What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-04 · 356 added, 266 removed, 1016 unchanged (38% of the section changed)

2 unchanged sentences

(In thousands)

June 30, 2021

September 30, 2021

March 31, 2021

71 unchanged sentences

Three Months Ended

$ 25,420  

$ 21,213  

Six Months Ended

September 30,

Cost of revenues

22,051  

16,173  

Operating expenses:

4 unchanged sentences

Total operating expenses

10,868  

Operating loss

( 7,499 )  

Interest income, net

Other expense, net

( 64 )  

Loss before income tax expense (benefit)

( 7,531 )  

Other income (expense), net

Loss before income tax expense

Income tax expense (benefit)

( 2,128 )  

$ ( 5,403 )  

Net loss per common share

$ ( 0.20 )  

Weighted average number of common shares outstanding

26,826  

21,689  

26,826  

21,689  

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

3 unchanged sentences

Three Months Ended

$ (5,403) $ ( 3,417 )

Other comprehensive (loss), net of tax:

Foreign currency translation (loss)

Total other comprehensive (loss), net of tax

Six Months Ended

September 30,

Other comprehensive (loss) gain, net of tax:

Foreign currency translation (loss) gain

Total other comprehensive (loss) gain, net of tax

Comprehensive loss

$ (5,466) $ ( 3,420 )

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE THREE MONTHS ENDED June 30, 2021 AND 2020

FOR THE THREE AND SIX MONTHS ENDED September 30, 2021 AND 2020

(In thousands)

31 unchanged sentences

$ 118,553  

Issuance of common stock - ESPP

Issuance of common stock - bonus payout

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

( 4,434 )  

Balance at September 30, 2021

28,793  

$ 1,130,921  

$ ( 3,639 )  

$ ( 316 )  

$ ( 1,011,150 )  

$ 116,104  

Accumulated Other  

27 unchanged sentences

$ 69,419  

Issuance of common stock - ESPP

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Repurchase of treasury stock

( 293 )  

Cumulative translation adjustment

( 43 )  

( 3,712 )  

Balance at September 30, 2020

23,458  

$ 1,055,548  

$ ( 3,336 )  

$ ( 262 )  

$ ( 985,764 )  

$ 66,420  

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

2 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Cash flows from operating activities:

$ ( 5,403 )  

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

3 unchanged sentences

Deferred income taxes

( 2,207 )  

Change in fair value of contingent consideration

Non-cash interest income

( 24 )  

Other non-cash items

2 unchanged sentences

Accounts receivable

( 7,388 )  

( 465 )  

Prepaid expenses and other assets

1 unchanged sentence

Deferred revenue

( 2,779 )  

Net cash used in operating activities

( 5,829 )  

Cash flows from investing activities:

Purchase of property, plant and equipment

( 224 )  

Sale of marketable securities

Cash paid for acquisition, net of cash acquired

( 11,479 )  

Proceeds from the maturity of marketable securities

Change in other assets

Net cash used in investing activities

( 11,708 )  

Net cash (used)/provided by investing activities

Cash flows from financing activities:

Repurchase of treasury stock

( 46 )  

Net cash used in financing activities

( 46 )  

Repayment of debt

Proceeds from exercise of employee stock options and ESPP

Net cash provided/(used) by financing activities

Effect of exchange rate changes on cash

Net decrease in cash, cash equivalents and restricted cash

( 17,588 )  

Net increase/(decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

75,539  

30,864  

Cash, cash equivalents and restricted cash at end of period

$ 57,951  

$ 26,876  

Supplemental schedule of cash flow information:

1 unchanged sentence

Non-cash investing and financing activities

Issuance of common stock in connection with the purchase of Neeltran, Inc.

$ 4,387  

Issuance of common stock to settle liabilities

14 unchanged sentences

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 

June 30, 2021 

September 30, 2021 

2020  and the financial position at 

June 30, 2021;

September 30, 2021;

however, these results are not necessarily indicative of results which may be expected for the full year.

3 unchanged sentences

filed with the SEC on June 2, 2021.

The Company has historically experienced recurring operating losses and as of June 30, 2021 , the Company had an accumulated deficit of $ 1,006.7 million.

In addition, the Company has historically experienced recurring negative operating cash flows.  At June 30, 2021 , the Company had cash, cash equivalents, and marketable securities of $ 55.2 million.

Marketable securities include certificate of deposits with maturities of less than three months. 

The Company has historically experienced recurring operating losses and as of September 30, 2021 , the Company had an accumulated deficit of $ 1,011.1  million.

In addition, the Company has historically experienced recurring negative operating cash flows.  At September 30, 2021 , the Company had cash and cash equivalents of $ 48.5 million.

Cash used in operations for the 

three months ended 

June 30, 2021 was $ 5.8 million.

six months ended 

September 30, 2021 was $ 11.7 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”

13 unchanged sentences

While these existing measures and, COVID- 19 generally, have not materially disrupted the Company’s business to date, any future actions necessitated by the COVID- 19 pandemic may result in disruption to the Company’s business.

While the COVID- 19 pandemic continues to rapidly evolve, the Company continues to assess the impact of the COVID- 19 pandemic to best mitigate risk and continue the operations of the Company’s business.

The extent to which the outbreak impacts the Company’s business, liquidity, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including new information that may emerge concerning the severity of the COVID- 19 pandemic, the spread of new variations of the virus, the actions to contain it or treat its impact and the effectiveness and adoption of vaccines, among others. 

If the Company, its customers or suppliers experience prolonged shutdowns or other business disruptions, the Company’s business, liquidity, results of operations and financial condition are likely to be materially adversely affected, and the Company’s ability to access the capital markets may be limited. 

The Company believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the financial statements for the three months ended June 30, 2021 .

While the COVID- 19 pandemic continues to rapidly evolve, the Company is starting to experience inflation pressure in its supply chains and some delays in sourcing materials needed for its products.

The Company continues to assess the impact of the COVID- 19 pandemic to best mitigate risk and continue the operations of the Company’s business.

If the Company, its customers or suppliers experience prolonged shutdowns or other business disruptions, including global supply chain disruptions, the Company’s business, liquidity, results of operations and financial condition are likely to be materially adversely affected, and the Company’s ability to access the capital markets may be limited. 

The Company’s liquidity is highly dependent on its ability to increase revenues, including its ability to collect revenues under its agreements with Inox, its ability to control its operating costs, and its ability to raise additional capital, if necessary.  The impact of the COVID- 19 pandemic 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.

3 unchanged sentences

Additionally, the Company paid approximately $ 7.6 million, including $ 1.9 million of indebtedness secured by the mortgage on the real property as described below, directly to Neeltran lenders at closing to extinguish outstanding Neeltran indebtedness to third parties.

Pursuant to the terms of the Real Property Purchase Agreement, AMSC Husky purchased the real property that serves as Neeltran's headquarters for $ 4.3 million, of which (a) $ 2.4 million was paid immediately available funds by AMSC Husky to the selling parties, and (b) $ 1.9 million was paid directly to TD Bank as full payment for the outstanding indebtedness secured by the mortgage on such real property.

Pursuant to the terms of the Real Property Purchase Agreement, AMSC Husky purchased the real property that serves as Neeltran's headquarters for $ 4.3 million, of which (a) $ 2.4 million was paid from immediately available funds by AMSC Husky to the selling parties, and (b) $ 1.9 million was paid directly to TD Bank as full payment for the outstanding indebtedness secured by the mortgage on such real property.

The total purchase price of $ 16.4 million includes cash paid, the fair value of the AMSC Shares issued at closing and the debt payoff on behalf of the sellers as follows (in millions):

3 unchanged sentences

$ 16.4  

The Neeltran Acquisition completed by the Company during the three months ended June 30, 2021 has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations.

The Neeltran Acquisition completed by the Company during the six months ended September 30, 2021 has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations.

The Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the date of Neeltran Acquisition.

3 unchanged sentences

Neeltran had previously adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606" ) as part of prior year audited financial statements.

The following table summarizes the allocation of the purchase price based on the estimated fair value of the assets acquired and liabilities assumed in connections with the Neeltran Acquisition (in millions):

The following table summarizes the allocation of the purchase price based on the estimated fair value of the assets acquired and liabilities assumed in connection with the Neeltran Acquisition (in millions):

Cash and short-term investments

13 unchanged sentences

The inventory step up adjustment increased cost of revenue

$ 0.3 million in the

three month period ended

June 30, 2021 as the inventory was sold. 

$ 0.6 m illion in the

six month period ended

September 30, 2021 as the inventory was sold. This increase is

not reflected in the pro forma condensed combined statements of operations because it does

not have a continuing impact beyond the

Backlog of $ 0.1 million was evaluated using the multi period excess earnings method under the income approach.

4 unchanged sentences

7 years with the expense being allocated to SG&A.

Trade names and trademarks of $ 1.2 million were reviewed using the assumption that the Company would continue to utilize the Neeltran trade name indefinitely.

The relief from royalty method was utilized using a 1 % royalty rate on revenues with a 24.5 % discount rate over 15 years.

13 unchanged sentences

May 6, 2021, for the

three months ended

June 30, 2021.

six months ended

September 30, 2021.

In the unaudited consolidated results for the

three months ended

June 30, 2021, Neeltran contributed

six months ended

September 30, 2021, Neeltran contributed

$ 12.5  million of revenue and

$ 0.2 million in net loss for the Company.

 $ 0.4  million in net loss for the Company.

2020 Acquisition of NEPSI

21 unchanged sentences

$ 42.4  

At the NEPSI Acquisition Date, in addition to the $ 26.0 million cash, the Company valued the Company’s common stock, using $ 14.23 per share, which was the closing price on the day that the Company acquired NEPSI and $ 4.0 million of contingent consideration for the earnout liability valued as of the NEPSI Acquisition Date.

Total consideration consists of (a) cash of $ 26.0 million, (b) issuance of the Company's common stock, using $ 14.23 per share, which was the closing price on the day that the Company acquired NEPSI, and (c) $ 4.0 million of contingent consideration for the earnout liability valued as of the NEPSI Acquisition Date.

NEPSI Acquisition costs of $ 0.3  million were recorded in selling, general and administrative ("SG&A") costs for the fiscal year ended March 31, 2021.

23 unchanged sentences

Goodwill resulting from the NEPSI Acquisition was assigned to the Company’s Grid business segment.  Goodwill recognized in the NEPSI Acquisition is not deductible for tax purposes. This purchase price allocation is preliminary and has not been finalized as the analysis on the assets and liabilities acquired, primarily the tax related liability 

may require further adjustments to our purchase accounting that could result in a measurement period adjustment that would impact our reported net assets and goodwill as of October 1, 2020.

Material changes, if any, to the preliminary allocation summarized above will be reported once the related uncertainties are resolved, but no later than October 1, 2021.

may require further adjustments to our purchase accounting that could result in a measurement period adjustment that would impact the Company's reported net assets and goodwill as of October 1, 2020. 

The $ 1.7 million of deferred tax liability is primarily related to inventory step up and intangibles. 

1 unchanged sentence

The unaudited pro forma condensed consolidated statement of operations for the

three months ended

June 30, 2021 and 

three and six months ended

September 30, 2021 and 

2020 is presented as if the NEPSI Acquisition and Neeltran Acquisition had occurred on

April 1, 2020.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ 27,908  

$ 32,233  

$ 56,158  

$ 64,860  

Operating loss

1 unchanged sentence

( 4,963 )  

( 11,131 )  

$ ( 4,548 )  

$ ( 3,855 )  

$ ( 11,809 )  

Net loss per common share

2 unchanged sentences

$ ( 0.44 )  

$ ( 0.17 )  

$ ( 0.44 )  

Shares - basic

1 unchanged sentence

23,036  

27,101  

22,951  

Shares - diluted

1 unchanged sentence

23,036  

27,101  

22,951  

The pro forma amounts include the historical operating results of the Company, NEPSI and Neeltran, with appropriate adjustments that give effect to acquisition related costs, income taxes, intangible amortization resulting from the NEPSI Acquisition and Neeltran Acquisition and certain conforming accounting policies of the Company. The pro forma amounts are

7 unchanged sentences

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 months ended June 30, 2021 and 2020, 78 % and 

In the three and six months ended September 30, 2021 , 86 % and 

82 % 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 six months ended September 30, 2020, 78 % and 79 % 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.

3 unchanged sentences

As these non-exchange transaction contracts are considered grant revenue and do not fall within any specific accounting literature, the Company follows guidance within ASC 606 by analogy to recognize grant revenue over time. 

In the three months ended June 30, 2021 and 2020 , the Company recorded $ 0.5 million and $ 0.4 million in grant revenue, respectively, which is included in the Company’s Grid business segment revenue. 

In the three and six months ended September 30, 2021 , the Company recorded $ 0.3 million and $ 0.8 million in grant revenue, respectively, which is included in the Company’s Grid business segment revenue. In the three and six months ended September 30, 2020, the Company recorded $ 0.4 million and $ 0.8 million in grant revenue, respectively, which is included in the Company's Grid segment revenue.

In the Company's service and technology development product line, there are several different types of transactions and each begins with a contract with a customer that summarizes each product sold to a customer, which typically represent distinct performance obligations.

The technology development transactions are primarily for activities that have no alternative use and for which a profit can be expected throughout the life of the contract.

In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract, the revenue is recognized at a point in time.

In these cases, the revenue is recognized over time, but in the instances where a reasonable profit margin cannot be assured throughout the entire contract, the revenue is recognized at a point in time.

Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach.

24 unchanged sentences

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Six Months Ended September 30, 2021

Product Line:

2 unchanged sentences

$ 1,826  

$ 44,189  

$ 2,860  

Services and technology development

4 unchanged sentences

$ 18,115  

Three Months Ended June 30, 2020

$ 40,760  

$ 24,619  

$ 3,289  

$ 48,119  

$ 5,209  

Three Months Ended September 30, 2020

Six Months Ended September 30, 2020

Product Line:

2 unchanged sentences

$ 4,059  

$ 31,798  

$ 6,676  

Services and technology development

4 unchanged sentences

$ 15,677  

As of June 30, 2021 , and 2020 , 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.

$ 26,231  

$ 16,347  

$ 4,770  

$ 34,062  

$ 8,267  

As of September 30, 2021 , and 2020 , 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.

20 unchanged sentences

Other changes and FX impact

Ending balance as of June 30, 2021

$ 8,561  

Ending balance as of September 30, 2021

$ 8,796  

15 unchanged sentences

Other changes and FX impact

Ending balance as of June 30, 2020

Ending balance as of September 30, 2020

$ 5,968  

$ 1,614  

$ 21,956  

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 June 30, 2021 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 86.9 million.

As of September 30, 2021 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 89.5 million.

There are also approximately $ 10.5 million of outstanding performance obligations to be recognized over a period of thirteen to sixty months.

3 unchanged sentences

The timing of the performance obligations beyond the twelve -month forecast provided by Inox are not determinable and therefore are not included in the total remaining performance obligations. 

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three months ended June 30, 2021 and 2020 :

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three and six months ended September 30, 2021 and 2020 :

Three Months Ended

Six Months Ended

September 30,

Inox Wind Limited

Tri-State Generation and Transmission Association, Inc.

Micron Technology

Nextera Energy Resources

Ascend Performance Materials Ops LLC

Reed & Reed Inc.

Siemens Gamesa Renewable Energy Pty.

2 unchanged sentences

The following table summarizes stock-based compensation expense by financial statement line item for the 

three months ended 

June 30, 2021 and 

three and six months ended 

September 30, 2021 and 

2020 (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Cost of revenues

2 unchanged sentences

$ 1,101  

The Company issued 119,044  shares of immediately vested common stock, of which 110,752 shares were issued in-lieu of cash bonuses in the period, and 309,700 shares of restricted stock awards during the three months ended 

June 30, 2021 . The Company issued 27,341  shares of immediately vested common stock and 658,667  shares of restricted stock awards during the three months ended June 30, 2020 .  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.

$ 2,393  

$ 1,758  

The Company issued 47,604 shares of immediately vested common stock, all of which were issued in lieu of cash bonuses, during the three months ended September 30, 2021, and 

166,648  shares of immediately vested common stock, of which 158,356 shares were issued in-lieu of cash bonuses and 309,700  shares of restricted stock awards during the six months ended 

September 30, 2021 . The Company issued 32,500 shares of restricted stock awards during the three months ended September 30, 2020, and 

27,341  shares of immediately vested common stock and 688,167  shares of restricted stock awards during the six months ended September 30, 2020 .  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 Company has no unrecognized compensation cost for unvested outstanding stock options at June 30, 2021 .

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 7.7 million at June 30, 2021 .

The Company has no unrecognized compensation co st for unvested outstanding stock options at September 30, 2021 .

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 6.8 million at September 30, 2021 .

This expense will be recognized over a weighted-average expense period of approximately 

The Company did not grant any stock options during the three  months ended 

June 30, 2021 or 2020.

The Company did not grant any stock options during the three and 

six  months ended 

September 30, 2021 or September 30, 2020.

Computation of Net Loss per Common Share

3 unchanged sentences

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 the three months ended June 30, 2021 , 

 For the three and six months ended September 30, 2021 , 

1.1 million shares were not included in the calculation of diluted EPS. 

2 unchanged sentences

0.1  million relate to outstanding stock options as they were considered anti-dilutive .

For the three months ended June 30, 2020 , 0.1  million shares related to outstanding stock options were not included in the calculation of diluted EPS as they were considered anti-dilutive.

For the three and six months ended September 30, 2020 , 0.1  million shares related to outstanding stock options were not included in the calculation of diluted EPS as they were considered anti-dilutive.

The following table reconciles the numerators and denominators of the earnings per share calculation for the 

three months ended 

June 30, 2021 and 

three and six months ended 

September 30, 2021 and 

2020 (in thousands, except per share data):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ ( 4,434 )  

$ ( 3,712 )  

$ ( 9,837 )  

Weighted-average shares of common stock outstanding

1 unchanged sentence

23,057  

28,141  

22,943  

Weighted-average shares subject to repurchase

( 1,108 )  

( 1,197 )  

( 1,101 )  

Shares used in per-share calculation ―

1 unchanged sentence

21,860  

27,040  

21,775  

Shares used in per-share calculation ―

1 unchanged sentence

21,860  

27,040  

21,775  

Net loss per share ―

$ ( 0.16 )  

$ ( 0.17 )  

$ ( 0.36 )  

Net loss per share ―

$ ( 0.16 )  

$ ( 0.17 )  

$ ( 0.36 )  

Goodwill and Other Intangibles

6 unchanged sentences

Less impairment loss

June 30, 2021

September 30, 2021

$ 43,471  

The Company did not identify any triggering events in the 

three months ended 

June 30, 2021 that would require interim impairment testing of goodwill.

three and six months ended 

September 30, 2021 that would require interim impairment testing of goodwill.

Other Intangibles

Intangible assets at 

June 30, 2021  and 

September 30, 2021  and 

March 31, 2021  consisted of the following (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

21 unchanged sentences

$ 9,153  

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $0.

6  million and $ 0.1 million, in the  

months ended 

June 30, 2021 , and 2020, respectively .

Additionally, in the 

three months ended 

June 30, 2021 , the Company recorded less than $ 0.

1 million related to intangible amortization related to backlog that is reported in cost of revenues.

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.6 million and $ 1.2 million, in the three and six  months ended 

September 30, 2021 , respectively, and $ 0.1 million and $ 0.2 million in the three and six months ended September 30, 2020, respectively.

Additionally, the Company recorded intangible amortization related to backlog that is reported in cost of revenues of less than $ 0.1 million and $ 0.1 million in the three and six months ended 

September 30, 2021 , respectively.

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

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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 three months ended June 30, 2021 .

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.

8 unchanged sentences

Changes in fair value are recorded to other income (expense), net. 

The Company recognized no change in the three months ended 

June 30, 2021  and $ 0.1  million in unrealized gains on marketable securities, which is recorded in other income (expense), net, for the three  months ended 

June 30, 2020 .

 The Company periodically reviews the realizability of each short- and long-term marketable security when impairment indicators exist with respect to the security. 

If other than temporary impairment of value of the security exists, then the carrying value of the security is written down to its estimated fair value.

The Company had no outstanding marketable securities as of September 30, 2021 and the Company recognized no change in t he three  and six months ended 

September 30, 2021 .

The Company recognized $ 0.2 million and $ 0.1 million in unrealized losses on marketable securities, which is recorded in other income (expense), net, for the three and six months ended September 30, 2020 and less than a $ 0.1 million gain which was recognized during the three and six months ended September 30, 2020 upon the sale of one of the certificates of deposit.

The Company periodically reviews the realizability of each short and long term marketable security when impairment indicators exist with respect to the security.

If other than temporary impairment of value of the security exists, the carrying value of the security is written down to its estimated fair value.

Contingent Consideration

4 unchanged sentences

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of 

June 30, 2021 and 

September 30, 2021 and 

March 31, 2021 (in thousands):

3 unchanged sentences

Significant Unobservable Inputs (Level 3)

June 30, 2021:

September 30, 2021:

Cash equivalents

2 unchanged sentences

Marketable securities

$ 5,165  

Derivative liabilities:

19 unchanged sentences

Acquisition Contingent Consideration

April 1, 2021

Balance at March 31, 2021

$ 7,050  

Mark to market adjustment

Balance at June 30, 2021

Change in fair value

Balance at September 30, 2021

$ 4,720  

1 unchanged sentence

Accounts receivable at 

June 30, 2021 and 

September 30, 2021 and 

March 31, 2021 consisted of the following (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

7 unchanged sentences

Inventory, net of reserves, at 

June 30, 2021 and 

September 30, 2021 and 

March 31, 2021 consisted of the following (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

8 unchanged sentences

$ 13,306  

The Company recorded inventory write-downs of $ 0.6 million and $ 0.8  million for the three months ended June 30, 2021 , and 2020 , respectively. 

The Company recorded inventory write-downs of $ 0.6 million and $ 0.5  million for the three months ended September 30, 2021 , and 2020 , respectively.

The Company recorded inventory write-downs of $ 1.2 million and $ 1.3 million for the six months ended September 30, 2021 and 2020, 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 

June 30, 2021 , and 

September 30, 2021 , and 

March 31, 2021 , primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.

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The cost and accumulated depreciation of property, plant and equipment at 

June 30, 2021 and 

September 30, 2021 and 

March 31, 2021 are as follows (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

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$ 8,997  

Depreciation expense was $ 0.6 million and $ 0.9  million for the three months ended June 30, 2021 and 2020 , respectively.

 The increase in land and building relates to the property added as part of the Neeltran Acquisition.

Depreciation expense was $ 0.7 million and $ 0.9  million for the three months ended September 30, 2021 and 2020 , respectively.

Depreciation expense was $ 1.3 million and $ 1.8 million for the six months ended September 30, 2021 and 2020, respectively.

The increase in land and building relates to the property added as part of the Neeltran Acquisition.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at 

June 30, 2021 and 

September 30, 2021 and 

March 31, 2021 consisted of the following (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

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Product warranty activity was as follows (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Balance at beginning of period

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$ 2,168  

$ 2,053  

$ 2,015  

Acquired warranty obligations

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( 238 )  

( 207 )  

( 460 )  

Balance at end of period

$ 2,155  

The Company recorded an income tax benefit of $ 2.1 million in the 

three month period ended June 30, 2021 . 

The Company recorded income tax expense of $ 0.2  million in the three months ended 

June 30, 2020 .

$ 2,109  

$ 2,155  

$ 2,109  

The Company recorded an income tax expense of $ 0.2 million and income tax benefit of $ 1.9 million in the 

three and six months ended September 30, 2021 , respectively. 

The Company recorded income tax expense of $ 0.2  million and $ 0.4 million in the three and six months ended September 30, 2020, respectively.

As a result of a difference in book and tax basis related to the intangible assets acquired in the Neeltran Acquisition (see Note 2, "Acquisitions"), the Company recorded a deferred tax liability of $ 2.3 million.

As a result, the Company was able to benefit from additional deferred tax assets and therefore released a corresponding valuation allowance of $ 2.3  million 

during the 

three  months ended 

June 30, 2021 .  The purchase price allocation is preliminary and has not been finalized as the analysis on the assets and liabilities acquired, primarily the tax related liability, may require further adjustments to the Company's purchase accounting that could result in measurement period adjustments that would impact the Company's reported net assets and goodwill as of May 6, 2021.

during the six months ended 

September 30, 2021 .  The purchase price allocation is preliminary and has not been finalized as the analysis on the assets and liabilities acquired, primarily the tax related liability, may require further adjustments to the Company's purchase accounting that could result in measurement period adjustments that would impact the Company's reported net assets and goodwill as of May 6, 2021.

Material changes, if any, to the preliminary allocation summarized in Note 2, "Acquisitions" will be reported once the related uncertainties are resolved, but no later than May 6, 2022.  

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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 

three months ended 

June 30, 2021 and did not have any gross unrecognized tax benefits as of June 30, 2021 .

six months ended 

September 30, 2021  and did not have any gross unrecognized tax benefits as of September 30, 2021 .

Contingent Consideration

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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:

September 30,

Fiscal Year 2021

Revenue risk premium

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6.60 %  

6.90 %  

Revenue volatility

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$ 17.39  

Payment delay (days)

Fiscal Year 2020

Revenue risk premium

6.70 %  

6.90 %  

Revenue volatility

$ 18.96  

$ 23.42  

$ 14.23  

Payment delay (days)

The Company recorded a net loss of $ 0.1  million resulting from the increase in the fair value of the contingent consideration in the 

three  months ended 

June 30, 2021 .

The Company recorded a net gain of $ 2.4  million and $ 2.3 million resulting from the decrease in the fair value of the contingent consideration in the 

three and six  months ended 

September 30, 2021 , respectively.

As part of the Neeltran Acquisition, the Company identified four equipment financing agreements that Neeltran had entered into prior to the acquisition on May 6, 2021.

The Company determined to account for these agreements as a debt transaction and recorded current and long-term debt liabilities of $ 0.1 million each during the three months ended June 30, 2021 . 

The Company determined to account for these agreements as a debt transaction and recorded current and long-term debt liabilities of $ 0.1 million each during the six  months ended September 30, 2021 . 

The Company determines whether a contract is or contains a lease at inception of a contract.

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The Company identified nine lease contracts with terms greater than twelve months and evaluated them under ASC 842 guidance.

As part of the implementation, we identified one lease contract that classified as a financing lease.

As part of the implementation, the Company identified one lease contract that classified as a financing lease.

The Company does not expect a material impact to the financial statements on an ongoing basis resulting from the adoption of the ASC 842 standard for the Neeltran business and Neeltran will follow the existing policies below.

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Accordingly, on May 6, 2021, the Company recognized a finance lease right-of-use asset and a finance lease liability of $13.2 thousand on the Neeltran opening balance sheet.

As of June 30, 2021, the right-of-use asset related to the finance lease was $ 12.2 thousand, net of accumulated amortization of $ 1.0  thousand, and is included in the property and equipment, net on the Company's consolidated balance sheet.

As of September 30, 2021, the right-of-use asset related to the finance lease was $ 10.7 thousand, net of accumulated amortization of $ 2.5  thousand, and is included in the property and equipment, net on the Company's 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.

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Supplemental balance sheet information related to leases at 

June 30, 2021 , and 

September 30, 2021 , and 

March 31, 2021 are as follows (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

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The costs related to the Company's operating leases for the 

three months ended June 30, 2021 , and 

three and six months ended September 30, 2021 , and 

2020 are as follows (in thousands):

Three Months Ended

June 30, 2021

Six Months Ended

September 30, 2021

Operating Leases:

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Three Months Ended

June 30, 2020

Six Months Ended

September 30, 2020

Operating Leases:

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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 June 30, 2021 , the Company had $ 5.6 million of restricted cash included in long-term assets and $ 2.3  million of restricted cash included in current assets.

As of September 30, 2021 , the Company had $ 6.2 million of restricted cash included in long-term assets and $ 2.3 million of restricted cash included in current assets.

As of March 31, 2021 , the Company had $ 5.6 million of restricted cash included in long term assets and $ 2.2 million of restricted cash included in current assets.

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

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ 24,619  

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$ 34,062  

Three Months Ended June 30,

Operating loss:

$ 27,908  

$ 21,117  

Unallocated corporate expenses

$ 53,328  

$ 42,329  

Three Months Ended September 30,

Six Months Ended September 30,

Operating Income (loss):

$ ( 5,836 )  

$ ( 1,374 )  

$ ( 11,180 )  

( 983 )  

( 558 )  

Unallocated corporate gain (expenses)

( 849 )  

( 63 )  

$ ( 4,302 )  

$ ( 3,206 )  

$ ( 11,801 )  

The accounting policies of the business segments are the same as those for the consolidated Company.

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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 consist of loss on contingent consideration of $ 0.1  million in the 

three months ended June 30, 2021 .

Additionally, unallocated corporate expenses consist of stock-based compensation expense of $ 1.3 million and $ 0.9  

million in the three months ended 

June 30, 2021 , and 2020 , respectively.

Unallocated corporate expenses consist of a gain on contingent consideration of $ 2.4 million and $ 2.3 million in the three and six months ended September 30, 2021, respectively.

Additionally, unallocated corporate expenses consist of stock-based compensation expense of $ 1.1 million and $ 0.8  million in the three months ended 

September 30, 2021 , and 2020 , respectively and $ 2.4 million and $ 1.8 million in the six months ended September 30, 2021 and 2020, respectively.

Total assets for the two business segments as of 

June 30, 2021 , and 

September 30, 2021 , and 

March 31, 2021 , are as follows (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

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

and located elsewhere herein regarding industry prospects, the timing of our resilient electric grid ("REG") system project with Commonwealth Edison Company, our prospective results of operations or financial position, the benefits of our acquisition of Northeast Power Systems, Inc.

and located elsewhere herein regarding industry prospects, our prospective results of operations or financial position, the benefits of our acquisition of Northeast Power Systems, Inc.

("NEPSI") and Neeltran, Inc.

("Neeltran"), 

and adoption of accounting changes may be deemed to be forward-looking statements.

("Neeltran"), changes in macroeconomic and market conditions, arising from the COVID-19 pandemic, including inflation, sourcing, 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,”

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DHS’s approval to commence with construction was obtained on June 20, 2019.

Substation work on the project began in late 2019 and we have delivered the REG project hardware. The REG system is expected to be operational in 2021.

Substation work on the project began in late 2019 and we successfully integrated the REG system on Com Ed's electric power grid and the REG system became fully operational in August 2021.

The REG system was placed into operation during the three months ended September 30, 2021.

On October 1, 2020, we 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, we acquired all of the issued and outstanding (i) shares of capital stock of “NEPSI, a New York corporation", 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").

Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, we acquired all of the issued and outstanding (i) shares of capital stock of Northeast Power Systems, Inc., a New York corporation (“NEPSI"), and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI’s headquarters (the "NEPSI Acquisition").

NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems. 

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The NEPSI purchase price was $26.0 million in cash on hand, including cash from the settlement of our $25 million certificate of deposit during the three months ended September 30, 2020, and 873,657 restricted shares of our common stock.  As part of the transaction, in the future, the selling stockholders may receive up to an additional 1,000,000 million restricted shares of our common stock upon the achievement of certain specified future revenue objectives during varying periods of up to four years after the closing.

On May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of (i) Neeltran, a Connecticut corporation that supplies rectifiers and transformers to industrial customers, and (ii) Neeltran International, Inc., a Connecticut corporation (“International”), as well as the real property that served as Neeltran’s headquarters ("the Neeltran Acquisition").

On May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of (i) Neeltran, Inc.

a Connecticut corporation ("Neeltran") that supplies rectifiers and transformers to industrial customers, and (ii) Neeltran International, Inc., a Connecticut corporation (“International”), as well as the real property that served as Neeltran’s headquarters ("the Neeltran Acquisition").

For additional information, see “Liquidity and Capital Resources”

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The COVID-19 pandemic continues to rapidly evolve.

The extent to which the outbreak impacts our business, liquidity, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the continued geographic spread of the disease, the duration of the pandemic, the location, duration and magnitude of future waves of infection, new variants of the virus, availability and adoption of vaccines, effectiveness of vaccines against the virus and its mutations, travel restrictions and social distancing in the United States, the European Union, India and other countries, the duration and extent of business closures or business disruptions and the effectiveness of actions taken to contain and treat the disease.

We are starting to experience inflation pressure in our supply chain and some delays in sourcing materials needed for our products which has increased our cost of revenues and decreased gross margin.

The extent to which the outbreak impacts our business, liquidity, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the continued geographic spread of the disease, the duration of the pandemic, the location, duration and magnitude of future waves of infection, new variants of the virus, availability and adoption of vaccines and treatments, effectiveness of vaccines against the virus and its mutations, travel restrictions and social distancing in the United States, the European Union, India and other countries, the duration and extent of business closures or business disruptions including global supply chain disruptions and the effectiveness of actions taken to contain and treat the disease.

Changes in macroeconomic and market conditions arising from the COVID-19 pandemic, including inflation, sourcing, material delays and global supply chain disruptions could have a material adverse effect on our business financial condition and results of operation.

Critical Accounting Policies and Estimates

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Results of Operations

Three months ended June 30, 2021 , compared to the three months ended June 30, 2020

Total revenues increased 20% to $25.4 million for the three months ended June 30, 2021 , compared to $21.2 million for the three months ended June 30, 2020. 

Three and six months ended September 30, 2021 , compared to the three and six months ended September 30, 2020

Total revenues increased 32% and 26% to $27.9 million and $53.3 million for the three and six months ended September 30, 2021 , respectively, compared to $21.1 million and $42.3 million for the three and six months ended September 30, 2020, respectively. 

Our revenues are summarized as follows (in thousands):

Three Months Ended June 30,

Our Grid business unit accounted for 92% of total revenues for the three months ended June 30, 2021 , compared to  84% for the three months ended June 30, 2020.

Three Months Ended September 30,

Six Months Ended September 30,

Our Grid business unit accounted for 88% and 9 0% of total revenues for the three and six months ended September 30, 2021 , respectively, compared to  77% and 80% for the three and six months ended September 30, 2020, respectively.

Our Grid business unit revenues increased 

33% to $23.5 million in the three months ended June 30, 2021 , from $ 17.7  million in the 

three months ended June 30, 2020 . 

The increase in the Grid business unit revenue in the three months ended June 30, 2021 , was driven by the contributions from the acquisitions of NEPSI and Neeltran as well as growth in the SPS product line.

Our Wind business unit accounted for 8% of total revenues for the three months ended June 30, 2021 , c ompared to 16% for the 

three months ended June 30, 2020 . 

Revenues in the Wind business unit decreased 45% to $ 1.9 million in the 

three months ended June 30, 2021 , from $3.5 million in the 

three months ended June 30, 2020 .

The decrease in the three months ending June 30, 2021 , was driven by shipments of electrical control systems ("ECS") to Doosan in the three months ended June 30, 2020 with no similar shipments in the current year period.

 Inox, historically one of the largest customers of our Wind business unit has had and may in the future have its ability to perform under our ECS supply contract hampered by the prolonged impacts of the COVID-19 pandemic.

51% and 41 % to $24.6 million and $48.1 million in the three and six months ended September 30, 2021 , respectively, from $16.3  million and $34.1 million in the 

three and six months ended September 30, 2020 , respectively. The increase in the Grid business unit revenue in the three and six months ended September 30, 2021 , was primarily driven by the contributions from the acquisitions of NEPSI and Neeltran.

Our Wind business unit accounted for 12% and 10% of total revenues for the three and six months ended September 30, 2021 , respectively, c ompared to 23% and 20% for the 

three and six months ended September 30, 2020 , respectively. 

Revenues in the Wind business unit decreased 31% and 37% to $ 3.3 million and $ 5.

2 million in the 

three and six months ended September 30, 2021 , from $4.8 million and $8.3 million in the 

three and six months ended September 30, 2020 .

The decrease in the three and six months ended September 30, 2021 , was driven by shipments of electrical control systems ("ECS") to Doosan in the three and six months ended September 30, 2020 with no similar shipments in the current year period. Inox, historically one of the largest customers of our Wind business unit has had and may in the future have its ability to perform under our ECS supply contract hampered by the prolonged impacts of the COVID-19 pandemic.

Inox has been active in the new central and state government auction regime in India and has a cumulative order book of over 1.4 GW. We are parties to a technology transfer & license agreement dated as of April 17, 2009, as amended (the “2009 TTLA”) with Inox for a 2 MW class wind turbine, the manufacture of which requires our ECS. 

On July 21, 2021, we sent written notice to Inox notifying Inox of its default under the 2009 TTLA due to Inox’s failure to pay royalties for commissioned 2 MW wind turbines in the amount of €0.7 million that Inox is obligated to pay under the terms of the 2009 TTLA. 

If Inox fails to pay such royalties in the amount of €0.7 million in accordance with the terms of the 2009 TTLA within the thirty working day cure period after receipt of the default notice, then we may terminate the 2009 TTLA by providing written notice of such termination to Inox. 

We cannot predict if and when Inox will pay royalties due and payable under the 2009 TTLA.

In the event we were to terminate the 2009 TTLA, Inox would no longer be able to manufacture 2 MW wind turbines, likely result in a decrease in Inox’s demand for our ECS and our revenues and liquidity could be impacted.

Inox subsequently paid the royalties during the cure period.

If Inox in the future fails to pay such royalties in accordance with the terms of the 2009 TTLA within the thirty working day cure period after receipt of the default notice, then we may terminate the 2009 TTLA by providing written notice of such termination to Inox. 

We cannot predict if and when Inox will pay royalties due and payable under the 2009 TTLA in the future.

In the event we were to terminate the 2009 TTLA in connection with Inox's failure to pay royalties under such agreement, Inox would no longer be able to manufacture 2 MW wind turbines, likely result in a decrease in Inox’s demand for our ECS and our revenues and liquidity could be impacted.

We cannot predict if and how successful Inox will be in executing on these orders or in obtaining new orders under the new central and state auction regime.

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Cost of Revenues and Gross Margin

Cost of revenues increased b y 36% to $22.1 million for the three months ended June 30, 2021 , compared to $16.2 million for the three month s ended June 30, 2020 .

Cost of revenues increased b y 58% and 47% to $24.6 million and $46.7 million for the three and six months ended September 30, 2021 , compared to $15.6 million and $31.8 million for the three and six month s ended September 30, 2020 .

Gross margin was 

13% for the 

three months ended June 30, 2021 , compared to 24% 

for the 

three months ended June 30, 2020 . 

The decrease in gross margin in the three months ended 

June 30, 2021 , was due to an unfavorable product mix and additional cost related to purchase accounting adjustments associated with the Neeltran Acquisition. Cost of revenues includes total amortization expense of less than $0.1 million in the 

three months ended 

June 30, 2021 , as a result of each of the NEPSI and Neeltran acquired backlog intangible assets.  In addition, a fair value purchase adjustment of approximately $0.3 million for the step-up basis assigned to acquired inventory, to properly reflect the fair value in purchase accounting, was charged to cost of revenues in the three months ended June 30, 2021 . 

12% and 13 % for the 

three and six months ended September 30, 2021 , compared to 26% and 25% for the 

three and six months ended September 30, 2020 . 

The decrease in gross margin in the three and six months ended 

September 30, 2021 , was due to an unfavorable product mix, higher raw materials cost and additional costs related to purchase accounting adjustments associated with the Neeltran Acquisition. Cost of revenues includes total amortization expense of less than $0.1 million and $0.1 million in the 

three and six months ended 

September 30, 2021 as a result of each of the NEPSI and Neeltran acquired backlog intangible assets.  In addition, a fair value purchase adjustment of approximately $0.3 million and $0.6 million for the step-up basis assigned to acquired inventory, to properly reflect the fair value in purchase accounting, was charged to cost of revenues in the three and six months ended September 30, 2021 . 

Operating Expenses

Research and development

Research and development ("R&D") expense s increased 22% in the three months ended 

June 30, 2021 , to $ 3.0 million from $2.

5  million in the three months ended 

June 30, 2020 .  The increase in R&D expense was due to higher overall compensation expense and less allocation of expenses to cost of goods sold for revenue generating projects in the three months ended 

June 30, 2021 , compared to the three months ended June 30, 2020 . 

Research and development ("R&D") expense remained relatively flat at 

$ 2.7 million  in the three months ended September 30, 2021 and 

September 30, 2020 , respectively.

The slight decrease in R&D expense was due to higher overall compensation expense and less allocation of expenses to cost of goods sold for revenue generating projects in the three months ended 

September 30, 2020,  compared to the three months ended September 30, 2021 . Research and development expenses increased 9% in the six months ended September 30, 2021 to $ 5.7  million from $5.2 million in the six months ended September 30, 2020.

The increase in R&D expense in the six month period was due to less allocation of expenses to cost of goods sold for revenue generating projects.

Selling, general, and administrative

Selling, general and administrative ("SG&A") expen ses increased 27%  in the three months ended June 30, 2021 , 

Selling, general and administrative ("SG&A") expen ses increased 14%  in the three months ended September 30, 2021 , 

to $ 6.7 million from $5.9 million 

in the three months ended 

June 30, 2020 . The increase in SG&A expense in the three months ended June 30, 2021  was due to higher overall compensation expense, including stock compensation, than in the prior year period and acquisition related costs due to the Neeltran Acquisition. 

September 30, 2020 . The increase in SG&A expense in the three months ended September 30, 2021  was due to higher overall compensation expense due to the additions of NEPSI and Neeltran, as well as higher stock compensation expense than in the prior year period.

Selling, general and administrative expenses increased 20 % to $13.8 million in the six months ended September 30, 2021 compared to $11.5 million in the six months ended September 30, 2020.

The increase in SG&A expense in the six months ended September 30, 2021 was due to higher overall compensation expense due to the additions of NEPSI and Neeltran than in the prior year period.

Amortization of acquisition related intangibles

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $0.6 million in the three months ended 

June 30, 2021  and $0.1 million in the three months ended June 30, 2020. 

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $0.6 million and $1.2 million in the three and six months ended 

September 30, 2021 , respectively, and $0.1 million and $0.2 million in the three and six months ended September 30, 2020, respectively. 

The increase in amortization expense is primarily a result of the acquisitions of 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 NEPSI Acquisition resulted in a loss of $0.1 million in the three months ended 

June 30, 2021 .

The change in the fair value was primarily driven by an increased likelihood of achieving certain revenue targets.

The change in fair value of our contingent consideration for the earnout payment on the NEPSI Acquisition resulted in a gain of $2.4 million and $2.3 million in the three and six months ended 

September 30, 2021 .

The change in the fair value was primarily driven by a decreased likelihood of achieving certain revenue targets.

Operating loss

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

Three Months Ended June 30,

Operating loss:

Three Months Ended September 30,

Six Months Ended September 30,

Operating Income (loss):

Unallocated corporate expenses

Our Grid business segment generated operating losses of $5.3 million in the three mon ths ended June 30, 2021 , compared to $1.2 million 

in the three months ended June 30, 2020 .

The increase in the Grid business unit operating loss in the three months ended June 30, 2021 , was due to a less favorable product mix and the impact of the purchase accounting adjustments recorded as part of the Neeltran Acquisition including the inventory step up charge noted above and an adjustment which reduced revenue by $0.4 million less than the contract value, to recognize the fair value adjustment related to the acquired customer deposits, in order to properly reflect pre-acquisition activities.  

Our Wind business segment generated an operating loss of $0.8 milli on in the three months ended June 30, 2021 , compared to $1.1 million in the three months ended June 30, 2020 .

The decrease in the Wind business unit operating los s was due to reduced manufacturing overhead associated with consolidating wind manufacturing into our Ayer manufacturing facility in Massachusetts.

Unallocated corporate expenses consist of a loss on contingent consideration of $0.1  

million in the three months ended June 30, 2021 .

Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $1.3 million and $0.9 million in the three months ended 

June 30, 2021  and 2020, respectively.

Our Grid business segment generated operating losses of $5.8 million and $11.1 million in the three and six mon ths ended September 30, 2021 , compared to $1.4 million and $2.6 million 

in the three and six months ended September 30, 2020 .

The increase in the Grid business unit operating loss in the three and six months ended September 30, 2021 , was due to a less favorable product mix and the impact of the purchase accounting adjustments recorded as part of the Neeltran Acquisition including the inventory step up charge noted above and an adjustment which reduced revenue by $0.6 million less than the contract value, to recognize the fair value adjustment related to the acquired customer deposits, in order to properly reflect pre-acquisition activities.  

Our Wind business segment generated an operating profit of $0.2 milli on and an operating loss of $0.6 million in the three and six months ended September 30, 2021 , compared to operating losses of $1.0 million and $2.1 million in the three and six months ended September 30, 2020 .

The decrease in the Wind business unit operating los s in the three and six month periods was due to reduced manufacturing overhead associated with consolidating wind manufacturing into our Ayer manufacturing facility in Massachusetts.

Unallocated corporate expenses consist of a gain on contingent consideration of $2.4 million and $2.3 million in the three and six months ended September 30, 2021.

Additionally, unallocated corporate expenses primarily consisted of stock-based compensation expense of $1.1 million and $0.8 million in the three months ended 

September 30, 2021 and 2020, respectively and $2.4 million and $1.8 million in the six months ended September 30, 2021 and 2020, respectively.

Interest income, net

Interest income, net, was less than $0.1 million in the three months ended June 30, 2021 , compared to $0.2 million in the three months ended June 30, 2020.

T he decrease in interes t income in the three months ended 

June 30, 2021 , was relate d to a lower cash balance earning lower interest rates than in the prior period.

Other (expense) income, n et

Other expense, net, was less than $0.1 million in the three months ended June 30, 2021 , compared to o ther expense, net of $ 0.2 million  in the 

three months ended June 30, 2020 . 

Other expense, net, during both periods was driven by the impacts of fluctuations in foreign currencies during the respective period.  

Interest income, net, was less than $0.1 million and $0.1 million in the three and six months ended September 30, 2021 , compared to $0.2 million and $0.3 million in the three and six months ended September 30, 2020.

T he decrease in interes t income in the three and six months ended 

September 30, 2021 was relate d to a lower cash balance earning lower interest rates than in the prior period.

Other (expense) income, net

Other income, net was less than $0.1 million and other expense, net was less than $0.1 million in the three and six months ended September 30, 2021 , compared to o ther expense, net of $ 0.5 million and $0.6 million  in the 

three and six months ended September 30, 2020 .

The decrease in other expense during both periods was driven by the impacts of favorable fluctuations in foreign currencies during the respective period.  

 Income Taxes

Income tax benefit was $2.1 million in the three months ended 

June 30, 2021 , and income tax expense was $0.2 million in the three months ended 

June 30, 2020 . 

The decrease in income tax expense is  a result of the release of the valuation allowance due to the recording of the deferred tax liability from the Neeltran Acquisition. 

Net loss was $5.4 million in the three months ended June 30, 2021 , compared to $3.4 million in the three months ended June 30, 2020.  

The increase in net loss was driven by lower gross margin and higher operating expenses primarily due to acquisition and purchase accounting adjustments 

in the period ending June 30, 2021.

Income tax expense was $0.2 million in the three months ended September 30, 2021 and income tax benefit was $1.9 million in the six months ended September 30, 2021.

I ncome tax expense was $0.2 million and $0.4 million in the three and six months ended 

September 30, 2020 . 

The decrease in income tax expense is  a result of the release of the valuation allowance to offset the recording of the deferred tax liability from the Neeltran Acquisition in the six months ended September 30, 2021. 

Net loss was $4.4 million and $ 9.8 million in the three and six months ended September 30, 2021 , compared to $3.7 million and $7.1 million in the three and six months ended September 30, 2020.  

The increase in net loss was driven by lower gross margin and higher operating expenses primarily due to acquisition costs and purchase accounting adjustments 

in the three and six months ended September 30, 2021.

Non-GAAP Financial Measure - 

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The non-GAAP measures included in this 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 loss as net loss before stock-based compensation, amortization of acquisition-related intangibles, acquisition costs, change in fair value of contingent consideration, and other non-cash or unusual charges.  We believe non-GAAP net 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 loss as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net loss is set forth in the table below (in thousands, except per share data):

Three Months Ended June 30,

We define non-GAAP net loss as net loss before stock-based compensation, amortization of acquisition-related intangibles, change in fair value of contingent consideration, acquisition costs, and other non-cash or unusual charges.  We believe non-GAAP net 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 loss as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net loss is set forth in the table below (in thousands, except per share data):

Three Months Ended September 30,

Six Months Ended September 30,

Stock-based compensation

Amortization of acquisition-related intangibles

Acquisition costs

Change in fair value of contingent consideration

Acquisition costs

Non-GAAP net loss

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Weighted average shares outstanding - basic

We incurred non-GAAP net losses of $ 2.7 million or $ 0.10  per share, for the 

three months ended June 30, 2021 , compared to $ 2.4 million , or $ 0.11 

per share, for the 

three months ended June 30, 2020 .

The increase in the non-GAAP net loss was due to a higher operating loss driven by lower gross margin and higher operating expenses.  

We incurred non-GAAP net losses of $ 5.1 million and $ 7.8 million or $ 0.19  and $0.29 per share, for the 

three and six months ended September 30, 2021 , compared to $ 2.7 million and $5.1 million , or $ 0.13 and $0.24 per share, for the 

three and six months ended September 30, 2020 .

The increase in the non-GAAP net loss for the three and six months ended September 30, 2021 was due to a higher operating loss driven by lower gross margin and higher operating expenses.  

Liquidity and Capital Resources

We have experienced recurring operating losses, and as of June 30, 2021 , had an accumulated deficit of $1,006.7 millio n.

We have experienced recurring operating losses, and as of September 30, 2021 , had an accumulated deficit of $1,011.1 millio n.

Our cash requirements depend on numerous factors, including the successful completion of our product development activities, our ability to commercialize our REG 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.

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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 described above, on May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of (i) Neeltran, that supplies rectifiers and transformers to industrial customers, and (ii) International, for:

As described above, on May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of (i) Neeltran and (ii) International, for:

(a) $1.0 million in cash, and (b) 301,556 shares of the Company’s common stock, which were paid and issued to the selling stockholders of Neeltran.

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All cash payments associated with the Neeltran Acquisition were funded with cash on hand.

As of June 30, 2021 , we had cash, cash equivalents, marketable securities and restricted cash of $63.1 million, compared to $80.7 million as of March 31, 2021, a decrease of $17.6 million.

As of June 30, 2021 , we had approximately $3.3 million of cash, cash equivalents, and restricted cash in foreign bank accounts.

As of September 30, 2021 , we had cash, cash equivalents, marketable securities and restricted cash of $57.0 million, compared to $80.7 million as of March 31, 2021, a decrease of $23.7 million.

As of September 30, 2021 , we had approximately $2.3 million of cash, cash equivalents, and restricted cash in foreign bank accounts.

Our cash, cash equivalents, marketable securities and restricted cash are summarized as follows (in thousands):

June 30, 2021

September 30, 2021

March 31, 2021

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Total cash, cash equivalents, marketable securities and restricted cash

For the three months ended June 30, 2021 , net cash used in operating activities was $5.8 million, compared to $3.1 million for the three months ended June 30, 2020. 

For the six months ended September 30, 2021 , net cash used in operating activities was $11.7 million, compared to $6.6 million for the six months ended September 30, 2020. 

The increase in net cash used in operations was due primarily to 

the deferred income taxes recorded in conjunction with the Neeltran Acquisition during the current year period .

For the three months ended June 30, 2021 , net cash used in investing activities was $ 11.7  million, compared to $0.5 million for the three months e nded June 30, 2020 .

The increase in net cash used in investing activities was primarily due to the cash that was used to pay for the Neeltran Acquisition. 

For the three months ended June 30, 2021 , net cash used in financing activities was less than $0.1 million compared to $0.4 million in the three months ended June 30, 2020. 

the overall impact of increased sales activities on operating activities during the current year period.

For the six months ended September 30, 2021 , net cash used in investing activities was $ 6.8  million, compared to net cash provided by investing activities of $23.7 million for the six months e nded September 30, 2020 .

The increase in net cash used in investing activities was primarily due to the cash that was used to pay for the Neeltran Acquisition.

Additionally the prior year period included $25 million for settlement of a certificate deposit that was used to fund the acquisition of NEPSI.

There was no such transaction in the six months ended September 30, 2021.

For the six months ended September 30, 2021 , net cash provided by financing activities was less than $0.1 million compared to net cash used in financing activities of $0.6 million in the six months ended September 30, 2020. 

The decrease in net cash used in financing activities was due primarily to a decrease in the repurchase of common stock in connection with employee tax obligations upon the vesting of stock awards.

As of June 30, 2021 , we had $5.6 million of restricted cash included in long-term assets and $2.3 million of restricted cash included in current assets. 

As of September 30, 2021 , we had $6.2 million of restricted cash included in long-term assets and $2.3 million of restricted cash included in current assets. 

These amounts of restricted cash primarily represent deposits to secure letters of credit for various supply contracts and long-term projects, including the irrevocable letter of credit in the amount of $5.0 million to secure certain of our obligations under the Subcontract Agreement with ComEd.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements