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Item 8. Financial Statements and Supplementary Data

2025-05-21 compared with 2024-05-29 · 314 added, 251 removed, 890 unchanged (39% of the section changed)

3 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Superconductor Corporation and its subsidiaries (the Company) as of March 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of American Superconductor Corporation and its subsidiaries (the Company) as of March 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended March 31, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated May 21, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Overtime Revenue Recognition

Over-Time Revenue Recognition

As described in Notes 3 and 4 of the consolidated financial statements, for certain arrangements, such as contracts to perform research and development, prototype development contracts and certain customized product sales, the Company records revenues using the over-time method, measured by the relationship of costs incurred to total estimated contract costs.

The ability to reliably estimate total costs at completion is challenging, especially on long-term prototype development contracts, and may require significant analysis and judgments by management, including evaluating customer change orders, to determine the appropriate amount of revenue to recognize.

We identified revenue recognition pertaining to customer contracts satisfied over time as a critical audit matter as there are significant judgments exercised by management in determining revenue recognition.

Given the high degree of management judgment involved in analyzing the terms and conditions of the Company’s unique customer contracts and the various management cost estimates that are used in the revenue calculations, the audit effort required to evaluate management’s judgments in determining revenue recognition for the Company’s contracts was extensive and required a high degree of auditor judgment.

The ability to reliably estimate total estimated contract costs is challenging, especially on long-term prototype development contracts, and may require significant analysis and judgments by management, including evaluating customer change orders, to determine the appropriate amount of revenue to recognize.

We identified revenue recognition pertaining to customer contracts satisfied over-time as a critical audit matter as there are significant judgments exercised by management in determining total estimated contract costs used in determining revenue recognition.

Given the high degree of management judgment involved in various cost estimates that are used in the revenue calculations, the audit effort required to evaluate management’s judgments in determining revenue recognition for the Company’s contracts was extensive and required a high degree of auditor judgment.

Our audit procedures related to revenue recognition included the following, among others:

We obtained an understanding of the relevant controls related to revenue recognition and tested controls specific to management’s analysis of customer contract terms and application of relevant accounting guidance as well as determination of significant assumptions used in computing revenue for design and operating effectiveness.

We obtained an understanding of the relevant internal controls related to revenue recognition and tested the design and operating effectiveness of those internal controls including management’s review control over the assumptions and key inputs used to recognize over-time revenue.

We selected a sample of contracts with customers and related revenue transactions and performed the following audit procedures:

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Evaluated management’s estimations of total contract cost by assessing actual costs to date against projections made throughout the course of the contract term.

Valuation of Certain Tangible and Intangible Assets in Business Combination

As described in Note 2 of the consolidated financial statements, the Company completed the acquisition of Megatran Industries, Inc.

on August 1, 2024, for total consideration of $61.4 million.

The Company accounted for this transaction under the acquisition method of accounting for business combinations.

Accordingly, the total consideration paid was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets and land.

The Company estimated the fair value of the identified intangible assets using the multi-period excess earnings method, which required management to make significant estimates and assumptions related to revenue growth and expense forecasts, customer attrition rates, and the selection of discount rates.

The Company also made significant judgments regarding the estimates used to determine the fair value of the acquired land.

We identified the valuation of the identified intangible assets and land as a critical audit matter because of the significant estimates and assumptions management used in the fair value determination.

Auditing management’s forecasted revenue growth and expenses, customer attrition rates, selection of the discount rates, and the fair value of acquired land required a high degree of auditor judgment and an increased extent of effort when performing audit procedures, including the use of our valuation specialists.

Our audit procedures related to the determination of the fair value of identified intangible assets and land, included the following, among others:

We obtained an understanding of the relevant internal controls related to the valuation of the identified intangible assets and land and tested the design and operating effectiveness of those internal controls including management’s review control over the assumptions and key inputs used in the purchase price allocation.

We evaluated the reasonableness of management’s revenue growth and expenses forecasts and customer attrition rates by comparing the projections to historical results as well as industry benchmarks.

With the assistance of our valuation specialists, we:

Evaluated the reasonableness of the Company’s valuation methodologies

Tested the source information underlying the determination of the discount rates and verified the accuracy of the calculations.

Tested the relevance and reliability of source information underlying the determination of fair value of the acquired land and compared to available market data.

Developed an independent estimate of the fair value of the acquired land and compared to management’s estimate.

Neeltran Goodwill Valuation Impairment Assessment

As described in Notes 3 and 5 to the consolidated financial statements, management tests goodwill for impairment, at the reporting unit level, as of February 28 of each fiscal year, or more frequently if events or changes in circumstances indicate the goodwill asset might be impaired.

The Company first assesses qualitatively whether it is necessary to perform a quantitative goodwill impairment test.

The quantitative impairment test is required only if the entity concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

A quantitative assessment was performed as of February 28, 2025, for the Company’s goodwill balance resulting from its acquisition of Neeltran, Inc.

To test goodwill quantitatively for impairment, management compares the estimated fair value of each reporting unit with the carrying amount of each reporting unit, including the recorded goodwill.

In estimating the fair value of each reporting unit, management uses a methodology which combines an income approach, using a discounted cash flows method, with a market approach.

We identified the goodwill impairment assessment for the Company’s Neeltran reporting unit as a critical audit matter because of the significant estimates and assumptions used by management when estimating the fair value of this reporting unit, including management’s forecasts of revenue growth rates, operating margins and terminal growth rates as well as management’s selection of the discount rates.

Auditing the reasonableness of management’s estimates and assumptions involved a high degree of auditor judgment and increased audit effort, including the use of our valuation specialists.

Our audit procedures related to the assessment of Neeltran goodwill impairment included the following, among others:

We obtained an understanding of the relevant internal controls related to management’s goodwill impairment assessment and tested the design and operating effectiveness of those internal controls including management’s review control over the significant assumptions in the goodwill impairment assessment.

We evaluated the reasonableness of management’s forecasts of revenue growth rates and operating margins by comparing the projections to historical results.

We tested the underlying data used by management in their development of forecasts of revenue growth rates and operating margins for accuracy and completeness.

We evaluated the reasonableness of management’s selection of comparable entities with similar operations and economic characteristics.

With the assistance of our valuation specialists, we:

Evaluated the reasonableness of the discount rate and multiple of earnings used in management’s assessment by comparing the underlying source information to publicly available market data and verifying the accuracy of the calculations

Evaluated the appropriateness of the valuation methods used by management and tested their mathematical accuracy.

/s/ RSM US LLP

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Deferred tax assets

Equity-method investments

$ 310,521 $ 232,771

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Deferred tax liabilities

Debt, long-term portion

Other liabilities

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1,259,540 1,212,913

Treasury stock, at cost, 397,631 at March 31, 2024 and 2023, respectively

Treasury stock, at cost, 403,351 and 397,631 at March 31, 2025 and 2024, respectively

( 3,765 ) ( 3,639 )

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Fiscal Year Ended March 31,

$ 145,639 $ 105,984

Cost of revenues

110,356 97,463

Operating expenses:

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Selling, general and administrative

31,600 28,700

Amortization of acquisition related intangibles

Change in fair value on contingent consideration

Change in fair value of contingent consideration

Restructuring

Total operating expenses

46,651 41,530

Operating loss

( 11,368 ) ( 33,009 )

Interest income, net

China dissolution

Other expense, net

( 736 ) ( 148 )

Loss before income tax expense

( 10,802 ) ( 34,826 )

Income tax expense

$ ( 11,111 ) $ ( 35,041 )

Net loss per common share

$ ( 0.37 ) $ ( 1.26 )

Income (loss) before income tax (benefit) expense

Income tax (benefit) expense

Net income (loss)

Net income (loss) per common share

Weighted average number of common shares outstanding

29,825 27,848

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

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Fiscal Year Ended March 31,

$ ( 11,111 ) $ ( 35,041 )

Other comprehensive income, net of tax:

China dissolution

Net income (loss)

Other comprehensive gain (loss), net of tax:

Foreign currency translation gain (loss)

Total other comprehensive income, net of tax

Comprehensive loss

$ ( 11,100 ) $ ( 33,179 )

Total other comprehensive (loss) gain, net of tax

Comprehensive income (loss)

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

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Comprehensive Income (Loss)

Accumulated Deficit Stockholders' Equity

Accumulated Deficit

Stockholders' Equity

Balance at March 31, 2023

28,920 $ 289 $ 1,133,536 $ ( 3,639 ) $ ( 291 ) $ ( 1,020,506 ) $ 109,389

Issuance of common stock - ESPP

60 1 234 — — — 235

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

827 8 ( 8 ) — — — —

Stock-based compensation expense

— — 4,729 — — — 4,729

Issuance of stock for 401(k) match

130 1 622 — — — 623

Issuance of common stock for contingent consideration

Issuance of common stock - Equity Offering

Cumulative translation adjustment

— — — — 1,862 — 1,862

— — — — — ( 35,041 ) ( 35,041 )

Balance at March 31, 2024

29,937 $ 299 $ 1,139,113 $ ( 3,639 ) $ 1,571 $ ( 1,055,547 ) $ 81,797

Issuance of common stock - ESPP

34 — 279 — — — 279

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

682 7 ( 7 ) — — — —

Stock-based compensation expense

— — 4,652 — — — 4,652

Issuance of stock for 401(k) match

80 1 623 — — — 624

Issuance of common stock for contingent consideration

400 4 3,088 — — — 3,092

Issuance of common stock - equity offering

6,210 62 65,165 — — — 65,227

Repurchase of treasury stock

Issuance of common stock - NWL acquisition, net of offering expenses

Issuance of common stock to settle contingent consideration

Cumulative translation adjustment

— — — — 11 — 11

— — — — — ( 11,111 ) ( 11,111 )

Balance at March 31, 2025

37,343 $ 373 $ 1,212,913 $ ( 3,639 ) $ 1,582 $ ( 1,066,658 ) $ 144,571

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

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Cash flows from operating activities:

$ ( 11,111 ) $ ( 35,041 )

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

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operations:

Depreciation and amortization

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Provision for excess and obsolete inventory

Amortization of operating lease right-of-use assets

Deferred income taxes

Earnings from equity method investments

Change in fair value of contingent consideration

China dissolution

Other non-cash items

Unrealized foreign exchange gain on cash and cash equivalents

( 2 ) ( 226 )

Changes in operating asset and liability accounts:

Accounts receivable

4,340 ( 10,360 )

( 6,841 ) ( 14,796 )

Prepaid expenses and other current assets

6,313 ( 5,757 )

Operating leases

Accounts payable and accrued expenses

( 13,825 ) 8,660

Deferred revenue

Net cash provided by (used in) operating activities

2,138 ( 22,485 )

Net cash provided by operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment

( 934 ) ( 1,236 )

Cash paid to settle NWL contingent consideration liability

Cash paid for NWL Acquisition, net of cash acquired

Change in other assets

( 27 ) ( 281 )

Net cash used in investing activities

( 961 ) ( 1,517 )

Cash flows from financing activities:

Repurchase of treasury stock

Repayment of debt

( 65 ) ( 73 )

Cash paid related to registration of common stock shares

Proceeds from public equity offering, net

Proceeds from exercise of ESPP

Proceeds from exercise of employee stock options and ESPP

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

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

66,605 ( 23,811 )

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

Cash, cash equivalents and restricted cash at beginning of year

25,675 49,486

Cash, cash equivalents and restricted cash at end of year

$ 92,280 $ 25,675

Supplemental schedule of cash flow information:

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Non-cash investing and financing activities

Issuance of common stock in connection with the purchase of NWL

Issuance of common stock to settle contingent consideration

Issuance of common stock to settle liabilities

Right-of-use assets obtained in exchange for new lease obligations

Issuance of common stock to settle 401(k) match liabilities

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

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These 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 -K.

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.

The Company has historically experienced recurring operating losses and as of March 31, 2024 , the Company had an accumulated deficit of $ 1,066.7 million.

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

All significant intercompany accounts and transactions are eliminated in consolidation.

Investments in entities in which we do not have a controlling interest are accounted for under the equity method of accounting.

The Company’s primary sources of liquidity are internally generated cash provided by operating activities, our cash and cash equivalents on hand, along with access to capital markets.

The Company believes that these sources of liquidity are sufficient to meet both its short-term and reasonably foreseeable long-term requirements and obligations.

At March 31, 2025 , the Company had cash and cash equivalents of $ 79.5 million.

Cash provided by operations for the year ended March 31, 2025 was $ 28.3 million.

In January 2024, the Company filed a shelf registration statement on Form S- 3 that will expire three years from the date on which it was declared effective, March 15, 2027 ( the “Form S- 3” ).

The Form S- 3 allows the Company to offer and sell from time-to-time up to $ 250 million of common stock, debt securities, warrants or units comprised of any combination of these securities.

The Form S- 3 is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its future capital needs.

On August 1, 2024 (the "Acquisition Date"), the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the selling stockholders named therein.

Pursuant to the terms of the Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding shares of Megatran Industries, Inc.

("Megatran") (the "Acquisition"), for aggregate consideration in an amount equal to $ 61.4 million (the “Purchase Price”), which consideration amount was subject to various adjustments set forth in the Stock Purchase Agreement (including those described below) and consisted of:

(a) (i) $ 25.0 million, minus (ii) the Indebtedness (as defined in the Stock Purchase Agreement) outstanding as of immediately prior to the closing, minus (iii) Company Expenses (as defined in the Stock Purchase Agreement) (collectively, the “Cash Purchase Price”);

(b) a number of restricted shares (rounded up or down to the nearest whole share, as applicable) (the “Company Shares”) of the Company’s common stock, $.

01 par value per share equal to the quotient obtained by dividing ( x ) $ 31.4 million (the “Share Purchase Price”) by (y) the closing price per share of common stock on the Nasdaq Global Select Market on the last trading day immediately preceding the Acquisition Date;

and (c) an additional cash payment equal to $ 5.0 million, as adjusted pursuant to Sections 5.6 (c), (d), and (f) of the Stock Purchase Agreement (the “Additional Cash Purchase Price”).

Megatran is now a wholly-owned subsidiary of the Company and, together with its wholly-owned subsidiaries and affiliates, is operated and reported as a component of its Grid business segment.

On the Acquisition Date, the Company paid to Megatran's selling stockholders $ 25.0 million in cash on hand, and 1,297,600 restricted shares of common stock.

On September 23, 2024, the Company paid $ 3.3 million to the selling stockholders, which was calculated based on the agreed upon formula set forth in the Stock Purchase Agreement.

As of March 31, 2025, there are no remaining obligations to the selling stockholders of Megatran.

Throughout the financial statements and related footnotes, this is referred to as the "acquisition of NWL".

In January 2024, we filed a shelf registration statement on Form S- 3 that will expire three years from the date on which it was declared effective, March 15, 2027 ( the “Form S- 3” ).

The Form S- 3 allows us to offer and sell from time-to-time up to $ 250 million of common stock, debt securities, warrants or units comprised of any combination of these securities.

The Form S- 3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund our future capital needs.

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.

On January 31, 2024, the Company entered into an underwriting agreement with Oppenheimer & Co.

Inc., as a representative of the several underwriters named therein, relating to the issuance and sale (the "2024 Offering") of 6,210,000 shares of the Company's common stock at a public offering price of $ 11.25 per share.

The net proceeds to the Company from the 2024 Offering were approximately $ 65.2 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The 2024 Offering closed on February 14, 2024.

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, 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 resulted in $ 1.0 million of cash expenses, of which $ 1.0 million has been paid as of March 31, 2024 , and is expected to result in annualized cost savings of approximately $ 5.0 million, which the Company began to realize in fiscal 2023.

In August 2024, the Company filed an automatically-effective shelf registration statement on Form S- 3 that will expire no later than August 12, 2027 ( the “Second Form S- 3” ).

The Second Form S- 3 allows the Company to offer and sell from time-to-time unspecified amounts of common stock, debt securities, warrants or units comprised of any combination of these securities and allows certain selling stockholders to offer and sell from time-to-time common stock.

The Second Form S- 3 assisted the Megatran selling stockholders in the resale of their common stock and is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its future capital needs.

The terms of any future offering under the Second 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 believes that based on the information presented above and its annual management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next

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March 31, 2025 .

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 global sources of instability, including the wars between Russia and Ukraine and Israel and Hamas, on the global financing markets

The impact of global sources of instability 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.

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.

Acquisition of NWL

As described in Note 1, Nature of the Business and Operations and Liquidity, on the Acquisition Date, the Company acquired all of the issued and outstanding shares of capital stock of Megatran.

Megatran's wholly-owned subsidiary, NWL, Inc.

("NWL"), is a U.S.-based global provider of engineered power conversion solutions for demanding industrial and military applications.

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

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

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

The total purchase price of approximately $ 61.4 million includes the fair value of shares of the Company’s common stock issued at closing, and cash paid, as follows (in millions):

Cash payments $ 30.0

Issuance of 1,297,600 shares of Company’s common stock $ 31.4

At the Acquisition Date, in addition to the $ 30.0 million cash, the Company valued the Company’s common stock, using $ 24.16 per share, which was the closing price on the day prior to the day that the Company acquired Megatran.

Acquisition costs of $ 1.1 million were included in selling, general and administrative ("SG&A") for the fiscal year ended March 31, 2025 .

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

Cash and cash equivalents

Equity-method investments

Prepaid expenses and other current assets

Accounts receivable

Property, plant, and equipment

Accounts payable and accrued expenses

Deferred revenue

Deferred tax liability

Net tangible assets/(liabilities)

Customer relationships

Net identifiable intangible assets

Total purchase consideration

The fair value of the financial assets acquired includes receivables with a fair value of $ 16.1 million.

The gross amount due is $ 16.9 million, of which $ 0.8 million is expected to be uncollectible.

Inventory includes a $ 0.7 million adjustment to step up the inventory balance to fair value consistent with the purchase price allocation.

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

The inventory step up adjustment increased cost of revenue $ 0.7 million for the fiscal year ended March 31, 2025 as the inventory was sold.

Backlog of $ 0.7 million was evaluated using the multi period excess earnings method under the income approach.

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

The amortization method being utilized is economic consumption estimated over an eight -month period with the expense being allocated to cost of revenues.

Customer relationships of $ 1.3 million relates to customers currently under contract and was determined based on a multi period excess earnings method under the income approach.

The method of amortization being utilized is straight line over 10 years, as the results were not materially different from the economic consumption method, with the expense being allocated to SG&A.

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

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

Goodwill recognized in the Acquisition is not deductible for tax purposes.

This purchase price allocation is preliminary and has not been finalized as the analysis on the assets and liabilities acquired, primarily the tax related liability, may require further adjustments to our purchase accounting that could result in a measurement period adjustment that would impact the Company's reported net assets and goodwill as of August 1, 2024.

Material changes, if any, to the preliminary allocation summarized above will be reported once the related uncertainties are resolved, but no later than August 1, 2025.

The deferred tax liability initially valued at $ 6.4 million is primarily related to basis difference of property, plant, and equipment.

As of March 31, 2025 based on basis differences identified through the finalization of NWL’s pre-acquisition tax returns as well as a true up of state tax rates, a reduction in the deferred tax liability of $ 0.8 million was recorded in the three months ended March 31, 2025.

This decreased the balance to $ 5.6 million, and the offsetting reduction was recorded to Goodwill, decreasing the balance to $ 4.7 million.

Pro forma Operating Results (Unaudited)

The pro forma consolidated statement of operations for the fiscal years ended March 31, 2025 and 2024 presented as if the Acquisition had occurred on April 1, 2023, is unaudited and is as follows:

Fiscal year ended March 31,

$ 246,089 $ 220,102

Operating income (loss)

1,413 ( 5,696 )

$ 4,153 $ 1,245

Net income per common share

$ 0.11 $ 0.04

Shares - basic

37,426 31,122

Shares - diluted

38,155 31,586

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

The pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Acquisition and related transactions had been completed at the beginning of the applicable periods presented.

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

In the consolidated results for the fiscal year ended March 31, 2025 , Megatran’s operations are included in the Company’s consolidated results from the Acquisition Date of August 1, 2024.

Megatran contributed $ 50.5 million of revenue and $ 6.0 million in net income for the Company for the fiscal year ended March 31, 2025 .

Amortization expense of $ 0.8 million is included for the fiscal year ended March 31, 2025 , as a result of the Megatran acquired intangible assets.

In addition, $ 0.7 million for the step-up basis assigned to acquired inventory was charged to cost of revenues for the fiscal year ended March 31, 2025 .

Summary of Significant Accounting Policies

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The Company bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, collectability of receivables, realizability of inventory, goodwill and intangible assets, contingent consideration, warranty provisions, stock-based compensation, tax reserves, and deferred tax assets.

On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, goodwill and intangible assets, business combinations, tax reserves, and deferred tax assets.

Provisions for depreciation are based on their estimated useful lives using the straight-line method.

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The Company’s accounts receivable relate principally to a limited number of customers.

As of March 31, 2025 , Innomotics, LLC.

, accounted for approximately 22 % of the Company's accounts receivable balance, with no other customers accounting for greater than 10% of the balance.

As of March 31, 2024 , Capital Power and INOX Wind Limited accounted for approximately 14 % and 12 % of the Company's accounts receivable balance, respectively, with no other customers accounting for greater than 10% of the balance.

As of March 31, 2023 , Anovion LLC and Fuji Bridex PTE Ltd accounted for approximately 21 % and 15 % of the Company's accounts receivable balance, respectively, with no other customers accounting for greater than 10% of the balance.

Changes in the financial condition or operations of the Company’s customers may result in delayed payments or non-payments which would adversely impact its cash flows from operating activities and/or its results of operations.

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Estimated Useful Life in Years

Machinery and equipment

Equipment and software

Furniture and fixtures

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Valuation of Long-Lived Assets

The Company periodically evaluates its long-lived assets, consisting principally of fixed assets and definite-lived intangible assets, for potential impairment.

In accordance with the applicable accounting guidance for the treatment of long-lived assets, the Company reviews the carrying value of its long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable.

The Company reviews the carrying value of its long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets may not be recoverable.

Under the held and used approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

The Company evaluates its long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be recoverable from the estimated undiscounted future cash flows.

There were no indicators requiring impairment testing on the Company's long-lived assets during the fiscal years ended March 31, 2024 and 2023 .

There was no impairment indicators during the fiscal years ended March 31, 2025 and 2024 .

Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated.

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See Note 5, "Goodwill" for further information and discussion.

The Company performed its annual assessment of goodwill on February 29, 2024 noting no triggering events from the analysis date to March 31, 2024 , and determined that there was no impairment to goodwill.

A dditionally, there was no impairment identified for the fiscal year ended March 31, 2023 based on the assessment performed in the prior fiscal year.

The Company performed its annual assessment of goodwill on February 28, 2025 , and determined that there was no impairment to goodwill.

Revenue Recognition

43 unchanged sentences

there are no continuing performance obligation in regards to the purchased product and these products have been segregated from the Company's inventories and cannot be used to fill other orders received.

During the fiscal year ended March 31, 2024 there were no such held transactions.

Revenues for the fiscal year ended March 31, 2023 included $ 0.6 million from such held transactions.

During the fiscal years ended March 31, 2025 and 2024 there were no such held transactions.

The Company has elected to record taxes collected from customers on a net basis and does not include tax amounts in revenue or costs of revenue.

30 unchanged sentences

Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized.

The Company has provided a valuation allowance against its U.S.

and Romania deferred income tax assets since the Company believes that it is more likely than not that these deferred tax assets are not currently realizable due to uncertainty around profitability in the future.

The Company has provided a valuation allowance against its U.S., Poland, and Romania deferred income tax assets since the Company believes that it is more likely than not that these deferred tax assets are not currently realizable due to uncertainty around profitability in the future.

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

23 unchanged sentences

The non-employee share based payments will be included within the Company's stock compensation currently reported.

Computation of Net Loss per Common Share

Equity Method Investments

The Company treats the equity investment in the consolidated financial statements under the equity method.

Equity method investments are equity securities in entities we do not control but over which we have the ability to exercise significant influence.

These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures .

Equity method investments are measured at cost minus impairment, if any, plus or minus the Company’s share of an investee’s income or loss, less distributions received.

Computation of Net Income (Loss) per Common Share

Basic net loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding for the period.

1 unchanged sentence

Common equivalent shares include the effect of restricted stock, exercise of stock options and warrants and contingently issuable shares.

For the fiscal years ended March 31, 2024 and 2023 , common equivalent shares of 809,949 , and 1,421,771 , respectively, were not included in the calculation of diluted EPS as they were considered antidilutive.

Of these, 300,000 and 1,000,000 , respectively, relate to shares associated with the derivative liability for which the contingency has not yet been met.

For the fiscal years ended March 31, 2025 , common equivalent shares of 468,815 were not included in the calculation of diluted EPS as they were considered antidilutive.

Of these, 468,652 were shares of performance-based restricted stock where the contingency was not met, and 163 were awards that were considered anti-dilutive.

For the fiscal years ended March 31, 2024 , common equivalent shares of 809,949 were not included in the calculation of diluted EPS as they were considered antidilutive.

Of these, 509,949 were shares of performance-based restricted stock where the contingency was not met, and 300,000 relate to shares associated with the derivative liability for which the contingency had not yet been met.

The following table reconciles the numerators and denominators of the EPS calculation for the fiscal years ended March 31, 2025 and 2024 (in thousands except per share amounts):

Fiscal year ended March 31,

Net income (loss)

$ 6,033 $ ( 11,111 )

17 unchanged sentences

Cumulative translation adjustments are excluded from net loss and shown as a separate component of stockholders’ equity.

Net foreign currency gains and losses are included in other expense, net on the consolidated statements of operations and were net losses of $ 0.7 million and $ 0.1 million, for the fiscal years ended March 31, 2024 and 2023 , respectively.

Net foreign currency gains and losses are included in other expense, net on the consolidated statements of operations and were net losses of $ 0.7 million, for both of the fiscal years ended March 31, 2025 and 2024 .

The Company has no restrictions on the foreign exchange activities of its foreign subsidiaries, including the payment of dividends and other distributions.

2 unchanged sentences

Actual results could materially differ from those estimates and would impact future results of operations and cash flows.

The Company invests its available cash in high credit, quality financial instruments and invests primarily in investment-grade marketable securities, including, but not limited to, government obligations, money market funds and corporate debt instruments.

Several of the Company’s government contracts are being funded incrementally, and as such, are subject to the future authorization, appropriation, and availability of government funding.

11 unchanged sentences

Disclosure of Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses, and derivatives.

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses, and contingent consideration.

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, short-term debt, accounts payable, and accrued expenses due to their short nature approximate fair value at March 31, 2025 and 2024 .

2 unchanged sentences

The fair value for the contingent consideration is estimated using a Monte Carlo simulation and subject to revaluation at each balance sheet date.

The fair value for the warrant arrangements was historically estimated by management based on various assumptions in a lattice model and was subject to revaluation at each balance sheet date.

The Company classifies the estimates used to fair value these instruments as Level 3 inputs.

5 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.

For each of the fiscal years ended March 31, 2024 and 2023 , 80 % of revenue was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

For the fiscal year ended March 31, 2025 , 88 % of revenue was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

For the fiscal year ended March 31, 2024 , 80 % of revenue 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.

26 unchanged sentences

The Company has elected to recognize incremental costs of obtaining a contract as expense when incurred except in contracts where the amortization period would exceed twelve months.

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

As of March 31, 2025 and 2024 , the Company's capitalized incremental contract costs were not material.

1 unchanged sentence

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.

During the year ended March 31, 2023, several long-term contracts that were acquired from Neeltran, Inc.

(“Neeltran”) were impacted by higher than planned costs due to required design changes and the impact of inflation on material costs, resulting in an increase to the contract loss accrual of $ 2.7 million in the year ended March 31, 2023 which negatively impacted the Company's gross margins.

At the end of March 31, 2024 these projects were completed and the contract loss accrual was relieved.

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

17 unchanged sentences

$ 122,065 $ 23,574

$ 94,631 $ 11,353

In the fiscal years ended March 31, 2024 , and 2023 , 37 % and 45 % of the Company’s revenues, respectively, were recognized from sales outside the United States.

The Company maintains operations in Austria and the United States and sales and service support centers around the world.

As of March 31, 2025 and March 31, 2024 , 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.

3 unchanged sentences

Contract Liabilities

Ending balance as of March 31, 2023

Beginning balance as of March 31, 2024

$ 6,150 $ 2,523 $ 57,829

Increases for balances acquired

Increases for costs incurred to fulfill performance obligations

31 unchanged sentences

Inox Wind Limited

Fuji Bridex Pte Ltd

The guidance under ASC 805 - 30, Business Combinations , provides for the recognition of goodwill on the acquisition date measured as the excess of the aggregate consideration transferred over the net of the acquisition date amounts of net assets acquired and liabilities assumed.

The Company's goodwill balance relates to the Neeltran acquisition in fiscal 2021, the NEPSI acquisition in fiscal 2020, and Infinia Technology Corporation acquisition in fiscal 2017 and is reported in the Grid business segment.

The Company's goodwill balance relates to the NWL acquisition in fiscal 2024, the Neeltran acquisition in fiscal 2021, the NEPSI acquisition in fiscal 2020, and Infinia Technology Corporation acquisition in fiscal 2017 and is reported in the Grid business segment.

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.

1 unchanged sentence

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 either of the fiscal years ended March 31, 2024 and 2023 .

The Company performed its annual assessment of goodwill on February 29, 2024 and noted no triggering events from the analysis date to March 31, 2024 and determined that there was no impairment to goodwill.

Additionally, no impairment resulted from the assessment performed in the fiscal year ended March 31, 2023 .

Goodwill increased by $ 4.7 million during the fiscal year ended March 31, 2025 , related to the NWL acquisition.

This includes a $ 0.8 million adjustment related to the true up of the deferred tax asset consisting primarily of tax basis differences identified through NWL's final pre-acquisition tax returns.

There were no changes to Goodwill during the fiscal year ended March 31, 2024 .

The Company performed its annual assessment of goodwill on February 28, 2025 and determined that there was no impairment to goodwill.

Fair Value Measurements

13 unchanged sentences

Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are classified within Level 1 of the valuation hierarchy.

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

Cash equivalents consist principally of money market accounts.

Short-term Cash Instruments

Short-term cash instruments consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices in markets that are not active, and are classified within Level 2 of the valuation hierarchy.

Short-term cash instruments consist principally of certificates of deposits.

Contingent Consideration

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 which conclude in September of 2024.

Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of Northeast Power Systems, Inc ("NEPSI") that provided that NEPSI could 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 which concluded in September of 2024.

The Megatran Stock Purchase Agreement provided that the selling stockholders would be made whole as set forth in the agreement.

We classified contingent consideration related to certain acquisitions within level 3 of the fair value hierarchy because the fair value is derived using significant unobservable inputs, which include revenue risk premium and revenue volatility.

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

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

As of September 30, 2024, the Company had settled all outstanding contingent consideration.

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of March 31, 2025 and 2024 (in thousands):

Total Carrying

Total Carrying Value

Quoted Prices in Active Markets (Level 1)

4 unchanged sentences

$ 51,230 $ 51,230 $ — $ —

Derivative liabilities:

Contingent Consideration

Short-term cash instruments

$ 1,404 $ — $ 1,404 $ —

6 unchanged sentences

$ 71,392 $ 71,392 $ — $ —

Short-term cash instruments

$ 1,440 $ — $ 1,440 $ —

Derivative liabilities:

2 unchanged sentences

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

NEPSI Acquisition Contingent Consideration

NWL Acquisition Contingent Consideration

Balance at March 31, 2023

Change in fair value

Settlement of contingent consideration

Balance at March 31, 2024

1 unchanged sentence

Settlement of contingent consideration

( 6,504 ) ( 3,278 )

Balance at March 31, 2025

21 unchanged sentences

Deferred program costs as of March 31, 2025 and March 31, 2024 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 Rescue Plan Act of 2021.

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

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

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

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

The Company evaluated its eligibility for the ERC and determined that it met all the criteria to claim a refundable tax credit against the employer portion of Social Security taxes for up to 70 % of the qualified wages the Company paid to employees for the three month periods ended March 31, 2021 and June 30, 2021 and for up to 50 % of the qualified wages the Company paid to employees for the three month period ended March 31, 2020.

The Company recorded a $ 3.3 million receivable in prepaid expenses and other current assets and a benefit of $ 1.8 million to cost of revenues, $ 0.8 million to selling, general, and administrative, 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 year ended March 31, 2024 , the Company received $ 3.0 million for the initial claims that were processed.

The remaining balance is expected to be received during fiscal 2024.

Property, Plant and Equipment

2 unchanged sentences

March 31, 2024

$ 22,650 $ 980

Construction in progress - equipment

1 unchanged sentence

47,774 44,095

Finance lease - right of use asset

Furniture and fixtures

7 unchanged sentences

Depreciation expense was $ 3.1 million and $ 2.3 million, for the fiscal years ended March 31, 2025 and 2024 , respectively.

The increase in land relates to the property added as part of the NWL Acquisition.

Intangible Assets

15 unchanged sentences

The Company recorded intangible amortization expense of $ 2.4 million and $ 2.2 million, for the fiscal years ended March 31, 2025 and 2024 , respectively.

Additionally, the Company recorded less than $ 0.1 million related to intangible amortization related to backlog that is reported in cost of revenues for both the fiscal years ended March 31, 2024 and 2023 .

Included in the current period is $ 0.7 million related to intangible amortization related to backlog that is reported in cost of revenues for the fiscal year ended March 31, 2025 and less than $ 0.1 million for the fiscal year ended March 31, 2024 .

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

1 unchanged sentence

The Company's intangible assets relate entirely to the Grid business segment operations in the United States.

Equity-Method Investments

Investment in NWL Pacific Inc.

The Company has a 50 % ownership in NWL Pacific Inc.

Co., LTD ("NWL Pacific").

The investment represents the Company's interest in NWL Pacific.

The investment is a joint venture in South Korea established on May 12, 1998.

The Company treats the equity investment in the consolidated financial statements under the equity method.

Equity method investments are equity securities in entities the Company does not control but over which it has the ability to exercise significant influence.

These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures .

Equity method investments are measured at cost minus impairment, if any, plus or minus the Company’s share of an investee’s income or loss, less distributions received.

As of March 31, 2025 the Company did not have material accounts receivable nor accounts payable balances with NWL Pacific.

The tables below present the summarized financial information from the Acquisition Date through March 31, 2025, as provided to the Company by the investee, for the unconsolidated company (in thousands):

Fiscal year ended March 31,

Income from operations

Balance at March 31,

Current Assets

Noncurrent Assets

Current Liabilities

Noncurrent Liabilities

Accounts Payable and Accrued Expenses

9 unchanged sentences

Accrued compensation

13,418 10,326

Income taxes payable

1 unchanged sentence

Accrued commissions

Accrued restructuring

$ 32,282 $ 24,235

5 unchanged sentences

$ 2,363 $ 2,638

Acquired warranty obligations

Provisions for warranties during the period

4 unchanged sentences

Contingent Consideration

NEPSI Contingent Consideration

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.

1 unchanged sentence

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.

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

The purchase price was $ 26.0 million in cash and 873,657 restricted shares of common stock of the Company.

As part of the transaction, the selling stockholders may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up to four years following closing of the NEPSI Acquisition.

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.

As part of the transaction, the selling stockholders were entitled to receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up to four years following closing of the NEPSI Acquisition.

During the year ended March 31, 2024, the Company issued 399,999 shares of common stock and cash in lieu of a fractional share of common stock, related to the achievement of specified revenue objectives in connection with the NEPSI Acquisition.

One specified revenue objective, which would have earned the selling stockholders 300,000 shares of Company common stock, was not achieved.

NEPSI recognized revenues in excess of $ 120.0 million during the four years after the NEPSI Acquisition Date.

As a result, during the quarter ended September 30, 2024, the Company issued 300,000 shares of common stock of the Company to the selling stockholders, following certification of the achievement of the specified earnout revenue objective.

As of September 30, 2024, the Company had settled all outstanding contingent consideration under the NEPSI Stock Purchase Agreement.

The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which was 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 the periods in which the Company had outstanding contingent consideration, the fair value of the contingent consideration was remeasured and the resulting gain or loss was recognized in operating expenses until the share amount was fixed.

The 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:

Fiscal Year 2024

March 31, 2024

December 31, 2023

September 30, 2023

June 30, 2024

Revenue risk premium

5.50 % 5.70 % 5.30 % 5.20 %

Revenue volatility

24.8 % 24.8 % 27.5 % 23 %

$ 13.51 $ 11.14 $ 7.55 $ 6.26

Payment delay (days)

Fair value (millions)

$ 3.1 $ 1.2 $ 3.5 $ 2.6

Fiscal Year 2022

March 31, 2023

December 31, 2022

September 30, 2022

June 30, 2022

Revenue risk premium

5.30 % 5.30 % 5.20 % 6.60 %

Revenue volatility

25 % 25 % 25 % 30 %

$ 4.91 $ 3.68 $ 4.38 $ 5.18

Payment delay (days)

Fair value (millions)

$ 1.3 $ 0.9 $ 1.1 $ 1.4

The Company issued 399,999 shares of common stock, 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 in the twelve months ended March 31, 2024 .

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.

During the fiscal year ended March 31, 2025 , the Company issued 300,000 shares of common stock related to the achievement of specified revenue objectives at a fair value of $ 6.5 million.

The Company recorded a loss of $ 3.4 million for the increase in the fair value of the contingent consideration in the year ended March 31, 2025 .

The Company recorded a loss of $ 4.9 million for the increase in the fair value of the contingent consideration in the year ended March 31, 2024 .

NWL Contingent Consideration

On August 1, 2024 , the Company entered into the Stock Purchase Agreement with the selling stockholders of NWL named therein.

Pursuant to the terms of the Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding shares of Megatran for aggregate consideration in an amount equal to $ 61.4 million which consideration amount was subject to various adjustments set forth in the Stock Purchase Agreement.

The value of the contingent consideration to make the sellers whole was determined to be de minimis at the time of the Acquisition.

On September 23, 2024, the Company paid $ 3.3 million to the selling stockholders, which was calculated based on the agreed upon formula set forth in the Stock Purchase Agreement.

This amount is reflected as the change in fair value of this contingent consideration in the fiscal year ended March 31, 2025.

As of September 30, 2024, there were no remaining obligations to the selling stockholders of NWL.

(Loss) income before income taxes for the fiscal years ended March 31, 2025 , and 2024 are provided in the table as follows (in thousands):

3 unchanged sentences

$ 2,366 $ ( 10,802 )

The components of income tax expense attributable to continuing operations consist of the following (in thousands):

The components of income tax expense (benefit) consist of the following (in thousands):

Fiscal years ended March 31,

1 unchanged sentence

Total deferred

Income tax expense

Income tax expense (benefit)

$ ( 3,667 ) $ 309

The reconciliation between the statutory federal income tax rate and the Company’s effective income tax rate is shown below.

4 unchanged sentences

Foreign income tax rate differential

Stock options

Research and development tax credit

Mark to market adjustment on contigent consideration

Mark to market adjustment on contingent consideration

Nondeductible expenses

True-up of NOLs

Withholding Tax

Valuation allowance

21 unchanged sentences

( 8,843 ) ( 2,913 )

Net deferred tax assets

Net deferred tax assets (liabilities)

$ ( 417 ) $ 819

Under the Tax Cuts and Jobs Act of 2017, taxpayers are required to capitalize and amortize expenses related for research and experimental as classified under Section 174 beginning in 2022.

Amortization recovery for such costs are five years for domestic expenditures and fifteen for foreign expenditures.

As of March 31, 2024 , the Company had approximately $ 18.4 million of research and experimental expenses that had been capitalized under Section 174.

The Company has provided a full valuation allowance against its net deferred income tax assets in the U.S.

and Romania since it is more likely than not that its deferred tax assets will not be realizable.

After consideration of all the available evidence, both positive and negative, the Company has determined tha t a $ 177.1 million valuation allowance at March 31, 2024 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized which is a $ 6.5 million decrease from the $ 183.6 valuation allowance as of March 31, 2023 .

As of March 31, 2025 , the Company had approximately $ 31.9 million of research and experimental expenses that had been capitalized under Section 174 with a remaining basis of $ 24.4 million.

The Company has provided a full valuation allowance against its net deferred income tax assets in the U.S., Romania and Poland since it is more likely than not that its deferred tax assets will not be realizable.

After consideration of all the available evidence, both positive and negative, the Company has determined tha t a $ 171.7 million valuation allowance at March 31, 2025 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized which is a $ 5.4 million decrease from the $ 177.1 million valuation allowance as of March 31, 2024 .

At March 31, 2025 , the Company had aggregate net operating loss carryforwards in the U.S.

5 unchanged sentences

Research and development and other tax credit carryforwards amounting to approximately $ 10.6 million and $ 2.5 million are availab le to offset federal and state income taxes, respectively, and will expire in the years ending 2026 through 2041.

During the year ended March 31, 2023, AMSC China was dissolved, so all deferred tax assets for AMSC China have been written off as of March 31, 2023.

As of March 31, 2024 , AMSC Romania has aggregate net operating loss carryforwards of approximately $ 0.6 million, which will begin to expire at March 31, 2028.

As of March 31, 2025 , AMSC Romania has aggregate net operating loss carryforwards of approximately $ 0.4 million, which will begin to expire at March 31, 2028 and NWL Poland has aggregate net operating loss carryforwards of approximately $ 0.4 million, which will begin to expire at March 31, 2030.

382 of the U.S.

8 unchanged sentences

The total amount of undistributed foreign earnings available to be repatriated at March 31, 2025 was $ 3.1 million resulting in the recording of a $ 0.4 million deferred tax liability for foreign withholding taxes.

The Company has not recorded a deferred tax asset for the temporary difference associated with the excess of the tax greater than the book basis in its Romanian subsidiary as the future tax benefit is not expected to reverse in the foreseeable future.

The Company has not recorded a deferred tax asset for the temporary difference associated with the excess of the tax greater than the book basis in its Romanian and Poland subsidiaries as the future tax benefit is not expected to reverse in the foreseeable future.

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

16 unchanged sentences

Tax filings in Romania for the fiscal years ended March 31, 2020 through 2025 remain open and subject to examination.

Tax filings in Poland for tax years 2021 through March 31, 2025 remain open and subject to examination.

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 balance is less than $ 0.1 million, as of March 31, 2024 , and current and long-term debt balance was $ 0.1 million as of March 31, 2023 .

The Company did not have a current or long-term debt balance as of March 31, 2025 , and had a current debt balance of less than $ 0.1 million and no long-term debt balance as of March 31, 2024 .

Operating Leases

10 unchanged sentences

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

Finance Leases

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

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

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

Supplemental balance sheet information related to leases at March 31, 2025 and 2024 are as follows (in thousands):

1 unchanged sentence

March 31, 2024

Right-of-use assets - Financing

Right-of-use assets - Operating

1 unchanged sentence

$ 3,829 $ 2,557

Lease liabilities - ST Financing

Lease liabilities - ST Operating

Lease liabilities - LT Financing

Lease liabilities - LT Operating

8 unchanged sentences

March 31, 2024

Operating Lease:

Operating Leases:

Operating lease costs - fixed

12 unchanged sentences

As of March 31, 2025 , the Company had two active stock plans:

the Amended and Restated 2007 Director Stock Plan (the “2007 Director Plan”) and the 2022 Stock Incentive Plan (the "2022 Plan").

On August 2, 2022, the Company's stockholders approved the 2022 Plan and amendments to the Company's 2007 Director Plan.

The 2022 Plan authorizes the issuance of 1,150,000 shares of common stock.

the Amended and Restated 2007 Director Stock Plan, as amended (the “2007 Director Plan”) and the 2022 Stock Incentive Plan, as amended and restated (the "2022 Plan").

On August 2, 2024, the Company's stockholders approved the amendments to the 2022 Plan and amendments to the Company's 2007 Director Plan.

The amendment to the 2022 Plan increased the total number of shares of common stock authorized for issuance under the 2022 Plan from 1,150,000 shares to 4,400,000 shares of common stock.

The amendment to the 2007 Director Plan increased the total number of shares of common stock authorized for issuance under the 2007 Director Plan from 430,000 shares to 580,000 shares.

21 unchanged sentences

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 outstanding stock options was less than $ 0.1 million as of March 31, 2024 .

The total unrecognized compensation cost for unvested outstanding restricted stock was $ 15.6 million as of March 31, 2025 .

7 unchanged sentences

The following table summarizes the information concerning currently outstanding and exercisable employee and non-employee options:

Options / Shares

Weighted-Average Exercise Price

4 unchanged sentences

Canceled/forfeited

( 44,999 ) 24.95

Outstanding at March 31, 2025

4 unchanged sentences

36,206 $ 6.94 5.2 $ 406

The Company did not grant any stock options under the 2007 Director Plan nor under the 2022 Plan during the fiscal year ended March 31, 2024 .

The Company granted 20,564 stock options under the 2007 Director Plan during the fiscal year ended March 31, 2023 .

The stock options granted during the fiscal year ended March 31, 2023 will vest over 2 years.

The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the fiscal year ended March 31, 2023 are as follows:

Expected volatility

Risk-free interest rate

Expected life (years)

Dividend yield

The Company did not grant any stock options under the 2007 Director Plan nor the 2022 Plan during both fiscal years ended March 31, 2025 and 2024 .

The following table summarizes the restricted stock activity for the year ended March 31, 2025 :

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( 524,201 ) 8.50

( 3,000 ) 5.94

Outstanding at March 31, 2025

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Any contributions made by the Company to the Plan are discretionary.

The Company has a stock match program under which the Company matched, in the form of Company common stock, 50 % of the first 6 % of eligible contributions.

The Company recorded expenses of $ 0.6 million in each of the fiscal years ended March 31, 2024 and 2023 , and recorded corresponding charges to additional paid-in capital related to this program.

Restructuring

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420” ) and ASC Topic 712, Compensation — Nonretirement Postemployment Benefits (“ASC 712” ).

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

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

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

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

On January 24, 2023, the Company approved a plan to reduce its global workforce by approximately 5 %, effective as of such date.

The purpose of the workforce reduction was to reduce operating expenses to better align with the Company’s current revenues.

In fiscal 2022, the Company recorded restructuring charges of $ 1.0 million as a result of this reduction in force, which was comprised of severance pay.

All amounts related to these restructuring activities have been paid as of March 31, 2024 .

The following table presents restructuring charges and cash payments during the year ended March 31, 2024 and 2023 (in thousands):

Severance pay and benefits

Accrued restructuring balance at April 1, 2023

Recoveries to operations

Cash payments

Accrued restructuring balance at March 31, 2024

Accrued restructuring balance at April 1, 2022

Charges to operations

Cash payments

Accrued restructuring balance at March 31, 2023

All restructuring charges discussed above are included within restructuring in the Company’s 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 has a stock match program under which the Company matched, in the form of Company common stock, 100 % up to 5 % of eligible contributions.

The Company recorded expenses of $ 1.2 million and $ 0.6 million in the fiscal years ended March 31, 2025 and 2024 , respectively, and recorded corresponding charges to additional paid-in capital related to this program.

Business Segments

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Grid and Wind.

In accordance with ASC 280, Segment Reporting , the Company aggregates four operating segments into one reporting segment for financial reporting purposes due to their similar operating and financial characteristics.

In accordance with ASC 280, Segment Reporting , the Company has identified two operating segments.

The Company's operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources.

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

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

Fiscal Years Ended March 31,

AMSC’s Chief Executive Officer Daniel McGahn is the chief operating decision maker.

The chief operating decision maker uses segment operating income (loss) to allocate resources (including employees, property, and financial or capital resources) for each segment predominantly in the annual budget and forecasting process.

The chief operating decision maker considers budget-to-actual variances on a monthly basis for segment operating income (loss) when making decisions about allocating capital and personnel to the segments.

The chief operating decision maker also uses segment operating income or loss to assess the performance for each segment by comparing the results and return on assets of each segment with one another and in the compensation of certain employees.

The following tables (i) summarize total sales by segment and (ii) reconcile each segment's sales to their respective segment operating income, including segment operating expenses, for each of the years ended March 31, 2025 and 2024 (in thousands):

Fiscal Year Ended March 31, 2025

Segment operating income:

$ 187,170 $ 35,648 $ - $ 222,818

Segment other operating expenses (b)

185,358 31,856 6,681 223,895

Segment operating income (loss)

$ 1,812 $ 3,792 $ ( 6,681 ) $ ( 1,077 )

(a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

(b) Segment other operating expense includes cost of sales, research and development expense, selling general, and administrative expense, amortization of acquisition related intangibles, and gain/loss on contingent consideration.

Fiscal Year Ended March 31, 2024

Segment operating income:

$ 122,065 $ 23,574 $ - $ 145,639

Segment other operating expenses (b)

128,974 23,125 4,908 157,007

Segment operating income (loss)

$ ( 6,909 ) $ 449 $ ( 4,908 ) $ ( 11,368 )

(a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker.

Unallocated corporate expenses consist of a loss on contingent consideration of $ 6.7 million in the fiscal year ended March 31, 2025, and a loss on contingent consideration of $ 4.9 million in the fiscal year ended March 31, 2024.

The reconciliation of segment operating loss to consolidated income (loss) before income taxes for the years ended March 31, 2025 and 2024 is as follows (in thousands):

Fiscal Years Ended March 31,

Operating income (loss):

Operating loss:

$ ( 1,077 ) $ ( 11,368 )

Interest income, net

Other expense

( 265 ) ( 736 )

Unallocated corporate expenses

Income (loss) before taxes

$ 2,366 $ ( 10,802 )

Depreciation and amortization expense by segment for the years ended March 31, 2025 and 2024 is as follows (in thousands):

Fiscal Years Ended March 31,

$ 5,468 $ 4,408

$ 5,560 $ 4,495

Total assets for the two business segments as of March 31, 2025 and March 31, 2024 are as follows (in thousands):

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The disaggregated financial results of the segments reflect allocation of certain functional expense categories consistent with the basis and manner in which Company management internally disaggregates financial information for the purpose of assisting in making internal operating decisions.

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 primarily consist of a loss on contingent consideration of $ 4.9 million, and stock-based compensation expense of $ 4.7 million in the fiscal year ended March 31, 2024 .

Unallocated corporate expenses consist of a loss on contingent consideration of $ 0.1 million, stock-based compensation expense of $ 4.7 million and a restructuring charge of $ 1.0 million in the year ended March 31, 2023 .

Geographic information about property, plant and equipment associated with particular regions is as follows (in thousands):

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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 ):

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 remained 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 consolidated financial statements.

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

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers .

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, the Company has adopted ASU 2021 - 08 and noted no material impact on its consolidated financial statements.

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

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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 March 31, 2024 , the Company is evaluating the impact on its consolidated financial statements.

As of March 31, 2025 , the Company has adopted ASU 2023 - 07 and made the required disclosures, and noted no other material impact on its consolidated financial statements.

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

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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 March 31, 2024 , the Company is evaluating the impact on its consolidated financial statements.

The Company is evaluating the impact on its consolidated financial statements.

In March 2024, the FASB issued ASU 2024 - 02, Codification Improvements—Amendments to Remove References to the Concepts Statements .

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Following the release of ASU 2024 - 02 in March 2024, the effective date will be annual reporting periods beginning after December 15, 2024.

As of March 31, 2024, the Company is evaluating any material impact on its consolidated financial statements.

The Company is evaluating any material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024 - 03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures .

The amendments in ASU 2024 - 03 address investor requests for more disclosure of disaggregated financial reporting information about expenses presented in the income statement.

Following the release of ASU 2024 - 03 in November 2024, the effective date will be annual reporting periods beginning after December 15, 2026.

The Company is evaluating the impact on its consolidated financial statements.

Subsequent Events

2 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data