What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-08-09 · 351 added, 214 removed, 811 unchanged (41% of the section changed)

2 unchanged sentences

(In thousands)

June 30, 2023

September 30, 2023

March 31, 2023

38 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Cost of revenues

8 unchanged sentences

Interest income, net

China dissolution

Other income (expense), net

Loss before income tax expense

Income tax expense

Loss before income tax expense (benefit)

Income tax expense (benefit)

Net loss per common share

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Other comprehensive (loss) gain, net of tax:

Foreign currency translation (loss) gain

Total other comprehensive (loss) gain, net of tax

China dissolution

Foreign currency translation gain

Total other comprehensive gain, net of tax

Comprehensive loss

2 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE THREE MONTHS ENDED June 30, 2023 AND 2022

FOR THE Three and Six Months Ended 

September 30, 2023 AND 2022

(In thousands)

12 unchanged sentences

Balance at June 30, 2023

Issuance of common stock - ESPP

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at September 30, 2023

Accumulated Other

11 unchanged sentences

Balance at June 30, 2022

Issuance of common stock - ESPP

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Cumulative translation adjustment

Balance at September 30, 2022

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

2 unchanged sentences

(In thousands)

Three Months Ended June 30,

Six Months Ended September 30,

Cash flows from operating activities:

5 unchanged sentences

Change in fair value of contingent consideration

China dissolution

Other non-cash items

11 unchanged sentences

Repayment of debt

Net cash used in financing activities

Proceeds from exercise of employee stock options and ESPP

Net cash provided by financing activities

Effect of exchange rate changes on cash

21 unchanged sentences

The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods ended 

June 30, 2023 

2022  and the financial position at June 30, 2023;

September 30, 2023 and 

2022 and the financial position at September 30, 2023 ;

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

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

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

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

1 unchanged sentence

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.

The Company has historically experienced recurring operating losses and as of September 30, 2023 , the Company had an accumulated deficit of $ 1,063.4  million.

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

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

At September 30, 2023 , the Company had cash and cash equivalents of $ 22.8 million.

Cash used in operations for the 

three months ended 

June 30, 2023 was $ 2.2 million.

six months ended 

September 30, 2023 was $ 1.3 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”

3 unchanged sentences

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.

While the impact of inflation has been challenging, the Company continues to take actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from the COVID- 19 pandemic or for other reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on the Company’s business, financial condition and results of operation.

From time-to-time the Company 

may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately 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 believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the financial statements for the three months ended June 30, 2023 .

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, $ 0.8  million of which has been paid as of September 30, 2023 , and to result in annualized cost savings of approximately $ 5.0 million, beginning in fiscal 2023.

The Company believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the unaudited condensed consolidated financial statements for the six months ended September 30, 2023 .

The Company’s liquidity is highly dependent on its ability to increase revenues, its ability to control its operating costs, and its ability to raise additional capital, if necessary.

The impact of the COVID- 19 pandemic and other sources of instability, including the war between Russia and Ukraine, on the global financing markets may reduce the Company's ability to raise additional capital, if necessary, which could negatively impact the Company's liquidity. 

The impact of the COVID- 19 pandemic and other sources of instability, including the wars between Russia and Ukraine and Israel and Hamas, on the global financing markets may reduce the Company's ability to raise additional capital, if necessary, which could negatively impact the Company's liquidity. 

There can be no assurance that the Company will be able to continue to raise additional capital, on favorable terms or at all, from other sources or execute on any other means of improving liquidity described above.

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The Company’s revenues in its Wind business segment are derived primarily through supplying advanced power electronics and control systems, licensing its highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers.

The Company records revenue based on a five -step model in accordance with ASC 606.

The Company records revenue based on a five -step model in accordance with Accounting Standards Codification ("ASC") 606.

For its customer contracts, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) control of goods or services is transferred to the customer.

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.

three and six months ended September 30, 2023 , 

79 % and 78 % of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

three and six months ended September 30, 2022 , 83 % and 77 % of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

In the 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.

1 unchanged sentence

The majority of the Company’s product sales transfer control to the customer in line with the contracted delivery terms and revenue is recorded at the point in time when title and risk transfer to the customer, which is primarily upon delivery, as the Company has determined that this is the point in time that control transfers to the customer.

The Company's equipment and system product line includes certain contracts which do not meet the requirements of an exchange transaction and therefore do not fall within the scope of ASC 606.

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 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.

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In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.

The Company provides assurance-type warranties on all product sales for a term of typically one to three years, and extended service-type warranties at the customer's option for an additional term ranging up to four additional years.

The Company provides assurance-type warranties on all product sales for a term of typically one to three years, and extended service-type warranties are available for purchase at the customer's option for an additional term ranging up to four additional years.

The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure.

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in such cases the long-term amount will be assessed for materiality.

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

The Company has elected to recognize revenue based on the As Invoiced practical expedient if there is a right to consideration from a customer in an amount that corresponds directly with the value of the Company's performance.

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

(“Neeltran”) were impacted by higher than planned costs due to required design changes and inflation on material costs, resulting in an increase to the contract loss accrual of $ 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. 

three and six months ended 

September 30, 2022 , respectively, which negatively impacted the Company's gross margins.

The contract loss accrual decreased by $ 0.9 million in each of the three and six months ended September 30, 2023 , respectively, as projects have been completed.

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

1 unchanged sentence

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

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Six Months Ended September 30, 2023

Product Line:

2 unchanged sentences

$ 4,879  

$ 45,808  

$ 8,862  

Services and technology development

4 unchanged sentences

$ 24,696  

Three Months Ended June 30, 2022

$ 47,856  

$ 28,515  

$ 5,489  

$ 54,251  

$ 10,007  

Three Months Ended September 30, 2022

Six Months Ended September 30, 2022

Product Line:

2 unchanged sentences

$ 1,330  

$ 42,204  

$ 3,302  

Services and technology development

4 unchanged sentences

$ 18,021  

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.

$ 34,923  

$ 25,698  

$ 1,982  

$ 45,527  

$ 4,833  

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

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

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

10,351  

Other changes and FX impact

Ending balance as of June 30, 2023

( 11 )  

Ending balance as of September 30, 2023

$ 6,335  

$ 2,075  

$ 59,046  

Unbilled Accounts Receivable

Program Costs

Deferred Program Costs

Contract Liabilities

Beginning balance as of March 31, 2022

10 unchanged sentences

( 47 )  

Ending balance as of June 30, 2022

Ending balance as of September 30, 2022

$ 6,512  

2 unchanged sentences

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

As of 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  

As of September 30, 2023 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 128.3  

There are also approximately $ 43.2  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 :

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

Three Months Ended

Six Months Ended

September 30,

Inox Wind Limited

SGL Carbon LLC

Fuji Bridex Pte Ltd

Gray Construction, Inc.

Ascend Performance Materials Ops LLC

Stock-Based Compensation

1 unchanged sentence

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

three months ended 

June 30, 2023 and 

three and six months ended 

September 30, 2023 and 

2022 (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Cost of revenues

3 unchanged sentences

$ 1,019  

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.

$ 2,468  

$ 2,052  

The Company issued 9,000  shares and 681,500  shares of restricted stock during the three and six months ended September 30, 2023 , respectively.

The Company issued no shares of immediately vested common stock during the 

three months ended September 30, 2023 and 

53,675 shares of immediately vested common stock during the 

six months ended September 30, 2023 .

The Company issued 338,500 shares of restricted stock during the 

three and six  months ended 

September 30, 2022 .

The Company issued no shares of immediately vested common stock during the three months ended 

September 30, 2022  and 

25,806 shares of immediately vested common stock during the 

six months ended September 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.

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’

service period.

The total unrecognized compensation cost for unvested stock options was less 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 $ 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 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:

The total unrecognized compensation cost for unvested stock options was less than $ 0.1  m illion for the 

six months ended 

September 30, 2023 . This expense will be recognized over a weighted average of approximately 0.7  years.

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 6.8  mi llion for the 

six months ended September 30, 2023 .

This expense will be recognized over a weighted-average expense period of approximately 2.0  years.

The Company granted no  stock options during the 

three and six  months ended 

September 30, 2023 .

The Company granted no stock options in the three months ended 

September 30, 2022 , and 20,564 stock options during the 

six  months ended 

September 30, 2022 . The stock options granted during the 

six months ended September 30, 2022  will vest over 2  years.

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

six months ended September 30, 2022  are as follows:

Expected volatility

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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 months ended June 30, 2023 , and 2022 , 

For each of the three and six months ended September 30, 2023 , 

1.0  million shares were not included in the calculation of diluted EPS. Of these, 1.0  

million relate to shares tied to the contingent consideration derivative liability for which the contingency has not yet been met, and less than 0.1 million relate to outstanding stock options as they were considered anti-dilutive . 

For each of the three and six months ended September 30, 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 .

million relate to shares tied to the contingent consideration derivative liability for which the contingency has not yet been met, and 0.1 million relate to outstanding stock options as they were considered anti-dilutive .

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

three months ended 

June 30, 2023 and 

three and six months ended 

September 30, 2023 and 

2022 (in thousands, except per share data):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ ( 2,485 )  

$ ( 9,881 )  

$ ( 7,883 )  

Weighted-average shares of common stock outstanding

1 unchanged sentence

28,775  

29,996  

28,648  

Weighted-average shares subject to repurchase

( 1,455 )  

( 908 )  

( 1,451 )  

Shares used in per-share calculation ―

1 unchanged sentence

27,867  

28,545  

27,714  

Shares used in per-share calculation ―

1 unchanged sentence

27,867  

28,545  

27,714  

Net loss per share ―

$ ( 0.09 )  

$ ( 0.35 )  

$ ( 0.28 )  

Net loss per share ―

$ ( 0.09 )  

$ ( 0.35 )  

$ ( 0.28 )  

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.  Goodwill is not amortized but reviewed for impairment.

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized but reviewed for impairment.

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

There were no changes to goodwill during the 

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

six  months ended 

September 30, 2023 or year ended March 31, 2023 .

The Company did not identify any triggering events in the 

three months ended 

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

three and six months ended 

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

Other Intangibles

Intangible assets at 

June 30, 2023  and 

September 30, 2023  and 

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

June 30, 2023

September 30, 2023

March 31, 2023

6 unchanged sentences

( 675 )  

$ 3,610  

$ ( 3,610 )  

( 681 )  

( 675 )  

Trade name and trademarks

Indefinite  

Customer relationships

12 unchanged sentences

$ 8,527  

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.

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.5  million and $ 1.1  million, in the 

three and six months ended 

September 30, 2023 , respectively, a nd $ 0.7  million and $ 1.4  million in the 

three and six months ended September 30, 2022 , respectively . Additionally, the Company recorded no intangible amortization related to backlog that is reported in cost of revenues in the three months ended 

September 30, 2023  and less than $ 0.1  million in the six  months ended 

September 30, 2023 .

The Company recorded no intangible amortization related to backlog in the three months ended 

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

September 30, 2022 , respectively.

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

Years ended March 31,

Years ending March 31,

$ 5,645  

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

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements.  A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes.  Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments.  The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three months ended June 30, 2023 .

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments. The Company did not have any transfers of assets and liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the six months ended September 30, 2023 .

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

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Contingent Consideration

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.

Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of Northeast Power Systems, Inc ("NEPSI") that provides that the selling stockholders may receive up to an additional 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.

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

June 30, 2023 and 

September 30, 2023 and 

March 31, 2023 (in thousands):

3 unchanged sentences

Significant Unobservable Inputs (Level 3)

June 30, 2023:

September 30, 2023:

Cash equivalents

17 unchanged sentences

$ 1,270  

The table below reflects the activity for the Company’s derivative liability measured at fair value on a recurring basis (in thousands):

The table below reflects the activity for the Company’s contingent consideration derivative liability measured at fair value on a recurring basis (in thousands):

Acquisition Contingent Consideration

4 unchanged sentences

Change in fair value

Balance at June 30, 2023

Balance at September 30, 2023

$ 3,470  

1 unchanged sentence

Accounts receivable at 

June 30, 2023 and 

September 30, 2023 and 

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

June 30, 2023

September 30, 2023

March 31, 2023

Accounts receivable (billed)

$ 21,174  

$ 20,707  

Accounts receivable (unbilled)

Accounts receivable, net

$ 27,509  

$ 30,665  

Inventory, net of reserves, at 

June 30, 2023 and 

September 30, 2023 and 

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

June 30, 2023

September 30, 2023

March 31, 2023

10 unchanged sentences

$ 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.

The Company recorded inventory write-downs of $ 0.7 million a nd $ 0.7  million f or the three months ended September 30, 2023  and 2022 , respectively. 

The Company recorded inventory write-downs of $ 1.1  million and $ 1.0 million for the 

six  months ended 

September 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 

June 30, 2023  and 

September 30, 2023  and 

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

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.

5 unchanged sentences

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.

six months ended September 30, 2023 , the Company received $ 3.0  million for the initial claims that were processed. The remaining balance is expected to be received during the remainder of fiscal 2023.

Property, Plant and Equipment

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

June 30, 2023 and 

September 30, 2023 and 

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

June 30, 2023

September 30, 2023

March 31, 2023

14 unchanged sentences

$ 12,309  

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

Depreciation expense was $ 0.6  million and $ 0.7 million for the three months ended September 30, 2023 and 2022 , respectively. Depreciation expense was $ 1.2  million and $ 1.4 million for the 

six months ended 

September 30, 2023 and 2022 , respectively.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at 

June 30, 2023 and 

September 30, 2023 and 

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

June 30, 2023

September 30, 2023

March 31, 2023

15 unchanged sentences

Product warranty activity was as follows (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Balance at beginning of period

1 unchanged sentence

$ 1,942  

$ 2,638  

$ 2,066  

Provisions for warranties during the period

1 unchanged sentence

( 678 )  

( 368 )  

( 1,598 )  

Balance at end of period

1 unchanged sentence

$ 2,053  

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 

three months ended 

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

$ 1,892  

$ 2,053  

The Company recorded income tax expense of $ 0.1  million and $ 0.2  million in the 

three and six months ended September 30, 2023 , respectively. 

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

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

Accounting for income taxes requires a two -step approach to recognizing and measuring uncertain tax positions.

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

six months ended 

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

Contingent Consideration

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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.

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.

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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.

four  years following closing of the NEPSI Acquisition.  NEPSI has recognized revenues in excess of $75.0 million during the three years after the NEPSI Acquisition Date. As a result, the Company expects to issue 400,000 shares of common stock of the Company to the selling stockholders during the quarter ending December 31, 2023, upon certification of the achievement of specified earnout revenue objectives.

Contingent Consideration

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 .

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

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

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

September 30,  

June 30,  

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5.30 %  

5.20 %  

Revenue volatility

27.5 %  

$ 7.55  

$ 6.26  

Payment delay (days)

15 unchanged sentences

Fair value (millions)

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.

The Company recorded net losses of $ 0.9  million and $ 2.2  million resulting from the increases in the fair value of the contingent consideration in the 

three and six  months ended 

September 30, 2023 , respectively. The Company recorded a net gain of $ 0.3 million and $ 0.1 million resulting from the decrease in the fair value of the contingent consideration in the 

three and six months ended September 30, 2022 , 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 current debt balanc e is $ 0.1 million as of September 30, 2023  and March 31, 2023 .

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

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Finance

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.

As of September 30, 2023 , the right-of-use asset related to the finance lease, net of accumulated amortization is less than $ 0.1  million, and is included in the property and equipment, net on the Company's condensed consolidated balance sheet.

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

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Supplemental balance sheet information related to leases at 

June 30, 2023 , and 

September 30, 2023 , and 

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

June 30, 2023

September 30, 2023

March 31, 2023

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

three months ended June 30, 2023  and 

three and six months ended September 30, 2023  and 

2022 are as follows (in thousands):

Three Months Ended

June 30, 2023

Six Months Ended

September 30, 2023

Operating Leases:

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Three Months Ended

June 30, 2022

Six Months Ended

September 30, 2022

Operating Leases:

4 unchanged sentences

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

Year ended March 31,

Year ending March 31,

Total minimum lease payments

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In addition, the Company has various contractual arrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis.

As of June 30, 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 September 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 or collateral deposits.  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

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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.

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

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

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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 

2022 through second quarter of fiscal 2023 ,  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):

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

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

Severance pay

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Cash payments

Accrued restructuring balance at June 30, 2023

Accrued restructuring balance at September 30, 2023

Severance pay

4 unchanged sentences

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.

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

Business Segments

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

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

$ 28,515  

2 unchanged sentences

$ 45,527  

Three Months Ended June 30,

Operating loss:

10,007  

$ 34,004  

$ 27,680  

$ 64,258  

$ 50,360  

Three Months Ended September 30,

Six Months Ended September 30,

Operating income (loss):

$ ( 679 )  

$ ( 6,495 )  

$ ( 2,649 )  

( 868 )  

( 398 )  

Unallocated corporate expenses

1 unchanged sentence

( 729 )  

( 4,655 )  

$ ( 2,369 )  

$ ( 8,092 )  

$ ( 7,702 )  

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

2 unchanged sentences

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 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 

June 30, 2023  and 2022 , respectively.

Unallocated corporate expenses consisted of a loss on contingent consider ation of $ 0.9  million and $ 2.2  million in the 

three and six  months ended September 30, 2023 , respectively.

Unallocated corporate expenses consisted of a gain on contingent consideration of $ 0.3 million and $ 0.1 million in the 

three and six months ended September 30, 2022 . 

Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $ 1.1 million and $ 1.0  million in the three  months ended 

September 30, 2023  and 2022 , respectively, 

and $ 2.5  million and $ 2.1 million in the 

six months ended 

September 30, 2023 and 2022 , respectively.

Total assets for the two business segments as of 

June 30, 2023  and 

September 30, 2023  and 

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

June 30, 2023

September 30, 2023

March 31, 2023

2 unchanged sentences

14,361  

Corporate assets

4 unchanged sentences

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ):

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016 - 13, Financial Instruments-Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments .

9 unchanged sentences

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

AMERICAN SUPERCONDUCTOR CORPORATION

7 unchanged sentences

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

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

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

("NEPSI") and Neeltran, Inc.

("Neeltran"), changes in macroeconomic and market conditions, including increasing inflation and impacts from the COVID-19 pandemic, sourcing, production disruption, material delays and global supply chain disruptions and adoption of accounting changes may be deemed to be forward-looking statements.

("Neeltran"), contingent payments related to the NEPSI acquisition, changes in macroeconomic and market conditions, including increasing inflation and impacts from the COVID-19 pandemic, sourcing, production disruption, material delays and global supply chain disruptions and adoption of accounting changes may be deemed to be forward-looking statements.

Without limiting the foregoing, the words “believes,”

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 Through our Gridtec™

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.

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

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

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We supply advanced power electronics and control systems, license our highly engineered wind turbine designs, and provide extensive customer support services to wind turbine manufacturers.

Our design portfolio includes a broad range of drivetrains and power ratings of 2 MW and higher.

Our design portfolio includes a broad range of drivetrains and power ratings of 2 megawatts ("MWs") and higher.

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

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Other fiscal years follow similarly.

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.

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

While the impact of inflation has been challenging, we continue to take actions to limit this pressure including adjusting the pricing of our products and services. Changes in macroeconomic and market conditions arising from the COVID-19 pandemic, or for other reasons, such as the ongoing wars between Russia and Ukraine or Israel and Hamas, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on 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 $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.

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

This restructuring is expected to incur $1.0 million of cash expenses, $0.8 million of which has been paid as of September 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.

During the six months ended September 30, 2023, we received $3.0 million in payments for the initial claims that were processed. The remaining balance is expected to be paid during the remainder of fiscal 2023.

Critical Accounting Policies and Estimates

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Results of Operations

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.

Three and six months ended September 30, 2023 , compared to the three and six months ended September 30, 2022

Total revenues increased 23% to $34.0 million for the three months ended September 30, 2023 and total revenues increased 28% to $64.3 million for the six months ended September 30, 2023, compared to $27.7 million and $50.4 million for the three and six months ended September 30, 2022, respectively.

Our revenues are summarized as follows (in thousands):

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. 

Three Months Ended September 30,

Six Months Ended September 30,

Our Grid business unit accounted for 84% of total revenues for each of the three and six months ended September 30, 2023, respectively, compared to 93% and 90% for the three and six months ended September 30, 2022, respectively.

Our Grid business unit revenues increased 11% to $28.5 million in the three months ended September 30, 2023, from $25.7 million in the three months ended September 30, 2022. Our Grid business unit revenues increased 19% to $54.3 million in the six months ended September 30, 2023, from $45.5 million in the six months ended September 30, 2022.

The increase in the Grid business unit revenue in the three and six months ended September 30, 2023, compared to the three and six months ended September 30, 2022 was primarily driven by increased shipments of new energy power systems and ship protection systems revenues than in the prior year periods.

Our Wind business unit accounted for 16% of total revenues for each of the three and six months ended September 30, 2023, respectively, compared to 7% and 10% for the three and six months ended September 30, 2022, respectively.

Revenues in the Wind business unit increased 177% and 107% to $5.5 million and $10.0 million in the three and six months ended September 30, 2023, from $2.0 million and $4.8 million in the three and six months ended September 30, 2022, respectively.

The increase in the three and six months ended September 30, 2023, compared to the three and six months ended September 30, 2022, was driven by additional shipments of electrical control systems ("ECS") at increased prices in the three and six months ended September 30, 2023. 

Cost of Revenues and Gross Margin

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 .

Cost of revenues decreased by 1% to $25.4 millio n for the three months ended September 30, 2023 , compared to $25.7 million for the three months ended September 30, 2022 .

Cost of revenues increased by 7% to $49.4 million for the six months ended September 30, 2023, compared to $46.2 million for the six months ended September 30, 2022.

Gross margin was 

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.

25%  and 23% for the 

three and six months ended September 30, 2023 , respectively, compared to 7% and 8% for the 

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

The increase in gross margin in the three and six months ended September 30, 2023, was due to higher revenues, a more favorable product mix including increased spares and service revenues and favorable impacts across the business due to pricing increases across our product lines.

Operating Expenses

Research and development

Research and development ("R&D") expenses 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.

Research and development ("R&D") expenses decreased 29% and 30% in the three and six months ended September 30, 2023, respectively, to $1.6 million from $2.3 million in the three months ended September 30, 2022, and 

to $3.5 million from $5.0 million in the six months ended September 30, 2022.

The decrease in both periods was driven primarily by 

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

Selling, general, and administrative

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. 

Selling, general and administrative ("SG&A") expenses increased 8%  in the three months ended September 30, 2023 , to $ 7.9 million from $7.3 million in the three months ended 

September 30, 2022 . The increase in SG&A expense in the three months ended September 30, 2023, was due to higher compensation and stock compensation expense than in the prior year period. 

SG&A expenses increased 6% to $15.8 million in the six months ended September 30, 2023, compared to $14.9 million in the six months ended September 30, 2022. The increase in SG&A expense in the six months ended September 30, 2023, was due to higher overall 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 $ 0.5 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”).

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $ 0.5 million and $1.1 million in the three and six months ended 

September 30, 2023 , respectively, and $0.7 million and $1.4 million in the three and six months ended September 30, 2022 , respectively. 

The decrease in amortization expense in both periods is a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets from Northeast Power Systems, Inc ("NEPSI") and Neeltran.

Change in fair value of contingent consideration

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in 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 June 30,

Operating loss:

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in a loss of $ 0.9  million and $2.2 million in the three and six months ended September 30, 2023, respectively, compared to a gain of $0.3 million and $0.1 million in the three and six months ended September 30, 2022, respectively. 

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

NEPSI has recognized revenues in excess of $75 million during the three years after the NEPSI Acquisition Date. 

As a result, we expect to issue 400,000 shares of common stock of the Company to the selling stockholders during the quarter ending December 31, 2023 upon certification of the achievement of specified earnout revenue objectives.

Operating income (loss)

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

Three Months Ended September 30,

Six Months Ended September 30,

Operating income (loss):

Unallocated corporate expenses

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.

Ou r Grid business segment generated operating losses of $ 0.7 million and $2.6 million in the three and six months ended September 30, 2023 , respectively, compared to operating losses of $6.5 million and $13.8 million in the three and six months ended September 30, 2022 , respectively.  The decrease in the Grid business unit operating loss in the three and six months ended September 30, 2023, was due to higher revenues and gross margins due to a favorable product mix 

as well as the reduction of the remaining acquired Neeltran backlog .

Our Wind business segment generated operating income of $ 0.3 million and operating loss of $0.4 million in the three and six months ended September 30, 2023 , respectively, compared to operating losses of $0.9 million and $1.3 million in the three and six months ended September 30, 2022 , respectively. The improvement in the Wind business unit operating margin in the three and six months ended September 30, 2023 was due to higher revenues and gross margins from increased sales of ECS units.

Unallocated corporate expenses included a loss on contingent consideration of $ 0.9  million and $2.2 million in the three and six months ended September 30, 2023, respectively, and a gain on contingent consideration of $0.3 million and $0.1 million in the three and six months ended 

September 30, 2022 , respectively. Additionally, unallocated corporate expenses primarily consisted of stock-based compensation expense of $1.1 million and $2.5  million in the three and six months ended September 30, 2023 , respectively, and $1.0 million and $2.1 million in the 

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

Interest income, net

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.

Interest income, net, was $0.2 million and $0.4 million in the three and six months ended September 30, 2023, respectively, compared to less than $0.1 million and $0.1 million in the three and six months ended September 30, 2022, respectively, due to higher earned interest at increased rates in the fiscal year 2023 periods. 

China dissolution

China dissolution expense was $1.9 million in each of the three and six months ended September 30, 2022, and there was no similar transaction in the three and six months ended September 30, 2023 . The impact of the China dissolution expense during the three and six months ended September 30, 2022 , was driven by the liquidation of our China entity, resulting in a foreign currency loss from the cumulative translation release of $1.9 million.

Other income (expense), net 

Other expense, net, was $0.1 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.

Other expense, net, was $0.2 million and $0.3 million in the 

three and six months ended September 30, 2023 , respectively, compared to other income, net, of $0.1 million and $0.2 million in the three and six months ended September 30, 2022, respectively.

The increase in other expense, net, during the three and six months ended September 30, 2023, compared to the three and six months ended September 30, 2022, was driven by the impacts of unfavorable fluctuations in foreign currencies during the periods.

 Income Taxes

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.

Income tax expense was $0.1 million and $0.2 million in the three and six months ended September 30, 2023, respectively.

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

Net loss was $ 2.5 million and $7.9 million in the 

three and six months ended September 30, 2023 , respectively, compared to $9.9 million and $18.6 million in the 

three and six months ended September 30, 2022 , respectively. The decrease in net loss in both periods was driven primarily by the increased revenues and gross margins.

Non-GAAP Financial Measure - 

Non-GAAP Net Loss

Non-GAAP Net Income (Loss)

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

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

We define non-GAAP net 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,

We define non-GAAP net income (loss) as net loss before, China dissolution, stock-based compensation, amortization of acquisition-related intangibles, change in fair value of contingent consideration, and other non-cash or unusual charges.  We believe non-GAAP net income (loss) 

assists management and investors in comparing our performance across reporting periods on a consistent basis by excluding these non-cash charges and other items that we do not believe are indicative of our core operating performance. In addition, we use non-GAAP net income (loss) as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net income (loss) is set forth in the table below (in thousands, except per share data):

Three Months Ended September 30,

Six Months Ended September 30,

China dissolution

Stock-based compensation

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Change in fair value of contingent consideration

Non-GAAP net loss

Non-GAAP net loss per share - basic

Non-GAAP net income (loss)

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

Weighted average shares outstanding - basic

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.  

We incurred non-GAAP net income of less than $0.1  million and a non-GAAP net loss of $2.1 million, or $ 0.00  and $0.07 per share, for the 

three and six months ended September 30, 2023 , respectively, compared to non-GAAP net losses of $6.5 million and $13.3 million, or $0.23 and $0.48 per share, for the 

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

The improvement in the non-GAAP net loss for the three and six months ended September 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 June 30, 2023 , had an accumulated deficit of $1,061 millio n.

We have experienced recurring operating losses and, as of September 30, 2023 , had an accumulated deficit of $1,063.4 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 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.

As of September 30, 2023 , we had cash, cash equivalents and restricted cash of $24.0 million, compared to $25.7 million as of March 31, 2023, a decrease of $1.7 million.

As of September 30, 2023 , we had $2.6 million in cash, cash equivalents, and restricted cash in foreign bank accounts.

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

June 30, 2023

September 30, 2023

March 31, 2023

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Total cash, cash equivalents, and restricted cash

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.

For the six months ended September 30, 2023, net cash used in operating activities was $1.3 million, compared to $11.6 million for the six months ended September 30, 2022. The decrease in net cash used in operations was due primarily to decrease in prepaid expenses and other current asset as well as accounts receivable in the six months ended September 30, 2023 as compared to September 30, 2022. Cash flows from operating activities in the six months ended September 30, 2023 included a reimbursement of $3.0 million for the ERC receivable in prepaid expenses and other current assets at March 31, 2023.

For the six months ended September 30, 2023, net cash used in investing activities was $0.4 million, compared to $0.7 million for the six months ended September 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.

For the six months ended September 30, 2023 and 2022, respectively, net cash provided by financing activities remained consistent at $0.1 million.  

As of September 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 June 30, 2023, while others are considered future commitments.

Certain contractual obligations are reflected on the consolidated balance sheet as of September 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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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.

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

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

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Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

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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