What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-02-01 · 358 added, 567 removed, 667 unchanged (58% of the section changed)

2 unchanged sentences

(In thousands)

December 31, 2022

June 30, 2023

March 31, 2023

1 unchanged sentence

Cash and cash equivalents

$ 23,685  

$ 40,584  

Accounts receivable, net

17,568  

20,280  

Inventory, net

38,725  

23,666  

Prepaid expenses and other current assets

1 unchanged sentence

Total current assets

94,165  

94,336  

Property, plant and equipment, net

12,611  

13,656  

Intangibles, net

11,311  

Right-of-use assets

43,471  

Restricted cash

Deferred tax assets

$ 165,072  

$ 173,887  

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable and accrued expenses

$ 32,060  

$ 29,140  

Lease liability, current portion

2 unchanged sentences

Deferred revenue, current portion

34,239  

22,812  

Total current liabilities

$ 68,053  

53,964  

Deferred revenue, long-term portion

4 unchanged sentences

Total liabilities

77,865  

64,498  

Commitments and Contingencies (Note 16)

1 unchanged sentence

Additional paid-in capital

1,137,622  

1,133,536  

Treasury stock

( 3,639 )  

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

( 1,048,678 )  

( 1,020,506 )

Total stockholders' equity

87,207  

109,389  

Total liabilities and stockholders' equity

$ 165,072  

$ 173,887  

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

3 unchanged sentences

Three Months Ended

Nine Months Ended

Cost of revenues

4 unchanged sentences

Change in fair value of contingent consideration

Restructuring

Total operating expenses

1 unchanged sentence

Interest income, net

China dissolution

Other income (expense), net

Loss before income tax expense

Income tax expense (benefit)

Income tax expense

Net loss per common share

5 unchanged sentences

Three Months Ended

Nine Months Ended

Other comprehensive (loss) gain, net of tax:

China dissolution

Foreign currency translation (loss) gain

4 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

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

FOR THE THREE MONTHS ENDED June 30, 2023 AND 2022

(In thousands)

3 unchanged sentences

Treasury Stock

Comprehensive Loss

Comprehensive Income

Accumulated Deficit

1 unchanged sentence

Balance at March 31, 2023

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

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at June 30, 2022

Issuance of common stock - ESPP

Issuance of common stock - restricted shares

2 unchanged sentences

Cumulative translation adjustment

Balance at September 30, 2022

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at December 31, 2022

Balance at June 30, 2023

Accumulated Other

6 unchanged sentences

Balance at March 31, 2022

Issuance of common stock - bonus payout

Issuance of common stock - restricted shares

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

Stock-based compensation expense

Issuance of stock for 401(k) match

Neeltran acquisition

Repurchase of treasury stock

Cumulative translation adjustment

Balance at June 30, 2022

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

Balance at September 30, 2021

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at December 31, 2021

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

2 unchanged sentences

(In thousands)

Nine Months Ended December 31,

Three Months Ended June 30,

Cash flows from operating activities:

5 unchanged sentences

Change in fair value of contingent consideration

China dissolution

Non-cash interest income

Other non-cash items

Unrealized foreign exchange loss on cash and cash equivalents

Changes in operating asset and liability accounts:

6 unchanged sentences

Purchase of property, plant and equipment

Cash paid for acquisition, net of cash acquired

Proceeds from the maturity of marketable securities

Change in other assets

1 unchanged sentence

Cash flows from financing activities:

Repurchase of treasury stock

Repayment of debt

Proceeds from exercise of employee stock options and ESPP

Net cash provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

5 unchanged sentences

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

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 

December 31, 2022 

2021  and the financial position at December 31, 2022;

June 30, 2023 

2022  and the financial position at June 30, 2023;

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

The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended 

The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited condensed consolidated financial statements for the year ended 

March 31, 2023, and notes thereto, included in the Company’s Annual Report on Form 10 -K for the year ended 

March 31, 2023 

filed with the SEC on June 1, 2022.

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

filed with the SEC on May 31, 2023.

The Company has historically experienced recurring operating losses and as of June 30, 2023 , the Company had an accumulated deficit of $ 1,061  million.

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

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

At June 30, 2023 , the Company had cash and cash equivalents of $ 22.0 million.

Cash used in operations for the 

nine months ended 

December 31, 2022 was $ 17.1 million.

three months ended 

June 30, 2023 was $ 2.2 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 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.

The Company continues to experience inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company’s cost of revenues and decreased gross margin.

While the impact of inflation has been challenging, the Company continues to take actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from the COVID- 19 pandemic or for other reasons, such as the ongoing 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 

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 believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the financial statements for the nine months ended December 31, 2022 .

may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately 5 % of the global workforce. This restructuring is expected to incur $ 1.0 million of cash expenses, $ 0.7  million of which has been paid as of June 30, 2023, and to result in annualized cost savings of approximately $ 5.0 million, beginning in fiscal 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.

1 unchanged sentence

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.

2021 Acquisition of Neeltran

On May 6, 2021, the Company entered into a Purchase and Sale Agreement (the "Real Property Purchase Agreement") and a Stock Purchase Agreement (the "Neeltran Stock Purchase Agreement") with the selling equity holders named therein.

Also on May 6, 2021 ,  pursuant to the terms of the Real Property Purchase Agreement, the Company's wholly-owned Connecticut limited liability company, AMSC Husky LLC ("AMSC Husky"), purchased the real property that serves as Neeltran's headquarters for $ 4.3  million, of which (a) $ 2.4  million was paid in immediately available funds by AMSC Husky to the owners of such real property, 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 Neeltran Stock Purchase Agreement, the Company purchased all of the issued and outstanding shares of capital stock of Neeltran, Inc., a Connecticut corporation ("Neeltran") and Neeltran International, Inc., a Connecticut corporation ("International") for $ 1.0 million in cash and 301,556  shares of the Company's common stock, $.

01  par value per share ("AMSC Shares"), that were paid and issued, respectively, to the Neeltran selling stockholders.

The Company also paid $ 1.1 million to International selling stockholders to pay off previous loans made by them to Neeltran.

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

Issuance of 301,556 shares of Company's common stock

Debt payment to third party lenders on behalf of sellers

Total consideration

$ 16.4  

The Neeltran Acquisition completed by the Company during the fiscal year ended March 

31, 2022  has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations.

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

The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill.

As Neeltran was previously a private company, the adoption of Accounting Standards Codification 842 ("ASC 842" ) was completed as part of the Neeltran Acquisition.

See Note 15, "Leases" for further details.

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

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

Cash and short-term investments

Net working capital (excluding inventory and deferred revenue)

Property, plant and equipment

Deferred revenue

Deferred tax liability

Net tangible assets/(liabilities)

Trade names and trademarks

Customer relationships

Net identifiable intangible assets/(liabilities)

Total purchase consideration

 Inventory include

s a $ 0.6 million adjustment to step up the inventory balance to fair value consistent with the purchase price allocation.

The fair value was based on the estimated selling price of the inventory, less the remaining manufacturing and selling cost and a normal profit margin on those manufacturing and selling efforts.

The inventory step up adjustment increased cost of revenue by $ 0.6 million in the twelve month period ended March 31, 2022 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 continui ng impact beyond the

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

The contracts with customers do not provide for any guarantees to source all future requirements from the Company.

The amortization method being utilized is economic consumption estimated over a two year period with the expense being allocated to cost of revenues.

 Customer relationships of $ 3.5 million relates to customers currently under contract and was determined based on a multi period excess earnings method under the income approach.

The method of amortization being utilized is the economic consumption over 

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.

The goodwill represents the value associated with the acquired workforce and expected synergies related to the business combinations of the 

two  companies.

Goodwill resulting from the Neeltran Acquisition was assigned to the Company's Grid business segment.

Goodwill recognized in the Neeltran Acquisition is 

not  deductible for tax purposes.

The Company has finalized its purchase price allocation for the Neeltran Acquisition, and there were no changes to the net assets and goodwill recorded by the Company as of May 6, 2021. 

Unaudited Pro Forma Operating Results

The unaudited pro forma condensed consolidated statement of operations for the

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 December 31,

Nine Months Ended December 31,

Operating loss

Net loss per common share

Shares - basic

Shares - diluted

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

In addition, the pro forma amounts are not necessarily indicative of operating results in future periods.

Acquisition of NEPSI

On October 1, 2020 ( the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein.

Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding (i) shares of capital stock of Northeast Power Systems, Inc., a New York corporation ("NEPSI"), and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI's headquarters (the "NEPSI Acquisition"). NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems.

Prior to the NEPSI Acquisition, the Company had purchased $ 0.4 million of products from NEPSI in fiscal year 2019 for which NEPSI was paid and had recorded revenue.

Pursuant to the NEPSI Stock Purchase Agreement, the Company acquired all of the issued and outstanding shares of NEPSI, and membership interest in the realty entity, for which the Company paid $ 26.0 million in cash and issued 873,657 restricted shares of the Company’s common stock.

Additionally, the Company may issue to the selling stockholders up to an additional 1,000,000 shares of common stock upon NEPSI’s achievement of specified revenue objectives during varying periods of up to four years following closing of the NEPSI Acquisition.

This contingent consideration is recorded as a derivative liability based on a Monte Carlo simulation to determine fair value at the time of issuance.

NEPSI is now a wholly-owned subsidiary of the Company and is operated and reported as a component of its Grid business unit.

The NEPSI Acquisition completed by the Company during the fiscal year ended March 31, 2021 

has been accounted for under the purchase method of accounting in accordance with ASC 805,  

Business Combinations .

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

The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill. 

As NEPSI was previously a private company, the adoption of ASC 606  was completed as part of the NEPSI Acquisition. 

See Note 3, "Revenue Recognition" for further details. 

There were no leases acquired and the NEPSI Acquisition had 

no impact to the Company's reporting under ASC 842.

The total purchase price of approximately $ 42.4  million includes the fair value of shares of the Company’s common stock issued at closing, cash paid, and contingent consideration as follows (in millions):

$ 26.0  

Issuance of 873,657 shares of Company’s common stock

Contingent consideration

Total consideration

$ 42.4  

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.

The fair value of the contingent consideration was determined using a Monte Carlo model and is accounted for as a derivative liability which is revalued at the fair value determined at each subsequent balance sheet date until the contingencies are resolved and the shares to be issued are determined, with the change in fair value recorded in the current period operating loss or (income). 

See Note 13, "Contingent Consideration" for further details and a summary of key assumptions used to determine fair value in each period.

The following table summarizes the allocation of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed and related deferred income taxes in connection with the NEPSI Acquisition (in millions):

Net working capital (excluding inventory and deferred revenue)

Property, plant and equipment

Deferred revenue

Deferred tax liability

Net tangible assets/(liabilities)

Trade names and trademarks

Customer relationships

Net identifiable intangible assets/(liabilities)

Total purchase consideration

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

The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling cost and a normal profit margin on those manufacturing and selling efforts.

The $ 1.0 million step up adjustment increased cost of revenue in the fiscal year ended March 31, 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 first year.

Backlog of $ 0.6 million was evaluated using the multi period excess earnings method under the income approach.

The contracts with customers do not provide for any guarantees to source all future requirements from the Company.

The amortization method being utilized is economic consumption estimated over a two year period with the expense being allocated to cost of revenues.

Customer relationships of $ 6.1 million relates to customers currently under contract and was determined based on a multi period excess earnings method under the income approach. The method of amortization being utilized is the economic consumption over 7 years with the expense being allocated to SG&A.

Trade names and trademarks of $ 0.6 million were reviewed, using the assumption that the Company would continue to utilize the NEPSI trade name indefinitely.

The relief from royalty method was utilized using an 8 % royalty rate on revenues with a 13 % discount rate over 8 years. 

Goodwill represents the value associated with the acquired workforce and expected synergies related to the business combination of the two companies.

Goodwill resulting from the NEPSI Acquisition was assigned to the Company’s Grid business segment.  Goodwill recognized in the NEPSI Acquisition is not deductible for tax purposes. The $ 1.7 million of deferred tax liability is primarily related to inventory step up and intangibles. 

Revenue Recognition

3 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 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.

three months ended June 30, 2023 , and 2022, 76 % and 70 % 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 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.

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

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

The Company recorded no grant revenue in the 

three month periods ended June 30, 2023, and 2022.

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

The technology development transactions are primarily for activities that have 

no  alternative use and for which a profit can be expected throughout the life of the contract.

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

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

The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts.

The transaction prices on these contracts are allocated based on an adjusted market approach which is reassessed annually for reasonableness.

The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are not deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists.

The transaction prices on these contracts are allocated based on an adjusted market approach which is re-assessed annually for reasonableness.

The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are 

not  deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists.

The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts.

1 unchanged sentence

The Company reports royalty revenue for usage-based royalties when the sales have occurred.

In circumstances when collectability is not assured and a contract does not exist under ASC 606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are no further remaining performance obligations.

In circumstances when collectability is 

not  assured and a contract does 

not  exist under ASC 

606,  revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are 

no  further remaining performance obligations.

The Company's service contracts can include a purchase order from a customer for specific goods in which each item is a distinct performance obligation satisfied at a point in time at which control of the goods is transferred to the customer. 

13 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 monitors costs to meet its obligations on its customer contracts. When it is evident that there is a loss expected on a contract, a contract loss is accrued in the period. Several long-term contracts that were acquired from Neeltran, Inc.

(“Neeltran”) were impacted by higher than planned costs due to required design changes and inflation on material costs, resulting in an increase to the contract loss accrual of $ 0.1 million and $ 0.2  million in the three month periods ended June 30, 2023 and 2022, respectively, 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 December 31, 2022

Nine Months Ended December 31, 2022

Three Months Ended June 30, 2023

Product Line:

2 unchanged sentences

$ 3,982  

$ 61,680  

$ 6,144  

Services and technology development

4 unchanged sentences

$ 4,517  

$ 51,934  

10,615  

$ 20,809  

$ 3,072  

$ 66,337  

$ 7,904  

Three Months Ended December 31, 2021

Nine Months Ended December 31, 2021

Three Months Ended June 30, 2022

Product Line:

2 unchanged sentences

$ 1,973  

$ 67,605  

$ 4,168  

Services and technology development

4 unchanged sentences

$ 2,850  

$ 57,498  

10,931  

$ 25,050  

$ 1,749  

$ 73,169  

$ 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.

As of June 30, 2023 , and 2022 , the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations.

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

1 unchanged sentence

and “Deferred program costs”

(see Note 8, “Accounts Receivable”

and Note 9, “Inventory”

(see Note 

7, “Accounts Receivable”

and Note 

8, “Inventory”

for a reconciliation to the condensed consolidated balance sheets) and "Contract liabilities", which are included in the current portion and long-term portion of "Deferred revenue" in the Company’s condensed consolidated balance sheets, are as follows (in thousands):

Unbilled Accounts Receivable  

Deferred Program Costs  

Contract Liabilities  

Unbilled Accounts Receivable

Deferred Program Costs

Contract Liabilities

Beginning balance as of March 31, 2023

1 unchanged sentence

$ 2,136  

$ 50,760  

Increases for costs incurred to fulfill performance obligations

6 unchanged sentences

Other changes and FX impact

Ending balance as of June 30, 2023

$ 5,572  

Ending balance as of December 31, 2022

$ 1,986  

$ 58,083  

Unbilled Accounts Receivable  

Deferred Program Costs  

Contract Liabilities  

Unbilled Accounts Receivable

Program Costs

Beginning balance as of March 31, 2022

2 unchanged sentences

Increases for costs incurred to fulfill performance obligations

Increase for balance acquired

10,048  

Increase (decrease) due to customer billings

4 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 December 31, 2021

( 25 )  

Ending balance as of June 30, 2022

$ 3,910  

$ 33,755  

The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments.

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

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

There are also approximately $ 30.4  

million of outstanding performance obligations to be recognized over a period of thirteen to sixty months.

The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated.

The twelve -month performance obligations include anticipated shipments to Inox based on the twelve -month rolling forecast provided by Inox on the multi-year supply contract.

The quantities specified in any forecast provided by Inox related to the multi-year supply contract are firm and irrevocable for the first three months of a twelve -month rolling forecast.

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 nine months ended December 31, 2022 and 2021 :

As of June 30, 2023 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 123.3  

There are also approximately $ 41.5  m illion o f outstanding performance obligations to be recognized over a period of thirteen to sixty months.

The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated. 

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three months ended June 30, 2023 and 2022 :

Three Months Ended

Nine Months Ended

Inox Wind Limited

Fuji Bridex Pte Ltd

SGL Carbon LLC

Stock-Based Compensation

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

three and nine months ended 

December 31, 2022 and 

three months ended 

June 30, 2023 and 

2022 (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Cost of revenues

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$ 1,033  

$ 3,492  

$ 3,513  

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.

The Company issued 672,500  shares of restricted stock and 53,675 shares of immediately vested common stock during the three months ended June 30, 2023. 

The Company issued 25,806 shares of immediately vested common stock during the three months ended June 30, 2022.

These restricted stock awards generally vest over 2 - 3 years.  Awards for restricted stock include both time-based and performance-based awards.  For options and restricted stock awards that vest upon the passage of time, expense is being recorded over the vesting period.  Performance-based awards are expensed over the requisite service period based on probability of achievement.

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service period.

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

The total unrecognized compensation cost for unvested stock options was less th an $ 0.1  m illion at June 30, 2023.

This expense will be recognized over a weighted average of approximately 0.9 years.

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

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 7.7 mi llion at June 30, 2023.

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

2.2  years.

The Company granted 20,564 stock options during the 

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,

The Company granted no stock options during the 

three  months ended 

June 30, 2023 .

The Company granted 20,564 stock options during the three months ended June 30, 2022. 

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

The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the three months ended June 30, 2022 

are as follows:

Expected volatility

71.40 %  

Risk-free interest rate

3.10 %  

Expected life (years)

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Stock options and warrants that are out-of-the-money with exercise prices greater than the average market price of the underlying common shares and shares of performance-based restricted stock where the contingency was not met are excluded from the computation of diluted EPS as the effect of their inclusion would be anti-dilutive.

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

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 .

 For each of the three months ended June 30, 2023 , and 2022 , 

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 nine months ended 

December 31, 2022 and 

three months ended 

June 30, 2023 and 

2022 (in thousands, except per share data):

Three Months Ended December 31,

Nine Months Ended December 31,

$ ( 9,581 )  

$ ( 4,324 )  

Three Months Ended June 30,

$ ( 5,398 )  

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28,520  

28,884  

28,234  

Weighted-average shares subject to repurchase

( 1,448 )  

( 1,066 )  

( 1,090 )  

Shares used in per-share calculation ―

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27,560  

27,794  

27,145  

Shares used in per-share calculation ―

1 unchanged sentence

27,560  

27,794  

27,145  

Net loss per share ―

$ ( 0.19 )  

$ ( 0.16 )  

$ ( 1.01 )  

Net loss per share ―

$ ( 0.19 )  

$ ( 0.16 )  

$ ( 1.01 )  

Goodwill and Other Intangibles

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. The Company's goodwill balance relates to the Neeltran Acquisition in fiscal 2021, the NEPSI Acquisition in fiscal 2020, and the acquisition of Infinia Technology Corporation in fiscal 2017 and is reported in the Grid business segment. Goodwill is not amortized but reviewed for impairment.

Goodwill is reviewed annually and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.

The following table provides a roll forward of the changes in the Company's Grid business segment goodwill balance:

March 31, 2021

$ 34,634  

Neeltran Acquisition

March 31, 2022

$ 43,471  

Less impairment loss

December 31, 2022

$ 43,471  

Goodwill is reviewed annually on February 28th and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.

There were no changes to goodwill during the 

three months ended June 30, 2023 or year ended March 31, 2023.

The Company did not identify any triggering events in the 

three and nine months ended 

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

three months ended 

June 30, 2023 that would require interim impairment testing of goodwill.

Other Intangibles

Intangible assets at 

December 31, 2022  and 

June 30, 2023  and 

March 31, 2023  consisted of the following (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

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$ 8,527  

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.

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.5  million and $ 0.7  million, in the three months ended 

June 30, 2023  and 2022 respectively .

 Additionally, the Company recorded intangible amortization related to backlog that is reported in cost of revenues of less t han $ 0.1 million in ea ch of the three months 

June 30, 2023  and 2022.

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 nine months ended December 31, 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.

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Contingent Consideration

Contingent consideration relates to the earnout payment set forth in the NEPSI Stock Purchase Agreement that provides that the selling stockholders may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives over varying periods of up to four years following the NEPSI Acquisition Date.

See Note 13 , "Contingent Consideration" and Note 2, “Acquisitions”

for further discussion.

The Company relied on a Monte Carlo method to determine the fair value of the contingent consideration on the NEPSI Acquisition Date and will continue to revalue the fair value of the contingent consideration using the same method at each subsequent balance sheet date until the contingencies are resolved and the shares to be issued are determined, with the change in fair value recorded in the current period operating loss.

Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of NEPSI that provides that the selling stockholders may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives over varying periods of up to four years following the NEPSI Acquisition Date.

See Note 13 , "Contingent Consideration" for further discussion.

The Company relied on a Monte Carlo method to determine the fair value of the contingent consideration on the closing of the acquisition of NEPSI and continues to revalue the fair value of the contingent consideration using the same method at each subsequent balance sheet date until the contingencies are resolved and the shares to be issued are determined, with the change in fair value recorded in the current period operating loss.

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

December 31, 2022 and 

June 30, 2023 and 

March 31, 2023 (in thousands):

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Significant Unobservable Inputs (Level 3)

December 31, 2022:

June 30, 2023:

Cash equivalents

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Contingent consideration

$ 2,620  

Total Carrying Value  

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Change in fair value

Balance at December 31, 2022

Balance at June 30, 2023

$ 2,620  

Accounts Receivable

Accounts receivable at 

December 31, 2022 and 

June 30, 2023 and 

March 31, 2023 consisted of the following (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

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Inventory, net of reserves, at 

December 31, 2022 and 

June 30, 2023 and 

March 31, 2023 consisted of the following (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

Raw materials

$ 19,141  

$ 16,654  

Work-in-process

17,294  

15,200  

Finished goods

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Net inventory

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. 

$ 42,874  

$ 36,986  

The Company recorded inventory write-downs of $ 0.4 million a nd $ 0.3  million f or the three months ended June 30, 2023  and 2022 , respectively.

These write-downs were based on the Company's evaluation of its inventory on hand for excess quantities and obsolescence.

Deferred program costs as of 

December 31, 2022  and 

June 30, 2023  and 

March 31, 2023 , primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.

Prepaid and Other Current Assets

During fiscal 2022, the Company conducted an analysis as to whether it was entitled to employee retention credits (“ERC”) under the CARES Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Plan Act of 

Based on the analysis, the Company determined that it was entitled to an ERC of approximately $ 3.3 million related to payroll taxes paid in the first and second quarters of 2021 and the first quarter of 2020.

The Company determined it met all the criteria required under the gross receipts test of the applicable Internal Revenue Service regulations related to ERCs.

As accounting for payroll tax credits are not within the scope of ASC 740, Income Taxes , the Company has chosen to account for the ERCs by analogizing to the International Accounting Standards Board IAS 20, Accounting for Government Grants and Disclosure of Government Assistance . 

In accordance with IAS 20, an entity recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received. 

Company evaluated its eligibility for the ERC and determined that it met all the criteria to claim a refundable tax credit against the employer portion of Social Security taxes for up to 70 % of the qualified wages the Company paid to 

employees for the three month periods ended March 31, 2021 

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

The Company recorded a $ 3.3 million receivable in Prepaid expenses and other current assets and a benefit of $ 1.8 million to Cost of revenues, $ 0.8 million to SG&A and $ 0.7 million to Research and development in the fiscal year ended March 31, 2023 for the ERC that is expected to be received based on the amended filings. 

During the 

three months ended June 30, 2023, the Company received $ 2.2  million for the initial claims that were processed. 

The remaining balance is expected to be received during fiscal 2023.

Property, Plant and Equipment

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

December 31, 2022 and 

June 30, 2023 and 

March 31, 2023 are as follows (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

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$ 12,309  

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.

Depreciation expense was $ 0.6 million and $ 0.7 million for the three months ended June 30, 2023 and 2022 , respectively.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at 

December 31, 2022 and 

June 30, 2023 and 

March 31, 2023 consisted of the following (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

Accounts payable

$ 10,878  

$ 13,935  

Accrued inventories in-transit

Accrued other miscellaneous expenses

Accrued contract loss

Advanced deposits

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Accrued product warranty

Accrued restructuring

$ 28,828  

$ 38,383  

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

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Product warranty activity was as follows (in thousands):

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Balance at beginning of period

Acquired warranty obligations

Change in accruals for warranties during the period

$ 2,638  

$ 2,066  

Provisions for warranties during the period

Settlements during the period

( 920 )  

Balance at end of period

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 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 nine months ended December 31, 2021.

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 nine  

months ended December 

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

$ 1,926  

$ 1,942  

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

three months ended June 30, 2023  and 2022, respectively.

Accounting for income taxes requires a two -step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any.  The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement.  The Company re-evaluates these uncertain tax positions on a quarterly basis.  The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.  Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.  The Company did not identify any uncertain tax positions in the 

nine months ended 

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

three months ended 

June 30, 2023  and did not have any gross unrecognized tax benefits as of June 30, 2023 .

Contingent Consideration

Acquisition of NEPSI

On October 1, 2020 ( the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein.

Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding (i) shares of capital stock of NEPSI, and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI's headquarters (the "NEPSI Acquisition"). NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems.

NEPSI is a wholly-owned subsidiary of the Company and is operated by its Grid business unit.

The purchase price was $ 26.0  million in cash and 

873,657  restricted shares of common stock of the Company.

As part of the transaction, the selling stockholders 

receive up to an additional 

1,000,000  shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up to 

four  years following closing of the NEPSI Acquisition.

Contingent Consideration

The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement (see Note 2, "Acquisitions" for further details), which may require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815, Derivatives and Hedging .

The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which may require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815, Derivatives and Hedging .

As a result, for each period, the fair value of the contingent consideration will be remeasured and the resulting gain or loss will be recognized in operating expenses until the share amount is fixed.

Following is a summary of the key assumptions used in a Monte Carlo simulation to calculate the fair value of the contingent consideration related to the NEPSI Acquisition:

September 30,

June 30,  

Fiscal Year 2023

Revenue risk premium

5.20 %  

Revenue volatility

$ 6.26  

Payment delay (days)

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Revenue risk premium

5.30 %  

5.20 %  

6.60 %  

Revenue volatility

$ 4.91  

$ 3.68  

$ 4.38  

$ 5.18  

$ 7.61  

Payment delay (days)

Fair value (millions)

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 and less than $0.1 million as of December 31, 2022, respectively.

The Company recorded net losses of $ 1.3 million and $ 0.2 million resulting from the increases in the fair value of the contingent consideration in the 

three  months ended 

June 30, 2023 and 2022, respectively.

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

The current and long-term aggregate debt balanc e is $ 0.1 million as of June 30, 2023 and March 31, 2023, respectively.

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

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Control over the use of the identified asset means that the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

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

The Company elected to apply the discount rate using the remaining lease term at the date of adoption for Neeltran lease contracts.

Following the Neeltran Acquisition, the Company evaluated all open Neeltran contracts at the date of the acquisition to determine if any applied under ASC 842 as Neeltran, a private company, had deferred adopting ASC 842 prior to the Neeltran Acquisition, as permitted.

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

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.

Operating Leases

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However, many of these leases are either short-term in nature or immaterial.

The Company has made the policy election to exclude short-term leases from the balance sheet. 

The Company has made the policy election to exclude short-term leases from the condensed consolidated balance sheet. 

Finance

As part of the adoption of ASC 842 at Neeltran, the Company identified one lease contract that is classified as a finance lease.

In February 2020, Neeltran entered into a contract to lease a copy machine for an initial term of 39 months, or through May 2023.

The Company concluded that the lease should be classified and accounted for as a finance lease as the total value of the lease payments are greater than fair value of the asset.

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 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.

As of June 30, 202 3, the right-of-use asset related to the finance lease, net of accumulated amortization is $ 13.2  thousand, and is included in the property and equipment, net on the Company's condensed consolidated balance sheet.

Finance lease right-of-use assets and lease liabilities are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use.

Finance lease right-of-use assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are ( 1 ) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and ( 2 ) reduced to reflect lease payments made during the period.

Amortization expense for finance lease right-of-use assets and interest accretion on finance lease liabilities are recorded to depreciation expense and interest expense, respectively in the Company's consolidated statement of operations.

Supplemental balance sheet information related to leases at 

December 31, 2022 , and 

June 30, 2023 , and 

March 31, 2023 are as follows (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

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Lease liabilities - ST Operating

Lease liabilities - LT Financing

Lease liabilities - LT Operating

Total lease liabilities

$ 2,828  

Weighted-average remaining lease term

3.79 years  

3.95 years  

Weighted-average discount rate

6.67 %  

The costs related to the Company's finance lease are not material.

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

three and nine months ended December 31, 2022  and 

three months ended June 30, 2023  and 

2022 are as follows (in thousands):

Three Months Ended

Nine Months Ended

December 31, 2022

June 30, 2023

Operating Leases:

4 unchanged sentences

Three Months Ended

Nine Months Ended

December 31, 2021

June 30, 2022

Operating Leases:

7 unchanged sentences

Present value of lease liabilities

$ 2,828  

Commitments and Contingencies

1 unchanged sentence

From time to time, the Company is involved in legal and administrative proceedings and claims of various types.

The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated.

The Company records a liability in its condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated.

The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate.

If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading.

If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.

The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds.

2 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 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 June 30, 2023 , the Company had $ 0.6 million of restricted cash included in long-term assets and $ 0.5  million of restricted cash included in current assets.

As of March 31, 2023 , the Company had $ 0.6 million of restricted cash included in long term assets and $ 1.7 million of restricted cash included in current assets.

These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts and long-term projects, including the irrevocable letter of credit in the amount of $ 5.0 million to secure certain of the Company's obligations under a subcontract agreement with ComEd.  These deposits are held in interest bearing accounts.  

These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts and long-term projects or collateral deposits.  These deposits are held in interest bearing accounts.

Restructuring

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic 

Exit or Disposal Cost Obligations  (“ASC 

) and ASC Topic 

Compensation —

Nonretirement Postemployment Benefits  (“ASC 

In accounting for these obligations, the Company is required to make assumptions related to the amounts of employee severance, benefits, and related costs and the time period over which leased facilities will remain vacant, sublease terms, sublease rates and discount rates.

Estimates and assumptions are based on the best information available at the time the obligation arises.

These estimates are reviewed and revised as facts and circumstances dictate;

changes in these estimates could have a material effect on the amount accrued on the consolidated balance sheet.

January 24, 2023 ,  the Company approved a plan to reduce its global workforce by approximately 

5 %, effective as of such date. The purpose of the workforce reduction was to reduce operating expenses to better align with the Company’s current revenues.

In fiscal 

2022 ,  the Company recorded restructuring charges of $ 1.0  million as a result of this reduction in force, which was comprised of severance pay. All amounts related to these restructuring activities are expected to be paid by 

March 31, 2024.

The following table presents restructuring charges and cash payments during the three months ended 

June 30, 2023 and year ended March 31, 2023 ( in thousands):

Severance pay

Accrued restructuring balance at April 1, 2023

Charges to operations

Cash payments

Accrued restructuring balance at June 30, 2023

Severance pay

Accrued restructuring balance at April 1, 2022

Charges to operations

Cash payments

Accrued restructuring balance at March 31, 2023

All restructuring charges discussed above are included within restructuring in the Company’s condensed consolidated statements of operations.

The Company includes accrued restructuring within accounts payable and accrued expenses in the consolidated balance sheets.  The Company's restructuring charges relate primarily to the Grid business segment operations in the United States.

Business Segments

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Grid and Wind.

Through the Company’s power grid offerings, the Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability through its transmission planning services, power electronics, and superconductor-based systems.

In accordance with ASC 

Segment Reporting , we aggregate 

four  operating segments into 

one  reporting segment for financial reporting purposes due to their similar operating and financial characteristics. Our operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources.

Through the Company’s power grid offerings, the Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through its transmission planning services, power electronics, and superconductor-based systems.

The sales process is enabled by transmission planning services that allow it to identify power grid congestion, poor power quality and other risks, which helps the Company determine how its solutions can improve network performance.

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Navy through its Grid business segment.

Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. 

The Company provides advanced power electronics and control system products, engineered designs, and support services.

Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field highly competitive wind turbines through its advanced power electronics and control system products, engineered designs, and support services.

The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers.

The Company’s design portfolio includes a broad range of drivetrains and power ratings of 2 megawatts ("MWs") and higher.

The Company’s design portfolio includes a broad range of drive trains and power ratings of 

2  megawatts ("MWs") and higher.

The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

$ 25,737  

$ 19,829  

$ 30,254  

$ 22,679  

Three Months Ended June 30,

Operating loss:

$ ( 1,971 )  

( 649 )  

Unallocated corporate expenses

( 2,713 )  

$ ( 5,333 )  

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 a gain on contingent consider ation of $ 0.2  million and $ 0.3  million 

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 

Unallocated corporate expenses consist of a loss on contingent consider ation of $ 1.3  million and $ 0.2  million 

in the three months ended June 30, 2023 and 2022,  respectively.

Additionally, unallocated corporate expenses consist of stock-based compensation expense of $ 1.4 million and $ 1.0  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.

June 30, 2023  and 2022 , respectively.

Total assets for the two business segments as of 

December 31, 2022 , and 

June 30, 2023  and 

March 31, 2023 , are as follows (in thousands):

December 31, 2022

June 30, 2023

March 31, 2023

$ 136,941  

$ 135,296  

10,374  

14,361  

Corporate assets

23,319  

25,904  

$ 170,634  

$ 175,561  

Recent Accounting Pronouncements

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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.

Following the release of ASU 2019 - 10 in November 2019, the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after December 15, 2022.

As of April 1, 2023, the Company has adopted ASU 2016 - 13 and noted no material impact on its condensed consolidated financial statements.

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

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The amendments in ASU 2021 - 08 will improve the accounting for acquired revenue contracts with customers in a business combination.

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

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 ):

Disclosures by Business Entities about Government Assistance .

The amendments in ASU 2021 - 10 will improve financial reporting by requiring disclosures that increase the transparency of transactions with government accounted for by applying a grant or contribution accounting model by analogy.

Following the release of ASU 2021 - 10 in November 2021, the new effective date will be annual reporting periods beginning after December 15, 2021.

As of April 1, 2022, the Company has adopted ASU 2021 - 10 and noted no material impact on its consolidated financial statements.

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

As of April 1, 2023, the Company has adopted ASU 2021 - 08 and noted no material impact on its condensed consolidated financial statements.

Subsequent Events

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There are a number of important factors that could materially impact the value of our common stock or cause actual results to differ materially from those indicated by such forward-looking statements.

These important factors include, but are not limited to: We have a history of operating losses, which may continue in the future.

These important factors include but are not limited to: We have a history of operating losses, which may continue in the future.

Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter;

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The continued funding of such contracts remains subject to annual congressional appropriation, which, if not approved, could reduce our revenue and lower or eliminate our profit;

The COVID-19 pandemic could adversely impact our business, financial condition and results of operations;

The COVID-19 pandemic has adversely impacted our business, financial condition and results of operations and other future pandemics or health crises may have similar impacts; 

Changes in U.S.

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Our success in addressing the wind energy market is dependent on the manufacturers that license our designs;

Our business and operations would be adversely impacted in the event of a failure or security breach of our or any critical third parties  

information technology infrastructure and networks;

Our business and operations would be adversely impacted in the event of a failure or security breach of our or any critical third parties information technology infrastructure and networks;

Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data, may adversely impact our business and financial results;

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We have had limited success marketing and selling our superconductor products and system-level solutions, and our failure to more broadly market and sell our products and solutions could lower our revenue and cash flow;

We may acquire additional complementary businesses or technologies, which may require us to incur substantial costs for which we may never realize the anticipated benefits;

Our success depends upon the commercial adoption of the REG system, which is currently limited, and a widespread commercial market for our products may not develop;

We may acquire additional complementary businesses or technologies, which may require us to incur substantial costs for which we may never r ealize the anticipated benefits ;

W e or third parties on whom we depend may be adversely affected by natural disasters, including events resulting from climate change, and our business continuity and disaster recovery plans may not adequately protect us or our value chain from such events;

Adverse changes in domestic and global economic conditions could adversely affect our operating results;

Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Adverse changes in domestic and global economic conditions could adversely affect our operating results;

We have operations in, and depend on sales in, emerging markets, including India, and global conditions could negatively affect our operating results or limit our ability to expand our operations outside of these markets.

Changes in India ’

s political, social, regulatory and economic environment may affect our financial performance;

Our products face competition, which could limit our ability to acquire or retain customers;

Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results;

Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy;

Changes in India's political, social, regulatory and economic environment may affect our financial performance;

Our products face competition, which could limit our ability to acquire or retain customers; Our products face competition, which could limit our ability to acquire or retain customers;

Industry consolidation could result in more powerful competitors and fewer customers; Our products face competition, which could limit our ability to acquire or retain customers;

Industry consolidation could result in more powerful competitors and fewer customers;

Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy;

Lower prices for other fuel sources may reduce the demand for wind energy development, which could have a material adverse effect on our ability to grow our Wind business;

The increasing focus on environmental sustainability and social initiatives could increase our costs, and inaction could harm our reputation and adversely impact our financial results;

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information;

Our patents may not provide meaningful protection for our technology, which could result in us losing some or all of our market position;

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and the other important factors discussed under the caption "Risk Factors" in Part 1.

Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, and our other reports filed with the SEC.

These important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time.

Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, and our other reports filed with the SEC.  These important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time.

Any such forward-looking statements represent management’s estimates as of the date of this Quarterly Report on Form 10-Q.

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Executive Overview

We are a leading system provider of megawatt-scale resiliency solutions that orchestrate the rhythm and harmony of power on the grid™, and that protect and expand the capability of the U.S.

Navy's fleet.

In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems.

We are a leading system provider of megawatt-scale power resiliency solutions that Orchestrate the Rhythm and Harmony of Power on the Grid™, and protect and expand the capability of our Navy's fleet.

Our solutions enhance the performance of the power grid, protect our Navy’s fleet, and lower the cost of wind power.  In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems.

In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics and control system products, engineering, and support services.

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Demand for our solutions is driven by the growing needs for modernized smart grids that improve power reliability, security and quality, the U.S.

Navy's effort to upgrade on-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy.

Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state, and national levels, including renewable portfolio standards, tax incentives and international treaties.

Navy's effort to upgrade in-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy.

We manufacture products using two proprietary core technologies:

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Grid and Wind.

We believe this market-centric structure enables us to more effectively anticipate and meet the needs of the U.S.

Navy, electric utilities, industrial facilities, power generation project developers and wind turbine manufacturers.

We believe this market-centric structure enables us to more effectively anticipate and meet the needs of power generation project developers, the Navy's ship protection systems, electric utilities and wind turbine manufacturers.

 Through our Gridtec™

Solutions, our Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability.

Solutions, our Grid business segment enables electric utilities and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability.

We provide transmission planning services that allow us to identify power grid congestion, poor power quality, and other risks, which help us determine how our solutions can improve network performance.

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Other fiscal years follow similarly.

On October 31, 2018, we entered into a Subcontract Agreement with Commonwealth Edison Company (“ComEd”) (the “Subcontract Agreement”) for the manufacture and installation of the Company’s resilient electric grid ("REG") system within ComEd’s electric grid in Chicago, Illinois (the “Project”).

As provided in the Subcontract Agreement, the Subcontract Agreement became effective upon the signing of an amendment by us and the U.S.

Department of Homeland Security (“DHS”) to the existing contract (the “Prime Contract”) between us and DHS on June 20, 2019.

Unless terminated earlier by us, ComEd or DHS according to the terms of the Subcontract Agreement, the term of the Subcontract Agreement will continue until we complete our warranty obligations under the Subcontract Agreement.

Under the terms of the Subcontract Agreement, we agreed, among other things, to provide the REG system and to supervise ComEd’s installation of the REG system in Chicago.

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.

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.

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

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. 

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.

We continue to experience inflationary pressure in our supply chain and some delays in sourcing materials needed for our products, resulting in some production disruption, both of which have increased our cost of revenues and decreased gross margin. 

While the impact of inflation has been challenging, we continue to take actions to limit this pressure including adjusting the pricing of our products and services. Changes in macroeconomic 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.

This restructuring is expected to incur $1.0 million of cash expenses, $0.7 million of which has been paid as of June 30, 2023 and to result in annualized cost savings of approximately $5.0 million, beginning in fiscal 2023.

In February 2023, we completed the process of determining and verifying our eligibility and amount of payroll tax credits known as the Employee Retention Credit (“ERC”) under the CARES Act which Congress enacted as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. 

This resulted in filing certain amended payroll tax forms for eligible quarters in 2020 and 2021, which, in the aggregate, totaled $3.3 million.

We recognized a receivable in prepaid expenses and other current assets and a benefit to cost of revenues and operating expenses in the quarter ended March 31, 2023.

During the quarter ended June 30, 2023, we received $2.2 million in payments for the initial claims that were processed. 

The remaining balance is expected to be paid during fiscal 2023.

Critical Accounting Policies and Estimates

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Results of Operations

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.

Three months ended June 30, 2023 , compared to the three months ended June 30, 2022

Total revenues increased 33% to $30.3 million for the three months ended June 30, 2023 , compared to $22.7 for the three months ended June 30, 2022.

Our revenues are summarized as follows (in thousands):

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. 

Three Months Ended June 30,

Our Grid business unit accounted for 85% of total revenues for the three months ended June 30, 2023, compared to 87% for the three months ended June 30, 2022.

Our Grid business unit revenues increased 30% to $25.7 million in the three months ended June 30, 2023, from $19.8 million in the three months ended June 30, 2022.

The increase in the Grid business unit revenue in the three months ended June 30, 2023, compared to the three months ended June 30, 2022 was primarily driven by higher new energy power systems revenues than in the prior year period.

Our Wind business unit accounted for 15% of total revenues for the three months ended June 30, 2023, compared to 13% for the three months ended June 30, 2022. Revenues in the Wind business unit increased 58% to $4.5 million in the three months ended June 30, 2023, from $2.9 million in the three months ended June 30, 2022.

The increase in the three months ended June 30, 2023, was driven by additional shipments of electrical control systems ("ECS") to Inox in the three months ended June 30, 2023. 

Cost of Revenues and Gross Margin

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.

Cost of revenues increased by 17% to $24.0 millio n for the three months ended June 30, 2023 , compared to $20.5 million for the three months ended June 30, 2022 .

Gross margin was 

2%  and 6% for the 

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.

21%  for the 

three months ended June 30, 2023 , compared to 10% for the 

three months ended June 30, 2022 . 

The increase in gross margin in the three months ended 

June 30, 2023 , was due to higher revenues, and a more favorable product mix in our Grid business unit.

Operating Expenses

Research and development

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. 

Research and development ("R&D") expenses decreased 30% in the three months ended June 30, 2023, to $1.9 million from $2.7 million in the three months ended June 30, 2022.

The decrease was driven by 

decreased compensation expense as well as increased labor charges reclassified to cost of goods sold for revenue generating projects.

Selling, general, and administrative

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 

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 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.

Selling, general and administrative ("SG&A") expenses increased 4%  in the three months ended June 30, 2023 , to $ 7.9 million from $7.6 million in the three months ended 

June 30, 2022 . The increase in SG&A expense in the three months ended June 30, 2023, was due to higher compensation and stock compensation 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 $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.

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $ 0.5 million in the three months ended 

June 30, 2023 , and $0.7 million in the three months ended June 30, 2022 .

The decrease in amortization expense in the three months ended June 30, 2023 is a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets from Northeast Power Systems, Inc.

("NEPSI") and Neeltran, Inc.

(“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 $0.2 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.

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in a loss of $ 1.3  million and $0.2 million in the three months ended June 30, 2023, and June 30, 2022 respectively.

The change in the fair value was primarily driven by an increased likelihood of achieving certain revenue targets and an increase in the Company's stock price.

Operating loss

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

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Operating loss:

Unallocated corporate 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 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 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.

Ou r Grid business segment generated operating losses of $ 2.0 million in the three months ended June 30, 2023 , compared to operating losses of $7.3 million in the three months ended June 30, 2022 . The decrease in the Grid business unit operating loss in the three months ended June 30, 2023, was due to higher gross revenues and gross margins due to a favorable product mix 

as well as reduction of remaining acquired Neeltran backlog .

Our Wind business segment generated operating losses of $ 0.6 million in the three months ended June 30, 2023 , compared to operating losses of $0.4 million in the three months ended June 30, 2022 . The increase in the Wind business unit operating loss was due to lower gross margins.

Unallocated corporate expenses included a loss on contingent consideration of $ 1.3  million and $0.2 million in the three months ended June 30, 2023 and 2022, respectively.

Additionally, unallocated corporate expenses primarily consisted of stock-based compensation expense of $1.4 million and $1.0 million in the three months ended June 30, 2023 and 2022, respectivel y.

Interest income, net

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 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.

Interest income, net, was $0.2 million in the three months ended June 30, 2023 compared to less than $0.1 million in the three months ended June 30, 2022.

Other income (expense), net 

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.

Other expense, net, was $0.1 million in the 

three months ended June 30, 2023 , compared to other income, net, of $0.2 million in the three months ended June 30, 2022.

The increase in other expense, net, during the three months ended June 30, 2023, was driven by the impacts of unfavorable fluctuations in foreign currencies during the period.

 Income Taxes

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.

Income tax expense was $0.1 million in the three months ended June 30, 2023 compared to less than $0.1 million in the three months ended June 30, 2022. 

Net loss was $ 5.4 million in the 

three months ended June 30, 2023 , compared to $8.7 million in the 

three months ended June 30, 2022 . The decrease in net loss was driven primarily by the increased revenues and gross margins.

Non-GAAP Financial Measure - 

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The non-GAAP measures included in this Quarterly Report on Form 10-Q, however, should be considered in addition to, and not as a substitute for or superior to the comparable measures prepared in accordance with GAAP.

We define non-GAAP net 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 December 31,

Nine Months Ended December 31,

China dissolution

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, 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,

Stock-based compensation

Amortization of acquisition-related intangibles

Acquisition costs

Change in fair value of contingent consideration

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Weighted average shares outstanding - basic

We incurred non-GAAP net losses of $ 7.7 million and $21.0 million,  or $ 0.27  and $0.76 

per share, for the 

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

or $ 0.17 and $0.46 per share , for the 

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.  

We incurred non-GAAP net losses of $ 2.1 million, or $ 0.08  per share, for the 

three months ended June 30, 2023 , compared to $6.8 million, or $0.25 per share, for the 

three months ended June 30, 2022 .

The improvement in the non-GAAP net loss for the three months ended June 30, 2023 was due to a lower operating loss driven by higher revenues and gross margins.  

Liquidity and Capital Resources

We have experienced recurring operating losses and, as of December 31, 2022 , had an accumulated deficit of $1,049 millio n.

We have experienced recurring operating losses and, as of June 30, 2023 , had an accumulated deficit of $1,061 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 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.

As of June 30, 2023 , we had cash, cash equivalents and restricted cash of $23.1 million, compared to $25.7 million as of March 31, 2023, a decrease of $2.6 million.

As of June 30, 2023 , we had approximately $2.3 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):

December 31, 2022

June 30, 2023

March 31, 2023

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Total cash, cash equivalents, and restricted cash

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 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.

These deposits are held in interest bearing accounts.

For the three months ended June 30, 2023, net cash used in operating activities was $2.2 million, compared to $5.9 million for the three months ended June 30, 2022. The decrease in net cash used in operations was due primarily to a decrease in prepaid expenses and other current assets and deferred revenue in the three months ended June 30, 2023 as compared to June 30, 2022. Cash flows from operating activities included a reimbursement of $2.1 million in the three months ended June 30, 2023 for the ERC receivable in prepaid expenses and other current assets at March 31, 2023.

For the three months ended June 30, 2023, net cash used in investing activities was $0.3 million, compared to $0.5 million for the three months ended June 30, 2022.

The decrease in net cash used in investing activities was primarily due to a decrease in purchases of property, plant and equipment.

For the three months ended June 30, 2023 and 2022, respectively, net cash used in financing activities remained consistent at less than $0.1 million.  

As of June 30, 2023, we had $0.6 million of restricted cash included in long-term assets and $0.5 million of restricted cash included in current assets. 

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

We are a party to many contractual obligations involving commitments to make payments to third parties.

These obligations impact our short-term and long-term liquidity and capital resource needs.

Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2022, while others are considered future commitments.

Certain contractual obligations are reflected on the consolidated balance sheet as of June 30, 2023, while others are considered future commitments.

We have various contractual arrangements, under which we have committed to purchase certain minimum quantities of goods or services on an annual basis.

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In addition, we may seek to raise additional capital, which could be in the form of loans, convertible debt or equity, to fund our operating requirements and capital expenditures.

Our liquidity is highly dependent on our ability to increase revenues, improve upon gross margins, control our operating costs, and raise additional capital, if necessary.

There can be no assurance that we will be able to raise additional capital on favorable terms or at all, or execute on any other means of improving our liquidity as described above.  Additionally, the impact of the COVID-19 pandemic and adverse macroeconomic conditions on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity.

Our liquidity is highly dependent on our ability to increase revenues, control our operating costs, and raise additional capital, if necessary.

There can be no assurance that we will be able to raise additional capital on favorable terms or at all or execute on any other means of improving our liquidity as described above. 

Additionally, the impact of the COVID-19 pandemic or other sources of instability, including the ongoing war between Russia and Ukraine, instability of financial institutions and political instability in the United States, on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity.

We also continue to closely monitor our expenses and, if required, we intend to reduce our operating and capital spending to enhance liquidity. 

Legal Proceedings

We are involved in legal and administrative proceedings and claims of various types.

See Part II, Item 1, “Legal Proceedings,”

for additional information.

We record a liability in our consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated.

From time to time, we are involved in legal and administrative proceedings and claims of various types.

We record a liability in our condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated.

We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate.

If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, we estimate and disclose the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading.

If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our consolidated financial statements.

If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our condensed consolidated financial statements.

Recent Accounting Pronouncements

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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 we remain a smaller reporting company, would be annual reporting periods beginning after December 15, 2022. We have evaluated the impact of the adoption of ASU 2016-13, and do not expect it to have a material impact on our consolidated financial statements.

Following the release of ASU 2019-10 in November 2019, the effective date, as long as we remain a smaller reporting company, was annual reporting periods beginning after December 15, 2022. 

As of April 1, 2023, we have adopted ASU 2016-13 and noted no material impact on our condensed consolidated financial statements.

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

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The amendments in ASU 2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination.

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

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):

Disclosures by Business Entities about Government Assistance .

The amendments in ASU 2021-10 improve financial reporting by requiring disclosures that increase the transparency of transactions with government accounted for by applying a grant or contribution accounting model by analogy.

Following the release of ASU 2021-10 in November 2021, the effective date was annual reporting periods beginning after December 15, 2021.

As of April 1, 2022, we have adopted ASU 2021-10 and noted no material impact on our consolidated financial statements.

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

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

As of April 1, 2023, we have adopted ASU 2021-08 and noted no material impact on our condensed consolidated financial statements.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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