What changed in this filing

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Item 1. Financial Statements

2024-01-24 compared with 2023-11-01 · 460 added, 254 removed, 908 unchanged (44% of the section changed)

2 unchanged sentences

(In thousands)

September 30, 2023

December 31, 2023

March 31, 2023

1 unchanged sentence

Cash and cash equivalents

$ 23,979  

$ 23,360  

Accounts receivable, net

24,721  

30,665  

Inventory, net

44,197  

36,986  

Prepaid expenses and other current assets

13,429  

Restricted cash

Total current assets

100,199  

106,173  

Property, plant and equipment, net

11,205  

12,309  

Intangibles, net

Right-of-use assets

43,471  

Restricted cash

Deferred tax assets

$ 166,343  

$ 175,561  

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable and accrued expenses

$ 23,002  

$ 38,383  

Lease liability, current portion

2 unchanged sentences

Deferred revenue, current portion

52,598  

43,572  

Total current liabilities

$ 77,551  

$ 84,108  

Deferred revenue, long-term portion

4 unchanged sentences

Total liabilities

86,818  

93,764  

Commitments and Contingencies (Note 16)

1 unchanged sentence

Additional paid-in capital

1,146,405  

1,139,113  

Treasury stock

( 3,639 )  

Accumulated other comprehensive income

Accumulated deficit

( 1,065,079 )  

( 1,055,547 )

Total stockholders' equity

79,525  

81,797  

Total liabilities and stockholders' equity

$ 166,343  

$ 175,561  

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

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

$ 39,353  

$ 23,881  

$ 103,611  

$ 74,241  

Cost of revenues

29,369  

23,364  

78,759  

69,533  

24,852  

Operating expenses:

1 unchanged sentence

Selling, general and administrative

23,648  

22,084  

Amortization of acquisition-related intangibles

Change in fair value of contingent consideration

( 220 )  

Restructuring

( 14 )  

Total operating expenses

11,422  

33,993  

30,878  

Operating loss

( 1,438 )  

( 9,209 )  

( 9,141 )  

Interest income, net

China dissolution

Other income (expense), net

Loss before income tax expense (benefit)

Income tax expense (benefit)

Other expense, net

( 298 )  

( 287 )  

( 618 )  

Loss before income tax expense

( 1,586 )  

( 9,454 )  

( 9,241 )  

Income tax expense

$ ( 1,649 )  

$ ( 9,581 )  

$ ( 9,532 )  

Net loss per common share

$ ( 0.06 )  

$ ( 0.34 )  

$ ( 0.33 )  

$ ( 0.06 )  

$ ( 0.34 )  

$ ( 0.33 )  

Weighted average number of common shares outstanding

29,092  

27,954  

28,728  

27,794  

29,092  

27,954  

28,728  

27,794  

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

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

$ ( 1,649 )  

$ ( 9,581 )  

$ ( 9,532 )  

Other comprehensive (loss) gain, net of tax:

China dissolution

Foreign currency translation gain

Total other comprehensive gain, net of tax

Foreign currency translation loss

( 106 )  

( 195 )  

( 44 )  

Total other comprehensive (loss) gain, net of tax

( 106 )  

( 195 )  

( 44 )  

Comprehensive loss

$ ( 1,755 )  

$ ( 9,776 )  

( 9,576 )  

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

FOR THE Three and Six Months Ended 

September 30, 2023 AND 2022

FOR THE Three and Nine Months Ended 

December 31, 2023 AND 2022

(In thousands)

3 unchanged sentences

Treasury Stock

Comprehensive Income

Comprehensive Income (Loss)

Accumulated Deficit

1 unchanged sentence

Balance at March 31, 2023

Issuance of common stock - restricted shares

29,937  

$ 1,139,113  

$ ( 3,639 )  

$ 1,571  

$ ( 1,055,547 )  

$ 81,797  

Issuance of common stock –

restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Issuance of common stock for 401(k) match

Cumulative translation adjustment

( 5,398 )  

Balance at June 30, 2023

Issuance of common stock - ESPP

30,669  

$ 1,140,626  

$ ( 3,639 )  

$ 1,569  

$ ( 1,060,945 )  

$ 77,918  

Issuance of common stock –

Issuance of common stock - restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Issuance of common stock for 401(k) match

Cumulative translation adjustment

( 2,485 )  

Balance at September 30, 2023

Accumulated Other

Number of Shares

Paid-in Capital

Treasury Stock

Comprehensive Loss

Accumulated Deficit

Stockholders' Equity

30,716  

$ 1,142,023  

$ ( 3,639 )  

$ 1,633  

$ ( 1,063,430 )  

$ 76,894  

Stock-based compensation expense

Issuance of common stock for 401(k) match

Issuance of common stock for contingent consideration

Cumulative translation adjustment

( 106 )  

( 1,649 )  

Balance at December 31, 2023

31,134  

$ 1,146,405  

$ ( 3,639 )  

$ 1,527  

$ ( 1,065,079 )  

$ 79,525  

Accumulated Other  

Number of Shares  

Par Value  

Paid-in Capital  

Treasury Stock  

Comprehensive Income (Loss)  

Accumulated Deficit  

Stockholders' Equity  

Balance at March 31, 2022

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

28,920  

$ 1,133,536  

$ ( 3,639 )  

$ ( 291 )  

$ ( 1,020,506 )  

$ 109,389  

Issuance of common stock –

restricted shares, net of forfeited shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Issuance of common stock for 401(k) match

Cumulative translation adjustment

( 8,710 )  

Balance at June 30, 2022

Issuance of common stock - ESPP

Issuance of common stock - restricted shares

28,939  

$ 1,134,707  

$ ( 3,639 )  

$ ( 228 )  

$ ( 1,029,216 )  

$ 101,913  

Issuance of common stock –

restricted shares

Stock-based compensation expense

Issuance of stock for 401(k) match

Issuance of common stock for 401(k) match

Cumulative translation adjustment

( 9,881 )  

Balance at September 30, 2022

29,337  

$ 1,136,028  

$ ( 3,639 )  

$ 1,798  

$ ( 1,039,097 )  

$ 95,383  

Issuance of common stock –

restricted shares

Stock-based compensation expense

Issuance of common stock for 401(k) match

Cumulative translation adjustment

( 195 )  

( 9,581 )  

Balance at December 31, 2022

29,928  

$ 1,137,622  

$ ( 3,639 )  

$ 1,603  

$ ( 1,048,678 )  

$ 87,207  

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

2 unchanged sentences

(In thousands)

Six Months Ended September 30,

Nine Months Ended December 31,

Cash flows from operating activities:

$ ( 9,532 )  

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

6 unchanged sentences

Other non-cash items

Unrealized foreign exchange loss on cash and cash equivalents

Changes in operating asset and liability accounts:

Accounts receivable

( 8,737 )  

Prepaid expenses and other assets

Accounts payable and accrued expenses

( 15,859 )  

Deferred revenue

11,619  

Net cash used in operating activities

( 97 )  

Cash flows from investing activities:

Purchase of property, plant and equipment

( 635 )  

Change in other assets

Net cash used in investing activities

( 643 )  

Cash flows from financing activities:

Repayment of debt

( 49 )  

Proceeds from exercise of employee stock options and ESPP

2 unchanged sentences

Net decrease in cash, cash equivalents and restricted cash

( 650 )  

Cash, cash equivalents and restricted cash at beginning of period

25,675  

49,486  

Cash, cash equivalents and restricted cash at end of period

$ 25,025  

$ 31,351  

Supplemental schedule of cash flow information:

1 unchanged sentence

Non-cash investing and financing activities

Issuance of common stock to settle contingent consideration

$ 3,092  

Issuance of common stock to settle liabilities

10 unchanged sentences

These unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and Exchange Commission’s (“SEC”) instructions to Form 10 -Q.

Certain prior period amounts were reclassified to conform to the presentation in the current period.

The going concern basis of presentation assumes that the Company will continue operations and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

2 unchanged sentences

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

September 30, 2023 and 

2022 and the financial position at September 30, 2023 ;

December 31, 2023 and 

2022 and the financial position at December 31, 2023 ;

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

3 unchanged sentences

filed with the SEC on May 31, 2023.

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.

The Company has historically experienced recurring operating losses and as of December 31, 2023 , the Company had an accumulated deficit of $ 1,065.1  million.

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

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

At December 31, 2023 , the Company had cash and cash equivalents of $ 24.0 million.

Cash used in operations for the 

six months ended 

September 30, 2023 was $ 1.3 million.

nine months ended 

December 31, 2023 was $ 0.1 million.

In February 2021, the Company filed a shelf registration statement on Form S- 3 that will expire in February 2024 ( the “Form S- 3”

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 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 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.

In recent periods, the Company has experienced inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company’s cost of revenues and decreased gross margin.

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

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, $ 0.8  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 .

may undertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023, the Company undertook a reduction in force that involved approximately 5 % of the global workforce. This restructuring is expected to incur $ 1.0 million of cash expenses, of which $ 0.9  million has been paid as of December 31, 2023  and the remaining $ 0.1 million is expected to be paid by March 31, 2024, and to result in annualized cost savings of approximately $ 5.0 million, beginning in fiscal 2023.

The Company’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 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. 

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

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

4 unchanged sentences

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

three and six months ended September 30, 2023 , 

three and nine months ended December 31, 2023 , 

85 % 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.

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.

three and nine months ended December 31, 2022 , 87 % and 80 % of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

In the Company's equipment and system product line, each contract with a customer summarizes each product sold to a customer, which typically represents distinct performance obligations.

36 unchanged sentences

(“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 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.

three and nine months ended 

December 31, 2022 , respectively, which negatively impacted the Company's gross margins.

The contract loss accrual decreased by $ 2.5 million and $ 3.4  million in each of the three and nine months ended December 31, 2023 , respectively, as projects have been completed.

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

1 unchanged sentence

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

Three Months Ended September 30, 2023

Six Months Ended September 30, 2023

Three Months Ended December 31, 2023

Nine Months Ended December 31, 2023

Product Line:

15 unchanged sentences

$ 87,854  

Three Months Ended September 30, 2022

Six Months Ended September 30, 2022

$ 15,757  

Three Months Ended December 31, 2022

Nine Months Ended December 31, 2022

Product Line:

15 unchanged sentences

$ 66,337  

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.

$ 7,904  

As of December 31, 2023 , and 2022 , the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations.

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

22 unchanged sentences

Other changes and FX impact

( 11 )  

Ending balance as of September 30, 2023

Ending balance as of December 31, 2023

$ 4,588  

16 unchanged sentences

( 15 )  

Ending balance as of September 30, 2022

Ending balance as of December 31, 2022

$ 4,313  

2 unchanged sentences

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

As of September 30, 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  

As of December 31, 2023 , the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $ 137.2  

There are also approximately $ 30.2  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 and six months ended September 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 nine months ended December 31, 2023 and 2022 :

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

Inox Wind Limited

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 and six months ended 

September 30, 2023 and 

three and nine months ended 

December 31, 2023 and 

2022 (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Cost of revenues

5 unchanged sentences

$ 3,492  

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 and 681,500  shares of restricted stock during the three and nine months ended December 31, 2023 , respectively.

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

three months ended September 30, 2023 and 

three months ended December 31, 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.

nine months ended December 31, 2023 .

The Company issued 550,000 shares of restricted stock and no shares of immediately vested common stock during the three months ended 

December 31, 2022  and 888,500 shares of restricted stock and 25,806 shares of immediately vested common stock during the 

nine months ended December 31, 2022 . These restricted stock awards generally vest over 2 - 3 years. Awards for restricted stock include both time-based and performance-based awards. For options and restricted stock awards that vest upon the passage of time, expense is being recorded over the vesting period. Performance-based awards are expensed over the requisite service period based on probability of achievement.

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

service period.

The total unrecognized compensation cost for unvested stock options was less than $ 0.1  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 .

The total unrecognized compensation cost for unvested stock options was less than $ 0.1  m illion as of December 31, 2023 . This expense will be recognized over a weighted average of approximately 0.4  years.

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 5.8  mi llion as of 

December 31, 2023 .

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

The Company granted no  stock options during the 

three and six  months ended 

September 30, 2023 .

three and nine  months ended 

December 31, 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.

December 31, 2022 , and 20,564 stock options during the 

nine  months ended 

December 31, 2022 . The stock options granted during the 

nine months ended December 31, 2022  will vest in equal annual installments over 2  years.

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

six months ended September 30, 2022  are as follows:

nine months ended December 31, 2022  are as follows:

Expected volatility

7 unchanged sentences

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

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

For each of the three and nine months ended December 31, 2023 , 0.3  million shares were not included in the calculation of diluted EPS. Of these, 0.3  million 

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

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

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

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 .

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

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

three and six months ended 

September 30, 2023 and 

three and nine months ended 

December 31, 2023 and 

2022 (in thousands, except per share data):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

$ ( 1,649 )  

32 unchanged sentences

There were no changes to goodwill during the 

six  months ended 

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

nine  months ended 

December 31, 2023 or year ended March 31, 2023 .

The Company did not identify any triggering events in the 

three and six months ended 

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

three and nine months ended 

December 31, 2023 that would require interim impairment testing of goodwill.

Other Intangibles

Intangible assets at 

September 30, 2023  and 

December 31, 2023  and 

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

September 30, 2023

December 31, 2023

March 31, 2023

22 unchanged sentences

The Company recorded intangible amortization expense related to customer relationship and core technology and know-how of $ 0.5  million and $ 1.6  million, in the 

three and 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.

three and nine months ended 

December 31, 2023 , respectively, a nd $ 0.7  million and $ 2.1  million in the 

three and nine months ended December 31, 2022 , respectively . Additionally, the Company recorded no intangible amortization related to backlog that is reported in cost of revenues in the three months ended 

December 31, 2023  and less than $ 0.1  million in the nine months ended 

December 31, 2023 .

The Company recorded less than $ 0.1 million related to backlog that is reported in cost of revenues in the 

three and nine months 

December 31, 2022 , respectively.

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

9 unchanged sentences

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

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

8 unchanged sentences

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

September 30, 2023 and 

December 31, 2023 and 

March 31, 2023 (in thousands):

3 unchanged sentences

Significant Unobservable Inputs (Level 3)

September 30, 2023:

December 31, 2023:

Cash equivalents

23 unchanged sentences

Balance at March 31, 2023

Settlement of contingent consideration

Change in fair value

Balance at September 30, 2023

Balance at December 31, 2023

$ 1,230  

1 unchanged sentence

Accounts receivable at 

September 30, 2023 and 

December 31, 2023 and 

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

September 30, 2023

December 31, 2023

March 31, 2023

7 unchanged sentences

Inventory, net of reserves, at 

September 30, 2023 and 

December 31, 2023 and 

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

September 30, 2023

December 31, 2023

March 31, 2023

10 unchanged sentences

$ 36,986  

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 $ 0.5  million a nd $ 0.2  million f or the three months ended December 31, 2023  and 2022 , respectively. 

The Company recorded inventory write-downs of $ 1.5  million and $ 1.2 million for the 

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.

nine  months ended 

December 31, 2023 and 2022 , respectively. These write-downs were based on the Company's evaluation of its inventory on hand for excess quantities and obsolescence.

Deferred program costs as of 

September 30, 2023  and 

December 31, 2023  and 

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

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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 

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.

nine months ended December 31, 2023 , the Company received $ 3.0  million for the initial claims that were processed. The remaining balance is expected to be received during the remainder of fiscal 2023.

Property, Plant and Equipment

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

September 30, 2023 and 

December 31, 2023 and 

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

September 30, 2023

December 31, 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 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.

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

nine months ended 

December 31, 2023 and 2022 , respectively.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at 

September 30, 2023 and 

December 31, 2023 and 

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

September 30, 2023

December 31, 2023

March 31, 2023

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Product warranty activity was as follows (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Balance at beginning of period

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The Company recorded income tax expense of $ 0.1  million and $ 0.3  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.

three and nine months ended December 31, 2023 , respectively. 

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

three and nine months ended December 31, 2022 , respectively.

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

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

six months ended 

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

The Company re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.  Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did not identify any uncertain tax positions in the 

nine months ended 

December 31, 2023  and did not have any gross unrecognized tax benefits as of December 31, 2023 .

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.

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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.  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

four  years following closing of the NEPSI Acquisition.  NEPSI has recognized revenues in excess of $75.0 million during the three years after the NEPSI Acquisition Date. As a result, the Company issued 399,999  shares of common stock of the Company and cash in lieu of a fractional share of common stock to the selling stockholders during the quarter ended 

December 31, 2023, following certification of the achievement of specified earnout revenue objectives.

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

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

December 31,  

September 30,  

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5.30 %  

5.20 %  

Revenue volatility

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$ 11.14  

$ 7.55  

$ 6.26  

Payment delay (days)

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Fair value (millions)

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.

 During the three and nine months ended December 31, 2023 the Company issued 399,999  shares and cash in lieu of a fractional share of common stock related to the achievement of specified revenue objectives at a fair value of $ 3.1  million.

One specified revenue objective, which would have earned the selling stockholders 300,000 shares of Company common stock, was not achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by September 30, 2024.

The Company recorded losses of $ 0.9  million and $ 3.1  million resulting from the increases in the fair value of the contingent consideration in the 

three and nine  months ended 

December 31, 2023 , respectively.

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

The current debt balanc e is $ 0.1 million as of September 30, 2023  and March 31, 2023 .

The current debt balanc e is less than $ 0.1 million as of December 31, 2023  and was 

$ 0.1 million as of 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 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.

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

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

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Supplemental balance sheet information related to leases at 

September 30, 2023 , and 

December 31, 2023 , and 

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

September 30, 2023

December 31, 2023

March 31, 2023

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

three and six months ended September 30, 2023  and 

three and nine months ended December 31, 2023  and 

2022 are as follows (in thousands):

Three Months Ended

Six Months Ended

September 30, 2023

Nine Months Ended

December 31, 2023

Operating Leases:

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Total lease costs

$ 1,047  

Three Months Ended

Six Months Ended

September 30, 2022

Nine Months Ended

December 31, 2022

Operating Leases:

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Present value of lease liabilities

$ 2,625  

Commitments and Contingencies

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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 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 December 31, 2023 , the Company had $ 0.4 million of restricted cash included in long-term assets and $ 0.7  million of restricted cash included in current assets.

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

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In fiscal 

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 

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 six  months ended 

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

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

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

Severance pay

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Cash payments

Accrued restructuring balance at September 30, 2023

Accrued restructuring balance at December 31, 2023

Severance pay

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

$ 33,603  

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$ 74,241  

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Operating income (loss):

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( 112 )  

( 398 )  

Unallocated corporate expenses

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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 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 net losses of $ 0.9  million and $ 3.1  million resulting from the increases in the fair value of contingent consideration in the 

three and nine  months ended 

December 31, 2023 , respectively. There are 300,000 shares remaining for potential issuance upon the achievement of the last specified revenue objective under the NEPSI Stock Purchase Agreement by September 30, 2024.

Unallocated corporate expenses consisted of a gain on contingent consideration of $ 0.2 million and $ 0.3 million in the 

three and six months ended September 30, 2022 . 

three and nine months ended December 31, 2022 , respectively. 

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

September 30, 2023  and 2022 , respectively, 

December 31, 2023  and 2022 , respectively, 

and $ 3.6  million and $ 3.5 million in the 

six months ended 

September 30, 2023 and 2022 , respectively.

nine months ended 

December 31, 2023 and 2022 , respectively.

Total assets for the two business segments as of 

September 30, 2023  and 

December 31, 2023  and 

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

September 30, 2023

December 31, 2023

March 31, 2023

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12,933  

14,361  

Corporate assets

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Recent Accounting Pronouncements

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

June 2016 ,  the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 

2016 - 13,  

Financial Instruments-Credit Losses (Topic  

Measurement of Credit Losses on Financial Instruments .

The amendments in ASU 2016 - 13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

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

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

The amendments in ASU 

2016 - 13  will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

Following the release of ASU 

2019 - 10  in 

November 2019, 

the effective date, as long as the Company remains a smaller reporting company, was annual reporting periods beginning after 

December 15, 2022.

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

In November 2023, the FASB issued ASU 

2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures .

The amendments in ASU 2023 - 07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

Following the release of ASU 2023 - 07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU 

2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures .

The amendments in ASU 2023 - 09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

Following the release of ASU 2023 - 09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

As of December 31, 2023, the Company is evaluating the impact on its condensed consolidated financial statements.

Subsequent Events

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("NEPSI") and Neeltran, Inc.

("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.

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

Without limiting the foregoing, the words “believes,”

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government and include certain other provisions in favor of the government.

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

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; 

The continued funding of such contracts remains subject to annual congressional appropriation, which, if not approved, could reduce our revenue and lower or eliminate our profit; COVID-19 has adversely impacted our business, financial condition and results of operations and other future pandemics or health crises may have similar impacts; 

Changes in U.S.

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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.

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

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

This restructuring is expected to incur $1.0 million of cash expenses, $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.

This restructuring is expected to incur $1.0 million of cash expenses, of which $0.9 million has been paid as of December 31, 2023 

and the remaining $0.1 million is expected to be paid by March 31, 2024, and to result in annualized cost savings of approximately $5.0 million, beginning in fiscal 2023.

In February 2023, we completed the process of determining and verifying our eligibility and amount of payroll tax credits known as the Employee Retention Credit (“ERC”) under the CARES Act which Congress enacted as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020. This resulted in filing certain amended payroll tax forms for eligible quarters in 2020 and 2021, which, in the aggregate, totaled $3.3 million.

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

During the 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.

During the nine months ended December 31, 2023, we received $3.0 million in payments for the initial claims that were processed. The remaining balance is expected to be paid during the remainder of fiscal 2023.

Critical Accounting Policies and Estimates

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Actual results may differ under different assumptions or conditions.

Certain prior period amounts were reclassified to conform to the presentation in the current period.

There were no significant changes in the critical accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Results of Operations

Three and 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.

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

Total revenues increased 65% to $39.4 million for the three months ended December 31, 2023 and total revenues increased 40% to $103.6 million for the nine months ended December 31, 2023, compared to $23.9 million and $74.2 million for the three and nine months ended December 31, 2022, respectively.

Our revenues are summarized as follows (in thousands):

Three Months Ended 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. 

Three Months Ended December 31,

Nine Months Ended December 31,

Our Grid business unit accounted for 85% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 87% and 89% for the three and nine months ended December 31, 2022, respectively.

Our Grid business unit revenues increased 61% to $33.6 million in the three months ended December 31, 2023, from $20.8 million in the three months ended December 31, 2022. Our Grid business unit revenues increased 32% to $87.9 million in the nine months ended December 31, 2023, from $66.3 million in the nine months ended December 31, 2022.

The increase in the Grid business unit revenues in the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022 was primarily driven by increased shipments of new energy power systems and increased ship protection systems revenues than in the prior year periods.

Our Wind business unit accounted for 15% of total revenues for each of the three and nine months ended December 31, 2023, respectively, compared to 13% and 11% for the three and nine months ended December 31, 2022, respectively.

Revenues in the Wind business unit increased 87% and 99% to $5.8 million and $15.8 million in the three and nine months ended December 31, 2023, from $3.1 million and $7.9 million in the three and nine months ended December 31, 2022, respectively.

The increase during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by additional shipments of electrical control systems ("ECS") at increased prices. 

Cost of Revenues and Gross Margin

Cost of revenues 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.

Cost of revenues increased by 26% to $29.4 millio n for the three months ended December 31, 2023 , compared to $23.4 million for the three months ended December 31, 2022 .

Cost of revenues increased by 13% to $78.8 million for the nine months ended December 31, 2023, compared to $69.5 million for the nine months ended December 31, 2022.

Gross margin was 

25%  and 24% for the 

three and 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.

three and nine months ended December 31, 2023 , respectively, compared to 2% and 6% for the 

three and nine months ended December 31, 2022 , respectively. 

The increase in gross margin in the three and nine months ended December 31, 2023 was due to higher revenues, a more favorable product mix and favorable impacts across the business due to pricing increases across our product lines.

Operating Expenses

Research and development

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

Research and development ("R&D") expenses increased 6% in the three months ended December 31, 2023 to $2.2 million from $2.1 million in the three months ended December 31, 2022.

The increase was driven primarily by 

lower cost share revenue.

R&D expense decreased 20% in the nine months ended December 31, 2023  

to $5.7 million from $7.1 million in the nine months ended December 31, 2022.

The decrease was driven primarily by decreased compensation, materials and supplies expenses.

Selling, general, and administrative

Selling, general and administrative ("SG&A") expenses increased 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.

Selling, general and administrative ("SG&A") expenses increased 9%  in the three months ended December 31, 2023  to $ 7.8 million from $7.2 million in the three months ended 

December 31, 2022 . 

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

Amortization of acquisition related intangibles

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $ 0.5 million and $1.1 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. 

We recorded amortization expense related to our core technology and know-how, customer relationships, and other intangible assets of $ 0.5 million and $1.6 million in the three and nine months ended 

December 31, 2023 , respectively, and $0.7 million and $2.1 million in the three and nine months ended December 31, 2022 , respectively. 

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

Change in fair value of contingent consideration

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

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in  losses of $0.9 million and $3.1 million resulting from the increase in the fair value of the contingent consideration in the three and nine months ended December 31, 2023, respectively. During the three and nine months ended December 31, 2023 we issued 399,999 shares and cash in lieu of a fractional share of common stock related to the achievement of specified revenue objectives in connection with the acquisition of NEPSI at a fair value of $3.1 million.

One specified revenue objective, which would have earned the selling stockholders 300,000 shares of our common stock, was not achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by September 30, 2024. We recorded the above noted losses , compared to a gain of $0.2 million and $0.3 million in the three and nine months ended December 31, 2022, respectively. 

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

Operating income (loss)

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

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

Operating income (loss):

Unallocated corporate expenses

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 

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

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

Our Wind business segment generated operating income of $ 0.3 million and operating loss of $0.4 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.

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

Unallocated corporate expenses included net losses of $0.9 million and $3.1 million resulting from the increases in the fair value of the NEPSI contingent consideration in the three and nine months ended December 31, 2023, respectively.

 Additionally, unallocated corporate expenses consisted of stock-based compensation expense of $1.1 million and $3.6  million in the three and nine months ended December 31, 2023 , respectively, and $1.4 million and $3.5 million in the 

three and nine months ended December 31, 2022, respectively.

Interest income, net

Interest income, net, was $0.2 million and $0.4 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. 

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

China dissolution

China dissolution expense was $1.9 million in 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.

China dissolution expense was $1.9 million in the nine months ended December 31, 2022, and there was no similar transaction in the three and nine months ended December 31, 2023 , or the three months ended December 31, 2022.

The impact of the China dissolution expense during the nine months ended December 31, 2022  was driven by the liquidation of our China entity, resulting in a foreign currency loss from the cumulative translation release of $1.9 million.

Other income (expense), net 

Other expense, net, was $0.3 million and $0.6 million in the 

three and 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.

three and nine months ended December 31, 2023 , respectively, compared to other expense, net, of $0.3 million and less than $0.1 million in the three and nine months ended December 31, 2022, respectively.

The increase in other expense, net, during the three and nine months ended December 31, 2023, compared to the three and nine months ended December 31, 2022, was driven by the impacts of unfavorable fluctuations in foreign currencies during the periods.

 Income Taxes

Income tax expense was $0.1 million and $0.2 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. 

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

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

Net loss was $ 1.6 million and $9.5 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.

three and nine months ended December 31, 2023 , respectively, compared to $9.6 million and $28.2 million in the 

three and nine months ended December 31, 2022 , respectively. The decrease in net loss in both periods was driven primarily by the increased revenues and gross margins.

Non-GAAP Financial Measure - 

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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 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) 

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,

Three Months Ended December 31,

Nine Months Ended December 31,

China dissolution

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Weighted average shares outstanding - basic

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.  

We incurred non-GAAP net income of $0.9  million and a non-GAAP net loss of $1.3 million, or $ 0.03  and $(0.04) per share, for the 

three and nine months ended December 31, 2023 , respectively, compared to non-GAAP net losses of $7.7 million and $21.0 million, or $(0.27) and $(0.76) per share, for the 

three and nine months ended December 31, 2022 , respectively.

The improvement in the non-GAAP net income (loss) for the three and nine months ended December 31, 2023 was due to a lower operating loss driven by higher revenues and gross margins.  

Liquidity and Capital Resources

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.

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

Our cash requirements depend on numerous factors, including the successful completion of our product development activities, our ability to commercialize our Resilient Electric Grid and ship protection system solutions, the rate of customer and market adoption of our products, collecting receivables according to established terms, the continued availability of U.S.

government funding during the product development phase of our superconductor-based products and whether Inox is successful in executing on Solar Energy Corporation of India Limited orders or in obtaining additional orders under the new central and state auction regime.

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

As of September 30, 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.

As of December 31, 2023 , we had cash, cash equivalents and restricted cash of $25.0 million, compared to $25.7 million as of March 31, 2023, a decrease of $0.7 million.

As of December 31, 2023 , we had $2.4 million in cash, cash equivalents, and restricted cash in foreign bank accounts.

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

September 30, 2023

December 31, 2023

March 31, 2023

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Total cash, cash equivalents, and restricted cash

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.

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

For the nine months ended December 31, 2023, net cash used in investing activities was $0.6 million, compared to $1.2 million for the nine months ended December 31, 2022.

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

For the 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.

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

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

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

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

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

Certain contractual obligations are reflected on the consolidated balance sheet as of December 31, 2023, while others are considered future commitments.

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

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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 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.

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

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

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Recent Accounting Pronouncements

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

In June 2016 ,  the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 

2016 - 13,  

Financial Instruments-Credit Losses (Topic  

Measurement of Credit Losses on Financial Instruments .

The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

Following the release of ASU 2019-10 in November 2019, the effective date, as long as 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.

The amendments in ASU 2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

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

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

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

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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 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.

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

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments in ASU 2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

As of December 31, 2023, we are evaluating the impact on our condensed consolidated financial statements.

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

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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