What changed in this filing

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Item 1. Financial Statements

2023-02-01 compared with 2022-11-01 · 244 added, 450 removed, 990 unchanged (41% of the section changed)

2 unchanged sentences

(In thousands)

September 30, 2022

December 31, 2022

March 31, 2022

70 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

$ 27,680  

$ 27,908  

$ 50,360  

$ 53,328  

Nine Months Ended

Cost of revenues

25,710  

24,647  

46,169  

46,698  

Operating expenses:

1 unchanged sentence

Selling, general and administrative

14,911  

13,838  

Amortization of acquisition-related intangibles

Change in fair value of contingent consideration

( 290 )  

( 2,430 )  

( 120 )  

Total operating expenses

10,062  

21,152  

18,431  

Operating loss

( 8,092 )  

( 4,302 )  

( 16,961 )  

Interest income, net

China dissolution

( 1,921 )  

Other income (expense), net

Loss before income tax expense

( 9,895 )  

( 4,253 )  

( 18,572 )  

Income tax expense (benefit)

( 14 )  

$ ( 9,881 )  

$ ( 4,434 )  

$ ( 18,590 )  

Net loss per common share

$ ( 0.35 )  

$ ( 0.16 )  

$ ( 0.67 )  

$ ( 0.35 )  

$ ( 0.16 )  

$ ( 0.67 )  

Weighted average number of common shares outstanding

27,867  

27,252  

27,714  

27,040  

27,867  

27,252  

27,714  

27,040  

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

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

$ ( 9,881 )  

$ ( 4,434 )  

$ ( 18,590 )  

Nine Months Ended

Other comprehensive (loss) gain, net of tax:

3 unchanged sentences

Comprehensive loss

$ ( 7,855 )  

$ ( 4,410 )  

$ ( 16,501 )  

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 and six MONTHS ENDED September 30, 2022 AND 2021

FOR THE THREE and NINE MONTHS ENDED December 31, 2022 AND 2021

(In thousands)

Accumulated Other  

Number of Shares  

Par Value  

Paid-in Capital  

Treasury Stock  

Comprehensive Loss  

Accumulated Deficit  

Stockholders' Equity  

Accumulated Other

Number of Shares

Paid-in Capital

Treasury Stock

Comprehensive Loss

Accumulated Deficit

Stockholders' Equity

Balance at March 31, 2022

28,920  

$ 1,133,536  

$ ( 3,639 )  

$ ( 291 )  

$ ( 1,020,506 )  

$ 109,389  

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

2 unchanged sentences

Cumulative translation adjustment

( 8,710 )  

Balance at June 30, 2022

28,939  

$ 1,134,707  

$ ( 3,639 )  

$ ( 228 )  

$ ( 1,029,216 )  

$ 101,913  

Issuance of common stock - ESPP

3 unchanged sentences

Cumulative translation adjustment

( 9,881 )  

Balance at September 30, 2022

29,337  

$ 1,136,028  

$ ( 3,639 )  

$ 1,798  

$ ( 1,039,097 )  

$ 95,383  

Accumulated Other  

Number of Shares  

Par Value  

Paid-in Capital  

Treasury Stock  

Comprehensive Loss  

Accumulated Deficit  

Stockholders' Equity  

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at December 31, 2022

Accumulated Other

Number of Shares

Paid-in Capital

Treasury Stock

Comprehensive Loss

Accumulated Deficit

Stockholders' Equity

Balance at March 31, 2021

27,988  

$ 1,121,495  

$ ( 3,593 )  

$ ( 277 )  

$ ( 1,001,313 )  

$ 116,592  

Issuance of common stock - bonus payout

4 unchanged sentences

Repurchase of treasury stock

( 46 )  

Cumulative translation adjustment

( 63 )  

( 5,403 )  

Balance at June 30, 2021

28,726  

$ 1,128,961  

$ ( 3,639 )  

$ ( 340 )  

$ ( 1,006,716 )  

$ 118,553  

Issuance of common stock - ESPP

3 unchanged sentences

Cumulative translation adjustment

( 4,434 )  

Balance at September 30, 2021

28,793  

$ 1,130,921  

$ ( 3,639 )  

$ ( 316 )  

$ ( 1,011,150 )  

$ 116,104  

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at December 31, 2021

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

2 unchanged sentences

(In thousands)

Six Months Ended September 30,

Nine Months Ended December 31,

Cash flows from operating activities:

$ ( 18,590 )  

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

4 unchanged sentences

Change in fair value of contingent consideration

( 120 )  

China dissolution

Non-cash interest income

Other non-cash items

( 134 )  

Unrealized foreign exchange loss on cash and cash equivalents

1 unchanged sentence

Accounts receivable

( 92 )  

( 13,749 )  

Prepaid expenses and other assets

2 unchanged sentences

Net cash used in operating activities

( 11,572 )  

Cash flows from investing activities:

Purchase of property, plant and equipment

( 560 )  

Cash paid for acquisition, net of cash acquired

1 unchanged sentence

Change in other assets

( 99 )  

Net cash used in investing activities

( 659 )  

Cash flows from financing activities:

1 unchanged sentence

Repayment of debt

( 33 )  

Proceeds from exercise of employee stock options and ESPP

2 unchanged sentences

Net decrease in cash, cash equivalents and restricted cash

( 12,132 )  

Cash, cash equivalents and restricted cash at beginning of period

49,486  

75,539  

Cash, cash equivalents and restricted cash at end of period

$ 37,354  

$ 56,989  

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.

Issuance of common stock to settle liabilities

$ 2,529  

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

5 unchanged sentences

or the “Company”) was founded on April 

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”

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”

5 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 

September 30, 2022 

2021  and the financial position at September 

December 31, 2022 

2021  and the financial position at December 31, 2022;

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

3 unchanged sentences

filed with the SEC on June 1, 2022.

The Company has historically experienced recurring operating losses and as of September 30, 2022 , the Company had an accumulated deficit of $ 1,039  million.

The Company has historically experienced recurring operating losses and as of December 31, 2022 , the Company had an accumulated deficit of $ 1,049  million.

In addition, the Company has historically experienced recurring negative operating cash flows.

At September 30, 2022 , the Company had cash and cash equivalents of $ 27.8 million.

At December 31, 2022 , the Company had cash and cash equivalents of $ 23.7 million.

Cash used in operations for the 

six months ended 

September 30, 2022 was $ 11.6 million.

nine months ended 

December 31, 2022 was $ 17.1 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”

2 unchanged sentences

The terms of any future offering under the Form S- 3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

The COVID- 19 pandemic continues to rapidly evolve.

While the COVID- 19 pandemic has 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.

In addition, the Company is experiencing substantial inflationary pressure in its supply chain, some delays in sourcing materials needed for its products and some production disruption resulting from higher than typical employee absenteeism, all of which have increased the Company’s cost of revenues and decreased gross margin. The extent to which the pandemic 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. 

Changes in macroeconomic conditions arising from the COVID- 19 pandemic or for other reasons, such as the ongoing war between Russia and Ukraine, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on the Company’s business, financial condition and results of operation.

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 six months ended September 30, 2022 .

The Company is experiencing substantial inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company’s cost of revenues and decreased gross margin. Changes in macroeconomic conditions arising from the COVID- 19 pandemic or for other reasons, such as the ongoing war between Russia and Ukraine, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on the Company’s business, financial condition and results of operation.

From time-to-time the Company 

may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately 5 % of the global workforce.

This restructuring is expected to incur an immaterial amount of cash expense and to result in annualized cost savings of approximately $ 5 million, beginning in fiscal year 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.

30 unchanged sentences

Total purchase consideration

$ 16.4  

 Inventory include

18 unchanged sentences

The unaudited pro forma condensed consolidated statement of operations for the

three and six months ended

September 30, 2022 and 

three and nine months ended

December 31, 2022 and 

2021 is presented as if the Neeltran Acquisition had occurred on

April 1, 2021.

Three Months Ended September 30,

Six Months Ended September 30,

$ 27,680  

$ 27,908  

$ 50,360  

$ 56,158  

Three Months Ended December 31,

Nine Months Ended December 31,

Operating loss

( 8,092 )  

( 4,302 )  

( 16,975 )  

$ ( 9,881 )  

$ ( 4,434 )  

$ ( 18,605 )  

Net loss per common share

$ ( 0.35 )  

$ ( 0.16 )  

$ ( 0.67 )  

$ ( 0.35 )  

$ ( 0.16 )  

$ ( 0.67 )  

Shares - basic

27,867  

27,252  

27,714  

27,101  

Shares - diluted

27,867  

27,252  

27,714  

27,101  

The pro forma amounts include the historical operating results of the Company, and Neeltran, with appropriate adjustments that give effect to acquisition related costs, income taxes, intangible amortization resulting from the Neeltran Acquisition and certain conforming accounting policies of the Company. The pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Neeltran Acquisition and related transactions had been completed at the beginning of the applicable periods presented.

37 unchanged sentences

Total purchase consideration

$ 42.4  

Inventory includes a $ 1.0 million adjustment to step up the inventory balance to fair value consistent with the purchase price allocation. 

14 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.

three and six months ended September 30, 2022 , 83 % and 77 % 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, 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.

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 three and nine  months ended December 31, 2021, 79 % and 76 % 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.

The Company recorded no grant revenue in each of the three and six months ended September 30, 2022. 

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.

The Company recorded no grant revenue in each of the three and nine  months ended December 

 In the three and nine  months ended December 31, 2021, 

the Company recorded $ 0.1  million and $ 0.9  million in grant revenue, respectively, which is included in the Company’s Grid business 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.

24 unchanged sentences

The Company has elected not to adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is twelve months or less.

The Company monitors costs to meet our obligations on our customer contracts. When it is evident that there is a loss expected on a contract, a contract loss is accrued in the period. Several long-term contracts that were acquired from Neeltran were impacted by higher than planned costs due to required design changes and inflation on material costs, resulting in an increase to the contract loss accrual of $ 1.6 million and $ 3.2 million in the three and nine month period ended December 31, 2022 which negatively impacted the Company's gross margins.

The Company’s contracts with customers do not typically include extended payment terms and may include milestone billing over the life of the contract.

1 unchanged sentence

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

Three Months Ended September 30, 2022

Six Months Ended September 30, 2022

Three Months Ended December 31, 2022

Nine Months Ended December 31, 2022

Product Line:

15 unchanged sentences

$ 66,337  

Three Months Ended September 30, 2021

Six Months Ended September 30, 2021

$ 7,904  

Three Months Ended December 31, 2021

Nine Months Ended December 31, 2021

Product Line:

15 unchanged sentences

$ 73,169  

As of September 30, 2022 , and 2021 , the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations.

$ 6,957  

As of December 31, 2022 , and 2021 , the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations.

The Company's accounts receivable balance is made up entirely of customer contract related balances.

19 unchanged sentences

( 15 )  

Ending balance as of September 30, 2022

Ending balance as of December 31, 2022

$ 4,313  

15 unchanged sentences

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

12,186  

Other changes and FX impact

Ending balance as of September 30, 2021

Ending balance as of December 31, 2021

$ 6,737  

2 unchanged sentences

The Company’s performance obligations may vary significantly each reporting period based on the timing of major new contractual commitments.

As of September 30, 2022 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 101.0 million.

As of December 31, 2022 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 112.1  million.

There are also approximately $ 30.4  

4 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 and six months ended September 30, 2022 and 2021 :

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three and nine months ended December 31, 2022 and 2021 :

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

Inox Wind Limited

Fuji Bridex Pte Ltd

Tri-State Generation and Transmission Association, Inc.

Micron Technology

Ascend Performance Materials Ops LLC

Stock-Based Compensation

1 unchanged sentence

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

three and six months ended 

September 30, 2022 and 

three and nine months ended 

December 31, 2022 and 

2021 (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Cost of revenues

5 unchanged sentences

$ 3,513  

The Company issued 338,500  shares of restricted stock awards during the three and six  months ended September 30, 2022, and 25,806  shares 

of immediately vested common stock  

during the six months ended 

September 30, 2022 . 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 550,000 shares of restricted 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.

 The Company issued 61,000 shares of restricted stock during the three months ended December 31, 2021, and 

370,700 shares of restricted stock and 166,648 shares of immediately vested common stock, of which 158,356 shares were issued in-lieu of cash bonuses during the nine months ended December 31, 2021.

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.

1 unchanged sentence

service period.

The total unrecognized compensation cost for unvested stock options was less than $ 0.1  million during the six months ended September 30, 2022. 

This expense will be recognized over a weighted average of approximately 1.7  years.

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 5.2  million at September 30, 2022.

The total unrecognized compensation cost for unvested stock options was $ 0.1  million during the nine  months ended December 31, 2022. 

This expense will be recognized over a weighted average of approximately 1.4 years.

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 6.1  million at December 31, 2022.

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

1 unchanged sentence

The Company granted 20,564 stock options during the 

six  months ended 

September 30, 2022 .

The Company did not grant any stock options during the three months ended September 30, 2022 or the three and six months ended September 30, 2021.

The stock options granted during the six months ended September 30, 2022 will vest over 2  years.

The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the 

six months ended September 30, 2022 are as follows:

Three Months Ended September 30,

Six Months Ended September 30,

nine  months ended 

December 31, 2022 .

The Company did not grant any stock options during the three months ended December 31, 2022 or the three and nine  months ended December 31, 2021.

The stock options granted during the nine  months ended December 31, 2022 will vest 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:

Three Months Ended December 31,

Nine Months Ended December 31,

Expected volatility

9 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 each of the three and six months ended September 30, 2022 , and 2021,  

 For each of the three and nine months ended December 31, 2022 , and 2021,  

1.1 million shares were not included in the calculation of diluted EPS. Of these, 1.0  million relate to shares tied to the 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 six months ended 

September 30, 2022 and 

three and nine months ended 

December 31, 2022 and 

2021 (in thousands, except per share data):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

$ ( 9,581 )  

38 unchanged sentences

Less impairment loss

September 30, 2022

December 31, 2022

$ 43,471  

The Company did not identify any triggering events in the 

three and six months ended 

September 30, 2022 that would require interim impairment testing of goodwill.

three and nine months ended 

December 31, 2022 that would require interim impairment testing of goodwill.

Other Intangibles

Intangible assets at 

September 30, 2022  and 

December 31, 2022  and 

March 31, 2022  consisted of the following (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

11 unchanged sentences

Trade name and trademarks

Indefinite  

Customer relationships

12 unchanged sentences

$ 11,311  

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.7  million and $ 1.4  million, in the three and six months ended 

September 30, 2022 , respectively, and $ 0.6 million and $ 1.2 million in the three and six months ended September 30, 2021, respectively.

 Additionally, the Company recorded no intangible amortization related to backlog in the three months 

September 30, 2022  and the Company recorded less than $0.1 million related to backlog that is reported in cost of revenues in the six months ended September 30, 2022.

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.

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.7  million and $ 2.1  million, in the three and nine months ended 

December 31, 2022 , respectively, and $ 0.6 million and $ 1.8 million in the three and nine months ended December 31, 2021, respectively.

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

December 31, 2022 .

The Company recorded intangible amortization related to backlog that is reported in cost of revenues of 

$0.1 million in each of the three and nine months ended December 31, 2021, respectively.

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

9 unchanged sentences

The Company develops these inputs based on the best information available, including its own data.

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements.  A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes.  Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments.  The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the six months ended September 30, 2022 .

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.

3 unchanged sentences

Cash equivalents consist principally of certificates of deposits and money market accounts.

Marketable Securities

Marketable securities consist of certificates of deposit that are measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy.

The Company determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates such classification as of each balance sheet date. 

All marketable securities are considered available for sale and are carried at fair value.

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

The Company had no outstanding marketable securities as of September 30, 2022 

and the Company recognized no change in t he three and six months ended 

September 30, 2022 .

The Company recognized $ 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, 2021.

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 

September 30, 2022 and 

December 31, 2022 and 

March 31, 2022 (in thousands):

3 unchanged sentences

Significant Unobservable Inputs (Level 3)

September 30, 2022:

December 31, 2022:

Cash equivalents

3 unchanged sentences

Contingent consideration

$ 1,080  

Total Carrying Value  

17 unchanged sentences

Change in fair value

Balance at September 30, 2022

$ 1,080  

Balance at December 31, 2022

Accounts Receivable

Accounts receivable at 

September 30, 2022 and 

December 31, 2022 and 

March 31, 2022 consisted of the following (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

Accounts receivable (billed)

$ 13,879  

$ 13,788  

Accounts receivable (unbilled)

Accounts receivable, net

$ 20,391  

$ 20,280  

Inventory, net of reserves, at 

September 30, 2022 and 

December 31, 2022 and 

March 31, 2022 consisted of the following (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

Raw materials

$ 17,601  

$ 11,020  

Work-in-process

14,591  

10,462  

Finished goods

1 unchanged sentence

Net inventory

$ 36,342  

$ 23,666  

The Company recorded inventory write-downs of $ 0.7 million and $ 0.6 million for the three months ended September 30, 2022  and 2021 , respectively.

The Company recorded inventory write-downs of $ 1.0  million and $ 1.2 million for the six months ended September 30, 2022 and 2021, respectively. 

The Company recorded inventory write-downs of $ 0.2 million and $ 0.4  million for the three months ended December 31, 2022  and 2021 , respectively.

The Company recorded inventory write-downs of $ 1.2  million and $ 1.6  million for the nine months ended December 31, 2022 and 2021, 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 

September 30, 2022  and 

December 31, 2022  and 

March 31, 2022 , primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.

1 unchanged sentence

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

September 30, 2022 and 

December 31, 2022 and 

March 31, 2022 are as follows (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

14 unchanged sentences

$ 13,656  

Depreciation expense was $ 0.7 million for each of the three months ended September 30, 2022 and 2021 , respectively.

Depreciation expense was $ 1.4 million and $ 1.3 million for the six months ended September 30, 2022 and 2021, respectively.

Depreciation expense was $ 0.6 million and $ 0.7 million for the three months ended December 31, 2022 and 2021 , respectively.

Depreciation expense was $ 2.0  million for each of the nine  months ended December 31, 2022 and 2021, respectively.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at 

September 30, 2022 and 

December 31, 2022 and 

March 31, 2022 consisted of the following (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

Accounts payable

$ 18,184  

$ 13,192  

Accrued inventories in-transit

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Accrued product warranty

$ 36,082  

$ 29,140  

The Company generally provides a one to three year warranty on its products, commencing upon delivery or installation where applicable.

1 unchanged sentence

Product warranty activity was as follows (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Balance at beginning of period

$ 1,942  

$ 2,187  

$ 2,066  

$ 2,053  

Acquired warranty obligations

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Settlements during the period

( 368 )  

( 238 )  

( 669 )  

Balance at end of period

$ 2,053  

$ 2,155  

$ 2,053  

$ 2,155  

The Company recorded an  income tax benefit of less than $ 0.1  million and an income tax expense of less than $ 0.1 million in the 

three and six months ended September 30, 2022 , respectively. 

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

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 during the six months ended September 30, 2021.

The Company recorded an  income tax expense of $ 0.1  million in each of the 

three and nine months ended December 31, 2022 .

The Company recorded an income tax expense of less than $ 0.1 million and income tax benefit of $ 1.9 million in the 

three and nine  months ended December 31, 2021, respectively.

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 six  

months ended September 

during the nine  

months ended December 

31, 2021 . Goodwill recognized in the Neeltran Acquisition is not deductible for tax purposes.

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 

six months ended 

September 30, 2022  and did not have any gross unrecognized tax benefits as of September 30, 2022 .

nine months ended 

December 31, 2022  and did not have any gross unrecognized tax benefits as of December 31, 2022 .

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,  

June 30,  

September 30,

Fiscal Year 2022

Revenue risk premium

5.20 %  

6.60 %  

Revenue volatility

$ 4.38  

$ 5.18  

Payment delay (days)

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Revenue risk premium

6.50 %  

6.60 %  

Revenue volatility

$ 7.61  

$ 10.88  

$ 14.58  

$ 17.39  

$ 18.96  

Payment delay (days)

Fair value (millions)

The Company recorded a net gain  of $ 0.3  and $ 0.1 million resulting  from the decrease in the fair value of the contingent consideration in the 

three and six  months ended 

September 30, 2022 .

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.

The Company recorded a net gain  of $ 0.2 million and $ 0.3 million resulting  from the decrease in the fair value of the contingent consideration in the 

three and nine  months ended 

December 31, 2022 .

The Company recorded a net gain of $ 2.1  million and $ 4.4  million resulting from the decrease in the fair value of the contingent consideration in the 

three and nine  months ended 

December 31, 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 mi llion each during the three  months ended June 

The current and long-term debt balance is $0.1 million each as of 

September 30, 2022.

The current and long-term debt balance is $0.1 million and less than $0.1 million as of December 31, 2022, respectively.

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

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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 September 30, 2022, the right-of-use asset related to the finance lease w as $ 4.2  t housand, net of accumulated amortization o f $ 9.0  

As of December 31, 2022, the right-of-use asset related to the finance lease w as $ 2.6  t housand, net of accumulated amortization o f $ 10.6  

thousand, and is included in the property and equipment, net on the Company's consolidated balance sheet.

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Supplemental balance sheet information related to leases at 

September 30, 2022 , and 

December 31, 2022 , and 

March 31, 2022 are as follows (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

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Weighted-average discount rate

6.37 %  

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 six months ended September 30, 2022  and 

three and nine months ended December 31, 2022  and 

2021 are as follows (in thousands):

Three Months Ended

Six Months Ended

September 30, 2022

Nine Months Ended

December 31, 2022

Operating Leases:

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Three Months Ended

Six Months Ended

September 30, 2021

Nine Months Ended

December 31, 2021

Operating Leases:

18 unchanged sentences

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 September 30, 2022 , the Company had $ 6.0 million of restricted cash included in long-term assets and $ 3.6  m illion of restricted cash included in current assets.

As of December 31, 2022 , the Company had $ 1.0 million of restricted cash included in long-term assets and $6 .6  m illion of restricted cash included in current assets.

As of March 31, 2022 , the Company had $ 6.1 million of restricted cash included in long term assets and $ 2.8 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 September 30,

Six Months Ended September 30,

$ 25,698  

$ 24,619  

$ 45,527  

$ 48,119  

$ 27,680  

$ 27,908  

$ 50,360  

$ 53,328  

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended December 31,

Nine Months Ended December 31,

Operating loss:

$ ( 6,495 )  

$ ( 5,836 )  

$ ( 13,776 )  

( 868 )  

( 1,254 )  

Unallocated corporate expenses

( 729 )  

( 1,931 )  

$ ( 8,092 )  

$ ( 4,302 )  

$ ( 16,961 )  

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

3 unchanged sentences

Unallocated corporate expenses consist of a gain on contingent consider ation of $ 0.2  million and $ 0.3  million 

in the three and six months ended September 30, 2022.

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 

in the three and nine  months ended December 31, 2022.

Unallocated corporate expenses consist of a gain on contingent consideration of $ 2.1  million and $ 4.4  million in the three and nine  months ended December 

Additionally, unallocated corporate expenses consist of stock-based compensation expense of $ 1.4 million and $ 1.1  million in the three months ended 

September 30, 2022 , and 2021 , respectively 

and $ 2.1  million and $ 2.4  million in the six months ended September 30, 2022 

December 31, 2022 , and 2021 , respectively  and $ 3.5  million in each of the nine  months ended December 31, 2022 

and 2021, respectively.

Total assets for the two business segments as of 

September 30, 2022 , and 

December 31, 2022 , and 

March 31, 2022 , are as follows (in thousands):

September 30, 2022

December 31, 2022

March 31, 2022

$ 121,227  

$ 114,053  

Corporate assets

40,804  

49,968  

$ 171,747  

$ 173,887  

Recent Accounting Pronouncements

2 unchanged sentences

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 new effective date, as long as the Company remains a smaller reporting company, would be annual reporting periods beginning after December 15, 2022.The Company evaluated the impact of the adoption of ASU 2016 - 13, and does not expect it to have a material impact on its consolidated financial statements.

The Company evaluated the impact of the adoption of ASU 2016 - 13, and does not expect it to have a material impact on its consolidated financial statements.

In October 2021, the FASB issued ASU 2021 - 08, Business Combinations (Topic 805 ):

2 unchanged sentences

Following the release of ASU 2021 - 08 in October 2021, the new effective date will be annual reporting periods beginning after December 15, 2022.

The Company is currently evaluating the impact, if any, that the adoption of ASU 2021 - 08 may have on its consolidated financial statements.

The Company evaluated the impact of the adoption of ASU 2021 - 08, and does not expect it to have a material impact on its consolidated financial statements.

In November 2021, the FASB issued ASU 2021 - 10, Government Assistance (Topic 832 ):

122 unchanged sentences

As part of our separate cost sharing arrangement with DHS under the Prime Contract, we received funding provided by DHS in connection with the Subcontract Agreement of approximately $10.0 million, which represents the total amount of revenue we recognized over the term of the Subcontract Agreement and includes $1.0 million that we have agreed to reimburse ComEd for costs incurred by ComEd while undertaking its tasks under the Subcontract Agreement (the “Reimbursement Amount”).

In addition, we are required to deliver an irrevocable letter of credit in the amount of $5.0 million to secure certain Company obligations under the Subcontract Agreement, which we have done, and deposited $5.0 million in an escrow account as collateral to secure such letter of credit.  ComEd has agreed to provide the site and provide all civil engineering work required to support the operation and integration of the REG system into ComEd’s electric grid.

We expect that this irrevocable letter of credit will be terminated and the full $5.0 million will be returned from escrow to us during the quarter ending March 31, 2023. ComEd has agreed to provide the site and provide all civil engineering work required to support the operation and integration of the REG system into ComEd’s electric grid.

Other than the Reimbursement Amount, ComEd is responsible for its own costs and expenses.

1 unchanged sentence

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 COVID-19 pandemic continues to rapidly evolve.

We are experiencing substantial inflationary pressure in our supply chain, some delays in sourcing materials needed for our products and some production disruption resulting from higher than typical employee absenteeism which have increased our cost of revenues and decreased gross margin.

The extent to which the pandemic 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.

Changes in macroeconomic and market conditions arising from the COVID-19 pandemic, or for other reasons, such as the ongoing war between Russia and Ukraine, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on our business, financial condition and results of operation.

We are experiencing substantial 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. Changes in macroeconomic and market conditions arising from the COVID-19 pandemic, or for other reasons, such as the ongoing war between Russia and Ukraine, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on our 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 an immaterial amount of cash expense and to result in annualized cost savings of approximately $5 million, beginning in fiscal year 2023.

Critical Accounting Policies and Estimates

4 unchanged sentences

Results of Operations

Three and six months ended September 30, 2022 , compared to the three and six months ended September 30, 2021

Total revenues decreased 1% to $27.7 million for the three months ended September 30, 2022  and total revenues decreased 6% to $50.4 million for the six months ended September 30, 2022, compared to $27.9 million and $53.3 million for the three and six months ended September 30, 2021, respectively.

Three and nine months ended December 31, 2022 , compared to the three and nine months ended December 31, 2021

Total revenues decreased 11% to $23.9 million for the three months ended December 31, 2022  and total revenues decreased 7% to $74.2 million for the nine months ended December 31, 2022 compared to $26.8 million and $80.1 million for the three and nine months ended December 31, 2021, respectively.

Our revenues are summarized as follows (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Our Grid business unit accounted for 93% and 90% of total revenues for the three and six months ended September 30, 2022 , respectively, compared to  88% and 90% 

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

Our Grid business unit revenues  increased 

4% to $25.7 million in the three months ended September 30, 2022, from $24.6 million in the three months ended September 30, 2021.

Our Grid business unit revenues decreased 5% to $45.5 million in the six months ended September 30, 2022 , from $48.1 million in the six 

months ended September 30, 2021 .

The increase in the Grid business unit revenue in the three months ended September 30, 2022, was primarily driven by higher NEPSI revenues than in the prior year period.

The decrease in the Grid business unit revenue in the six months ended September 30, 2022, was primarily driven by lower D-VAR revenues than in the prior year period.

Our Wind business unit accounted for 7% and 10% of total revenues for the three and six months ended September 30, 2022 , respectively, c ompared to 12% and 10% for the 

three and six months ended September 30, 2021 , respectively. Revenues in the Wind business unit decreased 40%  and 7% to $ 2.0 million and $4.8 million in the 

three and six months ended September 30, 2022 , from $3.3 million and $5.2 million i n the 

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

T he decrease in the three months ended September 30, 2022, was driven by fewer royalty collections and shipments of electrical control systems ("ECS") to Inox in the three months ended September 30, 2022. The decrease in the six months ended September 30, 2022 was driven by lower license and development revenue as well as fewer royalty collections than in the prior year period.

Three Months Ended December 31,

Nine Months Ended December 31,

Our Grid business unit accounted for 87% and 89% of total revenues for the three and nine months ended December 31, 2022 , respectively, compared to  93% and 91% 

for the three and nine months ended December 31, 2021, respectively.

Our Grid business unit revenues  decreased 

17% to $20.8 million in the three months ended December 31, 2022, from $25.0 million in the three months ended December 31, 2021.

Our Grid business unit revenues decreased 9% to $66.3 million in the nine months ended December 31, 2022 , from $73.2 million in the nine 

months ended December 31, 2021 .

The decrease in the Grid business unit revenue in the three and nine months ended December 31, 2022, was primarily driven by lower D-VAR revenues than in the prior year periods.

Our Wind business unit accounted for 13% and 11% of total revenues for the three and nine months ended December 31, 2022 , respectively, c ompared to  7% and 9% for the 

three and nine months ended December 31, 2021 , respectively. Revenues in the Wind business unit increased 76%  and 14% to $ 3.1 million and $7.9 million in the 

three and nine months ended December 31, 2022 , from $1.7 million and $7.0 million i n the 

three and nine months ended December 31, 2021 , respectively.

T he increase in the three and nine months ended December 31, 2022, was driven by additional shipments of electrical control systems ("ECS") to Inox in the three months ended December 31, 2022. 

Cost of Revenues and Gross Margin

Cost of revenues  increased b y 4% to $25.7 million for the three months ended September 30, 2022 , compared to $24.6 for the three month s ended September 30, 2021 .

Cost of revenues decreased by 1% to $46.2 million for the six months ended September 30, 2022, compared to $46.7 million for the six months ended September 30, 2021.

Cost of revenues  increased b y 1% to $23.4 million for the three months ended December 31, 2022 , compared to $23.2 million for the three month s ended December 31, 2021 .

Cost of revenues decreased by less than 1% to $69.5 million for the nine months ended December 31, 2022, compared to $69.9 million for the nine months ended December 31, 2021.

Gross margin was 

2%  and 6% for the 

three and six months ended September 30, 2022 , respectively compared to 12% and 13% 

for the 

three and six months ended September 30, 2021 . 

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

September 30, 2022 , 

was due to lower revenues, an unfavorable product mix and inflation pressure in our supply chain.

three and nine months ended December 31, 2022 , respectively, compared to 13% 

for both the 

three and nine months ended December 31, 2021 . 

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

December 31, 2022 , 

was due to lower revenues, contract losses, an unfavorable product mix and inflation pressure in our supply chain.

Operating Expenses

Research and development

Research and development ("R&D") expense decreased 13% in each of the three and six months ended September 30, 2022, to $2.3 million from $2.7 million in the three months ended September 30, 2021, and to $5.0 million from $5.7 million in the six months ended September 30, 2021.

The decrease in R&D expense was due to an increase in cost share revenues and a higher utilization of our research engineers supporting funded projects. 

Research and development ("R&D") expense decreased 22% in the three months ended December 31, 2022, to $2.1 million from $2.7 million in the three months ended December 31, 2021.

R&D expense decreased 15% in the nine months ended December 31, 2022, to $7.1 million from $8.4 million in the nine months ended December 31, 2021.

The decrease in R&D expense was due to lower overall compensation expense and an increase in utilization of our research engineers supporting funded projects. 

Selling, general, and administrative

Selling, general and administrative ("SG&A") expen ses increased 10%  in the three months ended September 30, 2022 , 

Selling, general and administrative ("SG&A") expen ses increased 6%  in the three months ended December 31, 2022 , 

to $ 7.2 million from $6.8  million 

in the three months ended 

September 30, 2021 . The increase in SG&A expense in the three months ended September 30, 2022, was due to higher overall compensation expense than in the prior year period. 

December 31, 2021 . The increase in SG&A expense in the three months ended December 31, 2022, was due to higher stock compensation expense than in the prior year period. 

SG&A expen ses increased 7% to $22.1 million 

in the six months ended September 30, 2022 , compared to $13.8 million in the six months ended September 30, 2021.

 The increase in SG&A expense in the six months ended September 30, 2022, was due to higher overall compensation expense than in the prior year period.

in the nine months ended December 31, 2022 , compared to $20.6 million in the nine months ended December 31, 2021.

 The increase in SG&A expense in the nine months ended December 31, 2022, was due to higher overall sales expense 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 $0.7 million and $1.4 million in the three and six months ended 

September 30, 2022 , respectively, and $0.6 million and $1.2 million in the three and six months ended September 30, 2021, respectively.

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $0.7 million and $2.1 million in the three and nine months ended 

December 31, 2022 , respectively, and $0.6 million and $1.8 million in the three and nine months ended December 31, 2021, respectively.

The increase in amortization expense is a result of additional expense tied to the acquisition of 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 gain of $0.3 million and $0.1 million in the three and six months ended September 30, 2022, respectively, compared to a gain of $2.4 million and $2.3 million in the three and six months ended September 30, 2021, respectively.

The change in fair value of our contingent consideration for the earnout payment on the NEPSI Acquisition resulted in a gain of $0.2 million and $0.3 million in the three and nine months ended December 31, 2022, respectively, compared to a gain of $2.1 million and $4.4 million in the three and nine months ended December 31, 2021, respectively.

The change in the fair value was primarily driven by a decreased likelihood of achieving certain revenue targets and a decline in the Company's stock price.

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Operating loss:

Unallocated corporate expenses

Our Grid business segment generated operating losses of $6.5 million and $13.8 million in the three and six mon ths ended September 30, 2022 , compared to $5.8 million and $11.2 million 

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

The increase in the Grid business unit operating loss in the three months ended September 30, 2022, was due to lower gross margins due to an unfavorable product mix, and higher operating expenses.

The increase in the grid business unit operating loss in the six months ended September 30, 2022 was due to lower revenues and gross margins due to an unfavorable product mix, and higher operating expenses.

Our Grid business segment generated operating losses of $7.1 million and $20.9 million in the three and nine mon ths ended December 31, 2022 , compared to operating losses of 

$3.7 million and $14.9 million 

in the three and nine months ended December 31, 2021 . 

The increase in the Grid business unit operating loss in the three months ended December 31, 2022, was due to lower gross margins due to an unfavorable product mix, and higher operating expenses.

The increase in the Grid business unit operating loss in the nine months ended December 31, 2022 was due to lower revenues and gross margins.

Our Wind business segment generated operating losses of $0.9 milli on and $2.2 million 

in the three and six months ended September 30, 2022 , compared to an operating profit of $0.2 million and an operating loss of $0.6 million in the three and six months ended September 30, 2021 , respectively. 

The increase in the Wind business unit operating loss was due to lower revenues and gross margins, and higher operating expenses.

in the three and nine months ended December 31, 2022 , compared to operating losses of $1.7 million and $2.2 million in the three and nine months ended December 31, 2021 , respectively. 

The decrease in the Wind business unit operating loss was due to higher revenues and gross margins.

Unallocated corporate expenses included a gain on contingent consideration of $0.2 million and $0.3 million 

in the three and six months ended September 30, 2022.

Additionally, unallocated corporate expenses primarily consisted of stock-based compensation expense of $1.0 million and $1.1 million in the three months ended September 30, 2022 and 2021, respectively, and $2.1 million and $2.4 million in the six months ended September 30, 2022 and 2021, respectively.

in the three and nine months ended December 31, 2022.

Unallocated corporate expenses consisted of a gain on contingent consideration of $2.1 million and $4.4 million in the three and nine months ended December 31, 2021, respectively.

Additionally, unallocated corporate expenses primarily consisted of stock-based compensation expense of $1.4 million and $1.1 million in the three months ended December 31, 2022 and 2021, respectively, and $3.5 million in each of the nine months ended December 31, 2022 and 2021, respectively.

Interest income, net

Interest income, net, was less tha n $0.1 million  in both the three and six months ended September 30, 2022  and September 30, 2021, respectively. 

Interest income, net, was less tha n $0.1 million  in the three months ended December 31, 2022 and 2021, respectively.

Interest income, net, was $0.1 million in the nine months ended December 31, 2022  and less than $0.1 million in the nine months ended December 31, 2021. 

China dissolution

China dissolution, was

million in each of the 

three and six months ended

September 30, 2022 , respectively, compared to no activity in each of the

three and six

September 30, 2021

The increase in China dissolution during the three and six months ended September 30, 2022, was driven by the liquidation of our China entity, resulting in a foreign currency gain/loss from the cumulative translation release of $1.9 million in the three and six months ended September 30, 2022 in which there was no similar transaction in the three and six months ended September 30, 2021.

China dissolution was

million in the nine months ended

December 31, 2022  compared to no activity in the 

three and nine

December 31, 2021

The increase in China dissolution during the nine months ended December 31, 2022, was driven by the liquidation of our China entity, resulting in a foreign currency gain/loss from the cumulative translation release of $1.9 million in the nine months ended December 31, 2022 in which there was no similar transaction in the three and nine months ended December 31, 2021.

Other income (expense), net 

Other income, net, was $0.1 

million and $0.2 million in the three and six months ended September 30, 2022 , respectively, compared to o ther income, net, of less than $ 0.1 million in the three months ended September 30, 2021 and other expense, net of less than $0.1 million in the six 

months ended September 30, 2021 .

The decrease in other expense during the three and six months ended September 30, 2022, was driven by the impacts of favorable fluctuations in foreign currencies during the respective period.

Other expense, net, was $0.3 

million and less than $0.1 million in the three and nine months ended December 31, 2022 , respectively, compared to o ther income, net, of less than $ 0.1 million in both the three and nine months ended December 31, 2021.

The increase in other expense during the three and nine months ended December 31, 2022, was driven by the impacts of unfavorable fluctuations in foreign currencies during the respective periods.

 Income Taxes

Income tax benefit was less than $0.1 million in the three months ended September 30, 2022 and income tax expense was less than $0.1 million in the six months ended September 30, 2022.

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. The increase in income tax benefit in the three months ended September 30, 2022 compared to the same period in fiscal 2021 was primarily due to lower withholding taxes from foreign jurisdictions in the three months ended September 30, 2022.

The increase in income tax expense in the six months ended September 30, 2022 compared to the same period in fiscal 2021 was 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 $9.9 million and $18.6 million  in the three and six months ended September 30, 2022 , compared to $4.4 million and $9.8 million in the three and six months ended September 30, 2021. The increase in net loss was driven primarily by the increased operating loss due to lower revenues and gross margins.

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

Income tax expense was less than $0.1 million in the three months ended December 31, 2021 and income tax benefit was $1.9 million in the nine months ended December 31, 2021. The increase in income tax expense in the three months ended December 31, 2022 compared to the same period in fiscal 2021 was primarily due to lower withholding taxes from foreign jurisdictions in the three months ended December 31, 2022.

The increase in income tax expense in the nine months ended December 31, 2022 compared to the same period in fiscal 2021 was a result of the release of the valuation allowance to offset the recording of the deferred tax liability from the Neeltran Acquisition in the nine months ended December 31, 2021. 

Net loss was $9.6 million and $28.2 million  in the three and nine months ended December 31, 2022 , compared to $4.3 million and $14.2 million in the three and nine months ended December 31, 2021. The increase in net loss was driven primarily by the increased operating loss due to lower revenues and gross margins.

Non-GAAP Financial Measure - 

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We define non-GAAP net loss as net loss before China dissolution, 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 September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

China dissolution

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per share, for the 

three and six months ended September 30, 2022 , compared to $5 .1 million and $7.8 million, 

three and nine months ended December 31, 2022 , compared to $4.6  million and $12.4 million, 

or $ 0.17 and $0.46 per share , for the 

three and six months ended September 30, 2021 .

The increase in the non-GAAP net loss for the three and six months ended September 30, 2022 was due to a higher operating loss driven by lower gross margin and higher operating expenses.  

three and nine months ended December 31, 2021 .

The increase in the non-GAAP net loss for the three and nine months ended December 31, 2022 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 September 30, 2022 , had an accumulated deficit of $1,039 millio n.

We have experienced recurring operating losses and, as of December 31, 2022 , had an accumulated deficit of $1,049 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 of September 30, 2022 , we had cash, cash equivalents and restricted cash of $37.4 million, compared to $49.5 million as of March 31, 2022, a decrease of $12.1 million.

As of September 30, 2022 , we had approximately $1.9 million of cash, cash equivalents, and restricted cash in foreign bank accounts.

As of December 31, 2022 , we had cash, cash equivalents and restricted cash of $31.4 million, compared to $49.5 million as of March 31, 2022, a decrease of $18.1 million.

As of December 31, 2022 , we had approximately $1.8 million of cash, cash equivalents, and restricted cash in foreign bank accounts.

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

September 30, 2022

December 31, 2022

March 31, 2022

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Total cash, cash equivalents, and restricted cash

For the six months ended September 30, 2022 , net cash used in operating activities was $11.6 million, compared to $11.7 million for the six months ended September 30, 2021. 

The decrease in net cash used in operations was due primarily to an increase in inventory purchases offset by accounts r eceivable collections in the six months ended September 30, 2022 as compared to September 30, 2021.

For the six months ended September 30, 2022 , net cash used in investing activities was $ 0.7  million, compared to $6.8 million for the six months e nded September 30, 2021 .

The decrease in net cash used in investing activities was primarily due to the cash that was used to pay for the Neeltran Acquisition in the six months ended September 30, 2021.

There was no such transaction in the six months ended September 30, 2022. 

For the six months ended September 30, 2022  and 2021, respectively, net cash provided by financing activities remained consistent at less than  $0.1 

For the nine months ended December 31, 2022 , net cash used in operating activities was $17.1 million, compared to $15.9 million for the nine months ended December 31, 2021. 

The increase in net cash used in operations was due primarily to an increase in inventory purchases offset by accounts r eceivable collections in the nine months ended December 31, 2022 as compared to December 31, 2021.

For the nine months ended December 31, 2022 , net cash used in investing activities was $ 1.2  million, compared to $7.1 million for the nine months e nded December 31, 2021 .

The decrease in net cash used in investing activities was primarily due to the cash that was used to pay for the Neeltran Acquisition in the nine months ended December 31, 2021.

There was no such transaction in the nine months ended December 31, 2022. 

For the nine months ended December 31, 2022  and 2021, respectively, net cash provided by financing activities remained consistent at less than  $0.1 

million.  

As of September 30, 2022 , we had $6.0 million of restricted cash included in long-term assets and $3.6 million of restricted cash included in current assets. 

As of December 31, 2022 , we had $1.0 million of restricted cash included in long-term assets and $6.6 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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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 September 30, 2022, while others are considered future commitments.

Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2022, 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.

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Following the release of ASU 2021-08 in October 2021, the new effective date will be annual reporting periods beginning after December 15, 2022.

We are currently evaluating the impact, if any, that the adoption of ASU 2021-08 may have on our consolidated financial statements.

We have evaluated the impact of the adoption of ASU 2021-08, and do not expect it to have a material impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

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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