same year. For example, fiscal 2023 refers to the fiscal year that began on April 1, 2023. Other fiscal years follow similarly.

 

28

 

We continue to experience some inflationary pressure in our supply chain and some delays in sourcing materials needed for our products, resulting in some production disruption, both of which have increased our cost of revenues and decreased gross margin.  While the impact of inflation has been challenging, we continue to take actions to limit this pressure including adjusting the pricing of our 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.

 

From time-to-time we may undertake restructuring activities in order to align our global organization in a manner that we believe will better position us to achieve our long-term goals. In January 2023, we undertook a reduction in force that involved approximately 5% of our 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.

 

In February 2023, we completed the process of determining and verifying our eligibility and amount of payroll tax credits known as the Employee Retention Credit (“ERC”) under the CARES Act which Congress enacted as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. This resulted in filing certain amended payroll tax forms for eligible quarters in 2020 and 2021, which, in the aggregate, totaled $3.3 million. We recognized a receivable in prepaid expenses and other current assets and a benefit to cost of revenues and operating expenses in the quarter ended March 31, 2023. During the nine months ended December 31, 2023, we received $3.0 million in payments for the initial claims that were processed. The remaining balance is expected to be paid during the remainder of fiscal 2023.

 

Critical Accounting Policies and Estimates

 

The preparation of the unaudited condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ under different assumptions or conditions. Certain prior period amounts were reclassified to conform to the presentation in the current period. There were no significant changes in the critical accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

 

Results of Operations

 

Three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022

 

Revenues

 

Total revenues increased 65% to $39.4 million for the three months ended December 31, 2023 and total revenues increased 40% to $103.6 million for the nine months ended December 31, 2023, compared to $23.9 million and $74.2 million for the three and nine months ended December 31, 2022, respectively. Our revenues are summarized as follows (in thousands):

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Revenues:

                               

Grid

  $ 33,603     $ 20,809     $ 87,854     $ 66,337  

Wind

    5,750       3,072       15,757       7,904  

Total

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

 

Our Grid business unit accounted for 85% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 87% and 89% for the three and nine months ended December 31, 2022, respectively. Our Grid business unit revenues increased 61% to $33.6 million in the three months ended December 31, 2023, from $20.8 million in the three months ended December 31, 2022. Our Grid business unit revenues increased 32% to $87.9 million in the nine months ended December 31, 2023, from $66.3 million in the nine months ended December 31, 2022. The increase in the Grid business unit revenues in the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022 was primarily driven by increased shipments of new energy power systems and increased ship protection systems revenues than in the prior year periods.

 

29

 

Our Wind business unit accounted for 15% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 13% and 11% for the three and nine months ended December 31, 2022, respectively. Revenues in the Wind business unit increased 87% and 99% to $5.8 million and $15.8 million in the three and nine months ended December 31, 2023, from $3.1 million and $7.9 million in the three and nine months ended December 31, 2022, respectively. The increase during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by additional shipments of electrical control systems ("ECS") at increased prices. 

 

Cost of Revenues and Gross Margin

 

Cost of revenues increased by 26% to $29.4 million for the three months ended December 31, 2023, compared to $23.4 million for the three months ended December 31, 2022. Cost of revenues increased by 13% to $78.8 million for the nine months ended December 31, 2023, compared to $69.5 million for the nine months ended December 31, 2022. Gross margin was 25% and 24% for the three and nine months ended December 31, 2023, respectively, compared to 2% and 6% for the three and nine months ended December 31, 2022, respectively. The increase in gross margin in the three and nine months ended December 31, 2023 was due to higher revenues, a more favorable product mix and favorable impacts across the business due to pricing increases across our product lines.

 

Operating Expenses

 

Research and development

 

Research and development ("R&D") expenses increased 6% in the three months ended December 31, 2023 to $2.2 million from $2.1 million in the three months ended December 31, 2022. The increase was driven primarily by lower cost share revenue. R&D expense decreased 20% in the nine months ended December 31, 2023 to $5.7 million from $7.1 million in the nine months ended December 31, 2022. The decrease was driven primarily by decreased compensation, materials and supplies expenses.

 

Selling, general, and administrative

 

Selling, general and administrative ("SG&A") expenses increased 9% in the three months ended December 31, 2023 to $7.8 million from $7.2 million in the three months ended December 31, 2022SG&A expenses increased 7% to $23.6 million in the nine months ended December 31, 2023, compared to $22.1 million in the nine months ended December 31, 2022. The increase in SG&A expense in the three and nine months ended December 31, 2023, was due to higher overall compensation expense than in each of the prior year periods.

 

Amortization of acquisition related intangibles

 

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets 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. The decrease in amortization expense in both periods is a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets from Northeast Power Systems, Inc ("NEPSI") and Neeltran.

 

Change in fair value of contingent consideration

 

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in losses of $0.9 million and $3.1 million resulting from the increase in the fair value of the contingent consideration in the three and nine months ended December 31, 2023, respectively. During the three and nine months ended December 31, 2023 we issued 399,999 shares and cash in lieu of a fractional share of common stock related to the achievement of specified revenue objectives in connection with the acquisition of NEPSI at a fair value of $3.1 million. One specified revenue objective, which would have earned the selling stockholders 300,000 shares of our common stock, was not achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by September 30, 2024. We recorded the above noted losses, compared to a gain of $0.2 million and $0.3 million in the three and nine months ended December 31, 2022, respectively. The change in the fair value was driven by an increased likelihood of achieving certain revenue targets and an increase in our stock price.

 

30

 

Operating income (loss)

 

Our operating income (loss) is summarized as follows (in thousands):

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Operating income (loss):

                               

Grid

  $ 268     $ (7,064 )   $ (2,383 )   $ (20,840 )

Wind

    286       (924 )     (112 )     (2,178 )

Unallocated corporate expenses

    (1,992 )     (1,221 )     (6,646 )     (3,152 )

Total

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

 

Our Grid business segment generated operating income of $0.3 million and operating loss of $2.4 million in the three and nine months ended December 31, 2023, respectively, compared to operating losses of $7.1 million and $20.9 million in the three and nine months ended December 31, 2022, respectively.  The increase in the Grid business unit operating income in the three and nine months ended December 31, 2023 was due to higher revenues and gross margins due to a favorable product mix as well as the reduction of the remaining acquired Neeltran backlog.

 

Our Wind business segment generated operating income of $0.3 million and operating loss of $0.1 million in the three and nine months ended December 31, 2023, respectively, compared to operating losses of $0.9 million and $2.2 million in the three and nine months ended December 31, 2022, respectively. The improvement in the Wind business unit operating income in the three and nine months ended December 31, 2023 was due to higher revenues and gross margins from increased sales of ECS units.

 

Unallocated corporate expenses included net losses of $0.9 million and $3.1 million resulting from the increases in the fair value of the NEPSI contingent consideration in the three and nine months ended December 31, 2023, respectively. Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $1.1 million and $3.6 million in the three and nine months ended December 31, 2023, respectively, and $1.4 million and $3.5 million in the three and nine months ended December 31, 2022, respectively.

 

Interest income, net
 

Interest income, net, was $0.2 million and $0.5 million in the three and nine months ended December 31, 2023, respectively, compared to less than $0.1 million and $0.1 million in the three and nine months ended December 31, 2022, respectively, due to higher earned interest at increased interest rates in the fiscal year 2023 periods. 

 

China dissolution

 

            China dissolution expense was $1.9 million in the nine months ended December 31, 2022, and there was no similar transaction in the three and nine months ended December 31, 2023, or the three months ended December 31, 2022. The impact of the China dissolution expense during the nine months ended December 31, 2022 was driven by the liquidation of our China entity, resulting in a foreign currency loss from the cumulative translation release of $1.9 million.

 

Other income (expense), net 

 

Other expense, net, was $0.3 million and $0.6 million in the three and nine months ended December 31, 2023, respectively, compared to other expense, net, of $0.3 million and less than $0.1 million in the three and nine months ended December 31, 2022, respectively. The increase in other expense, net, during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by the impacts of unfavorable fluctuations in foreign currencies during the periods.

 

 Income Taxes

 

Income tax expense was $0.1 million and $0.3 million in the three and nine months ended December 31, 2023, respectively. Income tax expense was $0.1 million in each of the three and nine months ended December 31, 2022. 

 

31

 

Net loss

 

Net loss was $1.6 million and $9.5 million in the three and nine months ended December 31, 2023, respectively, compared to $9.6 million and $28.2 million in the three and nine months ended December 31, 2022, respectively. The decrease in net loss in both periods was driven primarily by the increased revenues and gross margins.

 

Non-GAAP Financial Measure - Non-GAAP Net Income (Loss)

 

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this Quarterly Report on Form 10-Q, however, should be considered in addition to, and not as a substitute for or superior to the comparable measures prepared in accordance with GAAP.

 

We define non-GAAP net income (loss) as net loss before China dissolution, stock-based compensation, amortization of acquisition-related intangibles, change in fair value of contingent consideration, and other non-cash or unusual charges.  We believe non-GAAP net income (loss) assists management and investors in comparing our performance across reporting periods on a consistent basis by excluding these non-cash charges and other items that we do not believe are indicative of our core operating performance. In addition, we use non-GAAP net income (loss) as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net income (loss) is set forth in the table below (in thousands, except per share data):

 

   

Three Months Ended December 31,

   

Nine Months Ended December 31,

 
   

2023

   

2022

   

2023

   

2022

 

Net loss

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

China dissolution

                      1,921  

Stock-based compensation

    1,140       1,440       3,608       3,492  

Amortization of acquisition-related intangibles

    538       696       1,620       2,096  

Change in fair value of contingent consideration

    852       (220 )     3,052       (340 )

Non-GAAP net income (loss)

  $ 881     $ (7,665 )   $ (1,252 )   $ (21,002 )
                                 

Non-GAAP net income (loss) per share - basic

  $ 0.03     $ (0.27 )   $ (0.04 )   $ (0.76 )

Weighted average shares outstanding - basic

    29,092       27,954       28,728       27,794  

 

We incurred non-GAAP net income of $0.9 million and a non-GAAP net loss of $1.3 million, or $0.03 and $(0.04) per share, for the three and nine months ended December 31, 2023, respectively, compared to non-GAAP net losses of $7.7 million and $21.0 million, or $(0.27) and $(0.76) per share, for the three and nine months ended December 31, 2022, respectively. The improvement in the non-GAAP net income (loss) for the three and nine months ended December 31, 2023 was due to a lower operating loss driven by higher revenues and gross margins.  

 

32

 

Liquidity and Capital Resources

 

We have experienced recurring operating losses and, as of December 31, 2023, had an accumulated deficit of $1,065.1 million.

 

Our cash requirements depend on numerous factors, including the successful completion of our product development activities, our ability to commercialize our Resilient Electric Grid and ship protection system solutions, the rate of customer and market adoption of our products, collecting receivables according to established terms, the continued availability of U.S. government funding during the product development phase of our superconductor-based products and whether Inox is successful in executing on Solar Energy Corporation of India Limited orders or in obtaining additional orders under the new central and state auction regime. We continue to closely monitor our expenses and, if required, expect to reduce our operating and capital spending to enhance liquidity.

 

In February 2021, we filed a shelf registration statement on Form S-3 that will expire in February 2024 (the “Form S-3”). The Form S-3 allows us 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 us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund our 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.

 

As of December 31, 2023, we had cash, cash equivalents and restricted cash of $25.0 million, compared to $25.7 million as of March 31, 2023, a decrease of $0.7 million. As of December 31, 2023, we had $2.4 million in cash, cash equivalents, and restricted cash in foreign bank accounts. Our cash, cash equivalents, and restricted cash are summarized as follows (in thousands):

 

   

December 31, 2023

   

March 31, 2023

 

Cash and cash equivalents

  $ 23,979     $ 23,360  

Restricted cash

    1,046       2,315  

Total cash, cash equivalents, and restricted cash

  $ 25,025     $ 25,675  

 

For the nine months ended December 31, 2023, net cash used in operating activities was $0.1 million, compared to $17.1 million for the nine months ended December 31, 2022. The decrease in net cash used in operations was due primarily to decreases in net loss and in prepaid expenses and other current assets in the nine months ended December 31, 2023 as compared to December 31, 2022. Cash flows from operating activities in the nine months ended December 31, 2023 included a reimbursement of $3.0 million for the ERC receivable included in prepaid expenses and other current assets at March 31, 2023.

 

For the nine months ended December 31, 2023, net cash used in investing activities was $0.6 million, compared to $1.2 million for the nine months ended December 31, 2022. The decrease in net cash used in investing activities was primarily due to a decrease in purchases of property, plant and equipment.

 

For the nine months ended December 31, 2023, net cash provided by financing activities was $0.1 million. For the nine months ended December 31, 2022, net cash provided by financing activities was less than $0.1 million.

 

As of December 31, 2023, we had $0.4 million of restricted cash included in long-term assets and $0.7 million of restricted cash included in current assets. At March 31, 2023, we had $0.6 million of restricted cash included in long-term assets and $1.7 million of restricted cash in current assets. These amounts included in restricted cash primarily represent collateral deposits to secure surety bonds and letters of credit for various customer contracts. These deposits are held in interest bearing accounts.

 

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2023, while others are considered future commitments. We have various contractual arrangements, under which we have committed to purchase certain minimum quantities of goods or services on an annual basis. For information regarding our other contractual obligations, refer to Note 13, "Contingent Consideration," Note 14, "Debt," Note 15, "Leases" and Note 16, "Commitments and Contingencies" to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

 

33

 

We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. In addition, we may seek to raise additional capital, which could be in the form of loans, convertible debt or equity, to fund our operating requirements and capital expenditures. Our liquidity is highly dependent on our ability to increase revenues, control our operating costs, and raise additional capital, if necessary. There can be no assurance that we will be able to raise additional capital on favorable terms or at all or execute on any other means of improving our liquidity as described above.  Additionally, the impact of COVID-19 or other sources of instability, including the ongoing wars between Russia and Ukraine or Israel and Hamas, instability of financial institutions and political instability in the United States, on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity. We also continue to closely monitor our expenses and, if required, we intend to reduce our operating and capital spending to enhance liquidity. 

 

Legal Proceedings

 

From time to time, we are involved in legal and administrative proceedings and claims of various types. We record a liability in our condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate. If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, we estimate and disclose the possible loss or range of loss to the extent necessary to make the condensed consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our condensed consolidated financial statements.

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the release of ASU 2019-10 in November 2019, the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after December 15, 2022.  As of April 1, 2023, we have adopted ASU 2016-13 and noted no material impact on our condensed consolidated financial statements.

 

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. Following the release of ASU 2021-08 in October 2021, the effective date was annual reporting periods beginning after December 15, 2022. As of April 1, 2023, we have adopted ASU 2021-08 and noted no material impact on our condensed consolidated financial statements.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024. As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.

 

We do not believe that, outside of those disclosed here, there are any other recently issued accounting pronouncements that will have a material impact on our condensed consolidated financial statements.

 

34

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

35

 

PART II—OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

None

 

ITEM 1A.

RISK FACTORS

 

There have been no material changes to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on May 31, 2023.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The Company’s stock repurchase activity during the three months ended December 31, 2023 was as follows:

 

Month

 

Total Number
of Shares
Purchased(a)

   

Average
Price Paid
per Share

   

Total Number of
Shares Purchased
as Part of Publicly
Announced
Plans or
Programs

    Approximate
Dollar Value of Shares
that May Yet Be
Purchased under the
Plans or Programs
(in millions)
 
October 1, 2023 - October 31, 2023                          
November 1, 2023 - November 30, 2023                          
December 1, 2023 - December 31, 2023                          

Total

                         

 

(a) During the three months ended December 31, 2023, we did not repurchase shares in connection with our stock-based compensation plans.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not Applicable

 

 

ITEM 5.

OTHER INFORMATION

 

On December 13, 2023, Daniel P. McGahn, Chairman, President and Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 57,724 shares of the Company’s common stock until the earlier of (i) June 28, 2024, or (ii) the date in which all shares under the trading arrangement are sold.

 

On December 6, 2023, John W. Kosiba, Jr., Senior Vice President, Chief Financial Officer and Treasurer, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 61,000 shares of the Company’s common stock until the earlier of (i) June 28, 2024, or (ii) the date in which all shares under the trading arrangement are sold.

 

36

 
 

ITEM 6.

EXHIBITS

 

EXHIBIT INDEX

 

        Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

 

Filing

Date

 

Filed/Furnished

Herewith

31.1

 

Chief Executive Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2

 

Chief Financial Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1

 

Chief Executive Officer—Certification pursuant to Rule13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

 

 

 

 

32.2

 

Chief Financial Officer—Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

**

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document. 

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Calculation Linkbase Document. 

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Definition Linkbase Document. 

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Label Linkbase Document. 

 

 

 

 

 

 

 

 

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Presentation Linkbase Document. 

 

 

 

 

 

 

 

 

 

*

                         
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)                    

_________________________

 

*

Filed herewith

 

**

Furnished herewith

 

Attached as Exhibits 101 to this report are the following formatted in inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of December 31, 2023 and March 31, 2023 (ii) Condensed Statements of Operations for the three and nine months ended December 31, 2023 and 2022, (iii) Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended December 31, 2023 and 2022, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2023 and 2022, and (v) Notes to Condensed Consolidated Financial Statements.

 

37

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

AMERICAN SUPERCONDUCTOR CORPORATION

 

 

 

 

 

 

By:

/s/ John W. Kosiba, Jr.

Date:

January 24, 2024

 

John W. Kosiba, Jr.

 

 

 

Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

 

 

 

 

 

38
ex_599683.htm

Exhibit 31.1

 

AMERICAN SUPERCONDUCTOR CORPORATION

CERTIFICATIONS

I, Daniel P. McGahn, certify that: 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

January 24, 2024

By:

/s/ Daniel P. McGahn

 

 

  Daniel P. McGahn
 

 

 

Chief Executive Officer

 

 
ex_599684.htm

Exhibit 31.2

 

AMERICAN SUPERCONDUCTOR CORPORATION

CERTIFICATIONS

 

I, John W. Kosiba, Jr., certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q of American Superconductor Corporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date:

January 24, 2024

By:

/s/ John W. Kosiba, Jr.

 

 

 

John W. Kosiba, Jr.

 

 

 

Chief Financial Officer

 

 
ex_599685.htm

Exhibit 32.1

 

AMERICAN SUPERCONDUCTOR CORPORATION

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Daniel P. McGahn, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

January 24, 2024

By:

/s/ Daniel P. McGahn

 

 

 

Daniel P. McGahn

 

 

 

Chief Executive Officer

 

 
ex_599686.htm

Exhibit 32.2

 

AMERICAN SUPERCONDUCTOR CORPORATION

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of American Superconductor Corporation (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, John W. Kosiba, Jr., Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date:

January 24, 2024

By:

/s/ John W. Kosiba, Jr.

 

 

 

John W. Kosiba, Jr.

 

 

 

Chief Financial Officer