UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | |
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended: December 31, 2017
☐ | |
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from
_____ to _____.Commission File Number: 0-19672
American Superconductor Corporation
(Exact name of registrant as specified in its charter)
Delaware | 04-2959321 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
114 East Main St. Ayer, Massachusetts | 01432 |
(Address of principal executive offices) | (Zip Code) |
(978) 842-3000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, | AMSC | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | |||||
Non-accelerated filer | Smaller reporting company | |||||
Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Shares outstanding of the Registrant’s common stock:
Common Stock, par value $0.01 per share | 27,603,102 | |
Class | Outstanding as of |
INDEX Page No. Item 1. 3 Item 2. 21 Item 3. 28 Item 4. 28 Item 1. 29 Item 1A. 29 Item 2. 29 Item 3. 29 Item 4. 29 Item 5. 29 Item 6. 30 31Page No.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, 2020 | March 31, 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 41,246 | $ | 24,699 | ||||
| Marketable securities | 10,191 | 30,149 | ||||||
Accounts receivable, net | 16,810 | 16,987 | ||||||
Inventory | 14,155 | 18,975 | ||||||
Prepaid expenses and other current assets | 3,496 | 2,959 | ||||||
Restricted cash | 508 | 508 | ||||||
Total current assets | 86,406 | 94,277 | ||||||
| Marketable securities | — | 5,046 | ||||||
Property, plant and equipment, net | 8,140 | 8,565 | ||||||
Intangibles, net | 3,309 | 3,550 | ||||||
| Right-of-use assets | 3,907 | 3,359 | ||||||
Goodwill | 1,719 | 1,719 | ||||||
Restricted cash | 5,782 | 5,657 | ||||||
Deferred tax assets | 1,631 | 1,551 | ||||||
Other assets | 333 | 385 | ||||||
Total assets | $ | 111,227 | $ | 124,109 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 18,470 | $ | 22,091 | ||||
| Lease liability, current portion | 568 | 439 | ||||||
Deferred revenue, current portion | 13,547 | 18,430 | ||||||
Total current liabilities | 32,585 | 40,960 | ||||||
Deferred revenue, long term portion | 8,409 | 7,712 | ||||||
| Lease liability, long term portion | 3,430 | 3,000 | ||||||
Deferred tax liabilities | 352 | 180 | ||||||
Other liabilities | 31 | 38 | ||||||
Total liabilities | 44,807 | 51,890 | ||||||
Commitments and Contingencies (Note 14) | ||||||||
Stockholders' equity: | ||||||||
Common stock | 234 | 229 | ||||||
Additional paid-in capital | 1,055,548 | 1,053,507 | ||||||
Treasury stock | (3,336 | ) | (2,666 | ) | ||||
Accumulated other comprehensive loss | (262 | ) | (216 | ) | ||||
Accumulated deficit | (985,764 | ) | (978,635 | ) | ||||
Total stockholders' equity | 66,420 | 72,219 | ||||||
Total liabilities and stockholders' equity | $ | 111,227 | $ | 124,109 | ||||
| December 31, 2017 | March 31, 2017 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 22,113 | $ | 26,784 | |||
| Accounts receivable, net | 12,052 | 7,956 | |||||
| Inventory | 17,129 | 17,462 | |||||
| Prepaid expenses and other current assets | 2,822 | 2,703 | |||||
| Restricted cash | — | 795 | |||||
| Total current assets | 54,116 | 55,700 | |||||
| Property, plant and equipment, net | 36,684 | 43,438 | |||||
| Intangibles, net | 3,315 | 301 | |||||
| Goodwill | 1,719 | — | |||||
| Restricted cash | 165 | 165 | |||||
| Deferred tax assets | 545 | 407 | |||||
| Other assets | 227 | 233 | |||||
| Total assets | $ | 96,771 | $ | 100,244 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 15,486 | $ | 14,490 | |||
| Note payable, current portion, net of discount of $19 as of March 31, 2017 | — | 1,481 | |||||
| Derivative liabilities | 1,142 | 1,923 | |||||
| Deferred revenue | 14,194 | 14,323 | |||||
| Total current liabilities | 30,822 | 32,217 | |||||
| Deferred revenue | 8,425 | 7,631 | |||||
| Deferred tax liabilities | 125 | 125 | |||||
| Other liabilities | 54 | 45 | |||||
| Total liabilities | 39,426 | 40,018 | |||||
| Commitments and contingencies (Note 14) | |||||||
| Stockholders' equity: | |||||||
| Common stock | 211 | 147 | |||||
| Additional paid-in capital | 1,040,348 | 1,017,510 | |||||
| Treasury stock | (1,645 | ) | (1,371 | ) | |||
| Accumulated other comprehensive income (loss) | 770 | (503 | ) | ||||
| Accumulated deficit | (982,339 | ) | (955,557 | ) | |||
| Total stockholders' equity | 57,345 | 60,226 | |||||
| Total liabilities and stockholders' equity | $ | 96,771 | $ | 100,244 | |||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | $ | 21,117 | $ | 14,012 | $ | 42,329 | $ | 27,782 | ||||||||
Cost of revenues | 15,596 | 10,248 | 31,768 | 22,441 | ||||||||||||
Gross margin | 5,521 | 3,764 | 10,561 | 5,341 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 2,719 | 2,398 | 5,218 | 4,871 | ||||||||||||
Selling, general and administrative | 5,887 | 5,400 | 11,524 | 10,655 | ||||||||||||
Amortization of acquisition-related intangibles | 121 | 85 | 242 | 170 | ||||||||||||
Total operating expenses | 8,727 | 7,883 | 16,984 | 15,696 | ||||||||||||
Operating loss | (3,206 | ) | (4,119 | ) | (6,423 | ) | (10,355 | ) | ||||||||
Change in fair value of warrants | — | 1,145 | — | 4,092 | ||||||||||||
Interest income, net | 161 | 335 | 320 | 840 | ||||||||||||
Other (expense)/income, net | (476 | ) | 1,520 | (646 | ) | 976 | ||||||||||
Loss before income tax expense | (3,521 | ) | (1,119 | ) | (6,749 | ) | (4,447 | ) | ||||||||
Income tax expense (benefit) | 191 | (294 | ) | 380 | (83 | ) | ||||||||||
Net loss | $ | (3,712 | ) | $ | (825 | ) | $ | (7,129 | ) | $ | (4,364 | ) | ||||
Net loss per common share | ||||||||||||||||
Basic | $ | (0.17 | ) | $ | (0.04 | ) | $ | (0.33 | ) | $ | (0.21 | ) | ||||
Diluted | $ | (0.17 | ) | $ | (0.10 | ) | $ | (0.33 | ) | $ | (0.40 | ) | ||||
Weighted average number of common shares outstanding | ||||||||||||||||
Basic | 21,860 | 20,656 | 21,775 | 20,586 | ||||||||||||
Diluted | 21,860 | 20,723 | 21,775 | 20,736 | ||||||||||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | $ | 14,933 | $ | 27,148 | $ | 34,904 | $ | 59,000 | |||||||
| Cost of revenues | 9,917 | 22,107 | 34,103 | 50,992 | |||||||||||
| Gross margin | 5,016 | 5,041 | 801 | 8,008 | |||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 3,023 | 2,985 | 8,690 | 8,804 | |||||||||||
| Selling, general and administrative | 5,486 | 6,077 | 16,964 | 19,640 | |||||||||||
| Amortization of acquisition-related intangibles | 85 | 39 | 98 | 118 | |||||||||||
| Change in fair value of contingent consideration | 272 | — | 71 | — | |||||||||||
| Restructuring | 1 | — | 1,328 | — | |||||||||||
| Total operating expenses | 8,867 | 9,101 | 27,151 | 28,562 | |||||||||||
| Operating loss | (3,851 | ) | (4,060 | ) | (26,350 | ) | (20,554 | ) | |||||||
| Change in fair value of warrants | 399 | 101 | 1,468 | 667 | |||||||||||
| Gain on sale of minority interest | — | 325 | 951 | 325 | |||||||||||
| Interest income (expense), net | 49 | (89 | ) | 94 | (331 | ) | |||||||||
| Other (expense)/income, net | (279 | ) | 873 | (2,449 | ) | 481 | |||||||||
| Loss before income tax (benefit) expense | (3,682 | ) | (2,850 | ) | (26,286 | ) | (19,412 | ) | |||||||
| Income tax (benefit) expense | 566 | (82 | ) | 496 | 1,036 | ||||||||||
| Net loss | $ | (4,248 | ) | $ | (2,768 | ) | $ | (26,782 | ) | $ | (20,448 | ) | |||
| Net loss per common share | |||||||||||||||
| Basic | $ | (0.21 | ) | $ | (0.20 | ) | $ | (1.44 | ) | $ | (1.49 | ) | |||
| Diluted | $ | (0.21 | ) | $ | (0.20 | ) | $ | (1.44 | ) | $ | (1.49 | ) | |||
| Weighted average number of common shares outstanding | |||||||||||||||
| Basic | 19,949 | 13,792 | 18,614 | 13,746 | |||||||||||
| Diluted | 19,949 | 13,792 | 18,614 | 13,746 | |||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
Three Months Ended | Six Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (3,712 | ) | $ | (825 | ) | $ | (7,129 | ) | $ | (4,364 | ) | ||||
Other comprehensive loss, net of tax: | ||||||||||||||||
Foreign currency translation loss | (43 | ) | (1,269 | ) | (46 | ) | (851 | ) | ||||||||
Total other comprehensive loss, net of tax | (43 | ) | (1,269 | ) | (46 | ) | (851 | ) | ||||||||
Comprehensive loss | $ | (3,755 | ) | $ | (2,094 | ) | $ | (7,175 | ) | $ | (5,215 | ) | ||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net loss | $ | (4,248 | ) | $ | (2,768 | ) | $ | (26,782 | ) | $ | (20,448 | ) | |||
| Other comprehensive gain (loss), net of tax: | |||||||||||||||
| Foreign currency translation gain (loss) | 52 | (831 | ) | 1,273 | (1,372 | ) | |||||||||
| Total other comprehensive gain (loss), net of tax | 52 | (831 | ) | 1,273 | (1,372 | ) | |||||||||
| Comprehensive loss | $ | (4,196 | ) | $ | (3,599 | ) | $ | (25,509 | ) | $ | (21,820 | ) | |||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED September 30, 2020 AND 2019
(In thousands)
Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Par Value | Paid-in Capital | Treasury Stock | Comprehensive Income (Loss) | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||
Balance at March 31, 2020 | 22,902 | $ | 229 | $ | 1,053,507 | $ | (2,666 | ) | $ | (216 | ) | $ | (978,635 | ) | $ | 72,219 | ||||||||||||
Issuance of common stock - restricted shares | 493 | 5 | (5 | ) | — | — | — | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 909 | — | — | — | 909 | |||||||||||||||||||||
Issuance of stock for 401(k) match | 13 | — | 88 | — | — | — | 88 | |||||||||||||||||||||
Repurchase of treasury stock | — | — | — | (377 | ) | — | — | (377 | ) | |||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (3 | ) | — | (3 | ) | |||||||||||||||||||
Net loss | — | — | — | — | — | (3,417 | ) | (3,417 | ) | |||||||||||||||||||
Balance at June 30, 2020 | 23,408 | $ | 234 | $ | 1,054,499 | $ | (3,043 | ) | $ | (219 | ) | $ | (982,052 | ) | $ | 69,419 | ||||||||||||
| Issuance of common stock - ESPP | 8 | — | 99 | — | — | — | 99 | |||||||||||||||||||||
| Issuance of common stock - restricted shares | 33 | — | — | — | — | — | — | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 849 | — | — | — | 849 | |||||||||||||||||||||
| Issuance of stock for 401(k) match | 9 | — | 101 | — | — | — | 101 | |||||||||||||||||||||
| Repurchase of treasury stock | — | — | — | (293 | ) | — | — | (293 | ) | |||||||||||||||||||
| Cumulative translation adjustment | — | — | — | — | (43 | ) | — | (43 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (3,712 | ) | (3,712 | ) | |||||||||||||||||||
| Balance at September 30, 2020 | 23,458 | $ | 234 | $ | 1,055,548 | $ | (3,336 | ) | $ | (262 | ) | $ | (985,764 | ) | $ | 66,420 | ||||||||||||
Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||
| Number of Shares | Par Value | Paid-in Capital | Treasury Stock | Comprehensive Income (Loss) | Accumulated Deficit | Stockholders' Equity | ||||||||||||||||||||||
Balance at March 31, 2019 | 21,652 | $ | 216 | $ | 1,044,622 | $ | (2,101 | ) | $ | (5 | ) | $ | (961,539 | ) | $ | 81,193 | ||||||||||||
Issuance of common stock - restricted shares | 174 | 2 | (2 | ) | — | — | — | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | 249 | — | — | — | 249 | |||||||||||||||||||||
Issuance of stock for 401(k) match | 8 | — | 81 | — | — | — | 81 | |||||||||||||||||||||
Issuance of common stock - warrant exercise | 23 | — | 294 | — | — | — | 294 | |||||||||||||||||||||
Repurchase of treasury stock | — | — | — | (283 | ) | — | — | (283 | ) | |||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | 418 | — | 418 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (3,539 | ) | (3,539 | ) | |||||||||||||||||||
Balance at June 30, 2019 | 21,857 | $ | 218 | $ | 1,045,244 | $ | (2,384 | ) | $ | 413 | $ | (965,078 | ) | $ | 78,413 | |||||||||||||
| Issuance of common stock - ESPP | 15 | — | 100 | — | — | — | 100 | |||||||||||||||||||||
| Issuance of common stock - restricted shares | 10 | — | — | — | — | — | — | |||||||||||||||||||||
| Stock-based compensation expense | — | — | 397 | — | — | — | 397 | |||||||||||||||||||||
| Issuance of stock for 401(k) match | 12 | — | 92 | — | — | — | 92 | |||||||||||||||||||||
| Repurchase of treasury stock | — | — | — | (222 | ) | — | — | (222 | ) | |||||||||||||||||||
| Cumulative translation adjustment | — | — | — | — | (1,269 | ) | — | (1,269 | ) | |||||||||||||||||||
| Net loss | — | — | — | — | — | (825 | ) | (825 | ) | |||||||||||||||||||
| Balance at September 30, 2019 | 21,894 | $ | 218 | $ | 1,045,833 | $ | (2,606 | ) | $ | (856 | ) | $ | (965,903 | ) | $ | 76,686 | ||||||||||||
| Nine months ended December 31, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (26,782 | ) | $ | (20,448 | ) | |
| Adjustments to reconcile net loss to net cash used in operations: | |||||||
| Depreciation and amortization | 9,239 | 5,606 | |||||
| Stock-based compensation expense | 2,115 | 2,266 | |||||
| Provision for excess and obsolete inventory | 415 | 1,074 | |||||
| Gain on sale of minority interest | (951 | ) | (325 | ) | |||
| Change in fair value of warrants and contingent consideration | (1,397 | ) | (667 | ) | |||
| Non-cash interest expense | 19 | 127 | |||||
| Other non-cash items | 81 | (937 | ) | ||||
| Changes in operating asset and liability accounts: | |||||||
| Accounts receivable | (3,576 | ) | 3,213 | ||||
| Inventory | 180 | (2,294 | ) | ||||
| Prepaid expenses and other current assets | 647 | 2,283 | |||||
| Accounts payable and accrued expenses | 638 | (4,031 | ) | ||||
| Deferred revenue | (862 | ) | 3,598 | ||||
| Net cash used in operating activities | (20,234 | ) | (10,535 | ) | |||
| Cash flows from investing activities: | |||||||
| Purchase of property, plant and equipment | (2,125 | ) | (557 | ) | |||
| Proceeds from the sale of property, plant and equipment | 18 | 15 | |||||
| Change in restricted cash | 795 | 457 | |||||
| Cash paid for acquisition, net of cash acquired | 74 | — | |||||
| Proceeds from sale of minority interest | 951 | 325 | |||||
| Change in other assets | 26 | 117 | |||||
| Net cash (used in)/provided by investing activities | (261 | ) | 357 | ||||
| Cash flows from financing activities: | |||||||
| Employee taxes paid related to net settlement of equity awards | (274 | ) | (490 | ) | |||
| Repayment of debt | (1,575 | ) | (3,167 | ) | |||
| Proceeds from public equity offering, net | 16,952 | — | |||||
| Proceeds from exercise of employee stock options and ESPP | 85 | — | |||||
| Net cash provided by/(used in) financing activities | 15,188 | (3,657 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 636 | (432 | ) | ||||
| Net decrease in cash and cash equivalents | (4,671 | ) | (14,267 | ) | |||
| Cash and cash equivalents at beginning of year | 26,784 | 39,330 | |||||
| Cash and cash equivalents at end of year | $ | 22,113 | $ | 25,063 | |||
| Supplemental schedule of cash flow information: | |||||||
| Issuance of common stock in connection with the purchase of Infinia Technology Corporation | $ | 3,498 | $ | — | |||
| Cash paid for income taxes, net of refunds | 1,012 | 920 | |||||
| Issuance of common stock to settle liabilities | 252 | 289 | |||||
| Cash paid for interest | 42 | 238 | |||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (7,129 | ) | $ | (4,364 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: | ||||||||
Depreciation and amortization | 2,009 | 2,262 | ||||||
Stock-based compensation expense | 1,758 | 646 | ||||||
Provision for excess and obsolete inventory | 1,250 | 196 | ||||||
Change in fair value of warrants | — | (4,092 | ) | |||||
Non-cash interest income | — | (112 | ) | |||||
Other non-cash items | 233 | (888 | ) | |||||
| Unrealized foreign exchange loss on cash and cash equivalents | 272 | — | ||||||
Changes in operating asset and liability accounts: | ||||||||
Accounts receivable | 157 | (2,244 | ) | |||||
Inventory | 3,591 | (3,589 | ) | |||||
Prepaid expenses and other assets | (866 | ) | (1,810 | ) | ||||
Accounts payable and accrued expenses | (3,192 | ) | 2,799 | |||||
Deferred revenue | (4,636 | ) | 711 | |||||
Net cash used in operating activities | (6,553 | ) | (10,485 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (1,326 | ) | (1,736 | ) | ||||
Proceeds from the sale of property, plant and equipment | — | 3,001 | ||||||
| Purchase of marketable securities | — | (10,000 | ) | |||||
| Sale of marketable securities | 25,006 | — | ||||||
Change in other assets | 63 | 66 | ||||||
Net cash (used in)/provided by investing activities | 23,743 | (8,669 | ) | |||||
Cash flows from financing activities: | ||||||||
Repurchase of treasury stock | (670 | ) | (505 | ) | ||||
| Proceeds from exercise of employee stock options and ESPP | 99 | 100 | ||||||
Net cash used in financing activities | (571 | ) | (405 | ) | ||||
Effect of exchange rate changes on cash | 53 | (74 | ) | |||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | 16,672 | (19,633 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 30,864 | 78,198 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 47,536 | $ | 58,565 | ||||
Supplemental schedule of cash flow information: | ||||||||
Cash paid for income taxes, net of refunds | $ | 275 | $ | 130 | ||||
| Non-cash investing and financing activities | ||||||||
Issuance of common stock to Hercules to settle warrant liability | — | 294 | ||||||
Issuance of common stock to settle liabilities | 189 | 173 | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of the Business and Operations and Liquidity
Nature of the Business and Operations
American Superconductor Corporation (“AMSC”(together with its subsidiaries, “AMSC®” or the “Company”) was founded on April 9, 1987. The Company is a leading system provider of megawatt-scale power resiliency solutions that lowerorchestrate the costrhythm and harmony of wind power on the grid™, and enhancethat protect and expand the capability of the Navy’s fleet. The Company’s system level products leverage its proprietary “smart materials” and “smart software and controls” to provide enhanced resiliency and improved performance of themegawatt-scale power grid. In the wind power market, the Company enables manufacturers to field wind turbines through its advanced engineering, support services and power electronics products. In the power grid market, the Company enables electric utilities and renewable energy project developers to connect, transmit and distribute power through its transmission planning services and power electronics and superconductor-based products. The Company’s wind and power grid products and services provide exceptional reliability, security, efficiency and affordability to its customers.
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. 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. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those instructions. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods ended December 31, 2017September 30, 2020 and 20162019 and the financial position at December 31, 2017;September 30, 2020; however, these results are not necessarily indicative of results which may be expected for the full year. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2017,2020, and notes thereto, included in the Company’s annual reportAnnual Report on Form 10-K for the year ended March 31, 20172020 filed with the Securities and Exchange CommissionSEC on May 25, 2017.
Liquidity
The Company has historically experienced recurring operating losses and as of December 31, 2017,September 30, 2020, the Company had an accumulated deficit of $982.3$985.8 million. In addition, the Company has historically experienced recurring negative operating cash flows. At December 31, 2017,September 30, 2020, the Company had cash, and cash equivalents, and marketable securities of $22.1 million,$51.4 million. Marketable securities include certificate of deposits with no outstanding debt other than ordinary trade payables.maturities between six and eleven months. Cash used in operations for the ninesix months ended December 31, 2017September 30, 2020 was $20.2$6.6 million.
In December 2015, the Company entered into a set of strategic agreements valued at approximately $210.0 million with Inox Wind Ltd. (“Inox” or "Inox Wind"“Inox Wind”), which includes a multi-year supply contract pursuant to which the Company will supply electricelectrical control systems ("ECS") to Inox and a license agreement allowing Inox to manufacture a limited number of electrical control systems.ECS. After Inox purchases the specified number of electrical control systemsECS required under the terms of the supply contract, Inox agreed that the Company will continue as Inox’s preferred supplier and Inox will be required to purchase from the Company a majority of its electric control systemsECS requirements for an additional three-year period.
On October 1, 2020, 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 (i) shares of capital stock of Northeast Power Systems, Inc., a New York corporation (“NEPSI”), and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI’s headquarters. 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 now a wholly-owned subsidiary of the Company and will be operated by its Grid business unit. The purchase price was $26.0 million in cash and 873,657 restricted shares of common stock of the Company. As part of the transaction, the selling stockholders may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives in the future.
On October 22, 2020, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc., as representative of the several underwriters named therein, relating to the issuance and sale (the “Offering”) of 3,670,000 shares of the Company’s common stock at a public offering price of $15.00 per share. The net proceeds to the Company from the Offering were approximately $51.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Offering closed on October 26, 2020. In addition, the Company has granted the underwriters a 30-day option to purchase up to an additional 550,500 shares of common stock at the public offering price.
In March 2020, the World Health Organization declared the disease caused by the novel coronavirus, COVID-19, to be a pandemic. COVID-19 has spread throughout the globe, including in the Commonwealth of Massachusetts where the Company’s headquarters are located, and in other areas where the Company has business operations. In response to the outbreak, the Company has followed the guidelines of the U.S. Centers for Disease Control and Prevention and applicable state government authorities to protect the health and safety of the Company’s employees, families, suppliers, customers and communities. While these existing measures and, COVID-19 generally, have not materially disrupted the Company’s business to date, any future actions necessitated by the COVID-19 pandemic may result in disruption to the Company’s business.
While the COVID-19 pandemic continues to rapidly evolve, the Company continues to assess the impact of the COVID-19 pandemic to best mitigate risk and continue the operations of the Company’s business. The extent to which the outbreak impacts the Company’s business, liquidity, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including new information that may emerge concerning the severity of the COVID-19 pandemic and the actions to contain it or treat its impact, among others. If the Company, its customers or suppliers experience prolonged shutdowns or other business disruptions, the Company’s business, liquidity, results of operations and financial condition are likely to be materially adversely affected, and the Company’s ability to access the capital markets may be limited.
The Company believes that based on the information presented above and its quarterly management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the financial statements for the ninesix months ended December 31, 2017.September 30, 2020. The Company’s liquidity is highly dependent on its ability to increase revenues, including its ability to collect revenues under its agreements with Inox, its ability to control its operating costs, and its ability to raise additional capital, if necessary. The impact of the COVID-19 pandemic 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.
2. Revenue Recognition
The Company’s revenues in its Grid segment are derived primarily through enabling the transmission and distribution of power, providing planning services that allow it to identify power grid needs and risks, and developing ship protection systems for the U.S. Navy. The Company’s revenues in its Wind segment are derived primarily through supplying advanced power electronics and control systems, licensing its highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The Company records revenue based on a five-step model in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers. 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. In the three and six months ended September 30, 2020, 78% and 79% of revenue, respectively, was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time. In both the three and six months ended September 30, 2019, 77% 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. A contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s product sales transfer control to the customer in line with the contracted delivery terms and revenue is recorded at the point in time when title and risk transfer to the customer, as the Company has determined that this is the point in time that control transfers to the customer.
The Company's equipment and system product line includes certain contracts which do not meet the requirements of an exchange transaction and therefore do not fall within the scope of ASC 606. As these non-exchange transaction contracts are considered grant revenue and do not fall within any specific accounting literature, the Company follows guidance within ASC 606 by analogy to recognize grant revenue over time. In the three and six months ended September 30, 2020 the Company recorded $0.4 million and $0.8 million in grant revenue, respectively, which is included in the Company’s Grid segment revenue. In the three and six months ended September 30, 2019, the Company recorded $0.7 million and $1.1 million in grant revenue, respectively, which is included in the Company’s Grid revenue.
In the Company's service and technology development product line, there are several different types of transactions and each begins with a contract with a customer that summarizes each product sold to a customer, which typically represents distinct performance obligations. The technology development transactions are primarily for activities that have no alternative use and for which a profit can be expected throughout the life of the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract, the revenue is recognized at a point in time. Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost-plus expected margin approach. The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts. The transaction prices on these contracts are allocated based on an adjusted market approach which is re-assessed annually for reasonableness. The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are not deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists. The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts. The transaction prices of these agreements are calculated based on an adjusted market approach as specified in the contract. The Company reports royalty revenue for usage-based royalties when the sales have occurred. In circumstances when collectability is not assured and a contract does not exist under ASC 606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are no further remaining performance obligations.
The Company's service contracts can include a purchase order from a customer for specific goods in which each item is a distinct performance obligation satisfied at a point in time at which control of the goods is transferred to the customer. This transfer occurs based on the contracted delivery terms or when the requested service work has been completed. The transaction price for these goods is allocated based on the adjusted market approach considering similar transactions under similar circumstances. Service contracts are also derived from ongoing maintenance contracts and extended service-type warranty contracts. In these transactions, the Company is contracted to provide an ongoing service over a specified period of time. As the customer is consuming the benefits as the service is being provided, the revenue is recognized over time ratably.
The Company’s policy is not to accept volume discounts, product returns, or rebates and allowances within its contracts. In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.
The Company provides assurance-type warranties on all product sales for a term of typically one to three years, and extended service-type warranties at the customer's option for an additional term ranging up to four additional years. The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure. For all extended service-type warranties, the Company recognizes the revenue ratably over time during the effective period of the services.
The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with revenue-producing activities. The Company has elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized. 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. The Company has elected not to adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is twelve months or less.
The Company’s contracts with customers do not typically include extended payment terms and may include milestone billing over the life of the contract. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from delivery.
The following tables disaggregate the Company’s revenue by product line and by shipment destination:
Three Months Ended September 30, 2020 | Six Months Ended September 30, 2020 | |||||||||||||||
Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
| Equipment and systems | $ | 15,261 | $ | 4,059 | $ | 31,798 | $ | 6,676 | ||||||||
| Services and technology development | 1,086 | 711 | 2,264 | 1,591 | ||||||||||||
Total | $ | 16,347 | $ | 4,770 | $ | 34,062 | $ | 8,267 | ||||||||
Region: | ||||||||||||||||
| Americas | $ | 15,677 | $ | 30 | $ | 26,231 | $ | 42 | ||||||||
| Asia Pacific | 370 | 4,734 | 6,385 | 8,002 | ||||||||||||
| EMEA | 300 | 6 | 1,446 | 223 | ||||||||||||
Total | $ | 16,347 | $ | 4,770 | $ | 34,062 | $ | 8,267 | ||||||||
Three Months Ended September 30, 2019 | Six Months Ended September 30, 2019 | |||||||||||||||
Product Line: | Grid | Wind | Grid | Wind | ||||||||||||
Equipment and systems | $ | 10,044 | $ | 2,077 | $ | 18,399 | $ | 5,581 | ||||||||
Services and technology development | 1,445 | 446 | 2,946 | 856 | ||||||||||||
Total | $ | 11,489 | $ | 2,523 | $ | 21,345 | $ | 6,437 | ||||||||
Region: | ||||||||||||||||
Americas | $ | 10,698 | $ | 1 | $ | 18,499 | $ | 47 | ||||||||
Asia Pacific | 393 | 2,464 | 2,220 | 6,320 | ||||||||||||
EMEA | 398 | 58 | 626 | 70 | ||||||||||||
Total | $ | 11,489 | $ | 2,523 | $ | 21,345 | $ | 6,437 | ||||||||
As of September 30, 2020, and 2019, 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. Changes in the Company’s contract assets, which are included in “Accounts receivable (unbilled)” and “Deferred program costs” (see Note 7, “Accounts Receivable” and Note 8, “Inventory” for a reconciliation to the condensed consolidated balance sheets) and contract liabilities, which are included in the current portion and long term portion of "Deferred revenue" in the Company’s condensed consolidated balance sheets, are as follows:
| Unbilled Accounts Receivable | Deferred Program Costs | Contract Liabilities | ||||||||||
Beginning balance as of March 31, 2020 | $ | 5,711 | $ | 1,631 | $ | 26,142 | ||||||
Increases for costs incurred to fulfill performance obligations | — | 3,279 | — | |||||||||
Increase (decrease) due to customer billings | (5,929 | ) | — | 23,931 | ||||||||
Decrease due to cost recognition on completed performance obligations | — | (3,314 | ) | — | ||||||||
Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | 6,186 | — | (28,678 | ) | ||||||||
Other changes and FX impact | 0 | 18 | 561 | |||||||||
Ending balance as of September 30, 2020 | $ | 5,968 | $ | 1,614 | $ | 21,956 | ||||||
| Unbilled Accounts Receivable | Deferred Program Costs | Contract Liabilities | ||||||||||
Beginning balance as of March 31, 2019 | $ | 2,213 | $ | 318 | $ | 15,519 | ||||||
Increases for costs incurred to fulfill performance obligations | — | 2,153 | — | |||||||||
Increase (decrease) due to customer billings | (2,926 | ) | — | 19,340 | ||||||||
Decrease due to cost recognition on completed performance obligations | — | (310 | ) | — | ||||||||
Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations | 4,711 | — | (18,534 | ) | ||||||||
Other changes and FX impact | (4 | ) | (9 | ) | (313 | ) | ||||||
Ending balance as of September 30, 2019 | $ | 3,994 | $ | 2,152 | $ | 16,012 | ||||||
The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations may vary significantly each reporting period based on the timing of major new contractual commitments. As of September 30, 2020, the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $48.5 million. There are also approximately $10.7 million of outstanding performance obligations to be recognized over a period of thirteen to sixty months. The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated. The twelve-month performance obligations include anticipated shipments to Inox based on the twelve-month rolling forecast provided by Inox on the multi-year supply contract. The quantities specified in any forecast provided by Inox related to the multi-year supply contract are firm and irrevocable for the first three months of a twelve-month rolling forecast. The timing of the performance obligations beyond the twelve-month forecast provided by Inox are not determinable and therefore are not included in the total remaining performance obligations.
The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three and six months ended September 30, 2020 and 2019:
Three Months Ended | Six Months Ended | ||||||||||||||||
Reportable | September 30, | September 30, | |||||||||||||||
Segment | 2020 | 2019 | 2020 | 2019 | |||||||||||||
| EPC Services | Grid | 12 | % | 0 | % | 18 | % | 0 | % | ||||||||
Hoffman Construction | Grid | <10% | 25 | % | <10% | 12 | % | ||||||||||
Inox Wind Limited | Wind | <10% | <10% | <10% | 17 | % | |||||||||||
M.J. Electric, LLC | Grid | <10% | 25 | % | <10% | 13 | % | ||||||||||
Micron Technology | Grid | <10% | <10% | <10% | 14 | % | |||||||||||
| Reed & Reed Inc. | Grid | 25 | % | 0 | % | 12 | % | 0 | % | ||||||||
| Siemens Gamesa Renewable Energy Pty. Ltd. | Grid | <10% | 0 | % | 13 | % | 0 | % | |||||||||
3. Stock-Based Compensation
The Company accounts for its stock-based compensation at fair value. The following table summarizes stock-based compensation expense by financial statement line item for the three and ninesix months ended December 31, 2017September 30, 2020 and 20162019 (in thousands):
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cost of revenues | $ | 30 | $ | 21 | $ | 59 | $ | 24 | ||||||||
Research and development | 161 | 92 | 291 | 103 | ||||||||||||
Selling, general and administrative | 658 | 283 | 1,408 | 519 | ||||||||||||
Total | $ | 849 | $ | 397 | $ | 1,758 | $ | 646 | ||||||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Cost of revenues | $ | 39 | $ | 40 | $ | 98 | $ | 139 | |||||||
| Research and development | 184 | 61 | 294 | 153 | |||||||||||
| Selling, general and administrative | 660 | 512 | 1,723 | 1,974 | |||||||||||
| Total | $ | 883 | $ | 613 | $ | 2,115 | $ | 2,266 | |||||||
The Company issued 37,14027,341 shares of immediately vested common stock and 800,500688,167 shares of restricted stock awards during the ninesix months ended December 31, 2017,September 30, 2020 and issued 35,00013,174 shares of immediately vested common stock and granted 126,000170,500 shares of restricted stock awards during the ninesix months ended December 31, 2016.September 30, 2019. 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. In addition, the Company issued 16,667 restricted stock units under the 2007 Stock Incentive Plan during the nine months ended December 31, 2017, each of which represents the right to receive one share of common stock in connection with a severance agreement entered into with one of the Company's former executive officers. These restricted stock units vested and were settled in shares of common stock on the eighth day after receipt of an irrevocable release.
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 $0.3less than $0.1 million at December 31, 2017.September 30, 2020. This expense will be recognized over a weighted average expense period of approximately 1.20.6 years. The total unrecognized compensation cost for unvested outstanding restricted stock was $2.8$5.9 million at December 31, 2017.September 30, 2020. This expense will be recognized over a weighted-average expense period of approximately 2.02.2 years.
The Company did not grant any stock options during the three and nineor six months ended December 31, 2017. DuringSeptember 30, 2020. The Company granted 5,939 stock options during the ninesix months ended December 31, 2016,September 30, 2019. The stock options granted during the Company granted 9,703 stock options. These optionssix months ended September 30, 2019 will vest over 2 years.years. The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the ninesix months ended December 31, 2016September 30, 2019 are as follows:
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Expected volatility | N/A | N/A | N/A | 66.5 | % | |||||||||||
Risk-free interest rate | N/A | N/A | N/A | 1.8 | % | |||||||||||
Expected life (years) | N/A | N/A | N/A | 5.91 | ||||||||||||
Dividend yield | N/A | N/A | N/A | None | ||||||||||||
4. Computation of Net 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. Where applicable, diluted EPS is computed by dividing the net loss by the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period, calculated using the treasury stock method. Common equivalent shares include the effect of restricted stock, exercise of stock options and warrants and contingently
The following table reconciles the numerators and denominators of the earnings per share calculation for the three and ninesix months ended December 31, 2017September 30, 2020 and 20162019 (in thousands, except per share data):
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss | $ | (3,712 | ) | $ | (825 | ) | $ | (7,129 | ) | $ | (4,364 | ) | ||||
Less: decrease in fair value of warrants, net of income tax | — | (1,145 | ) | — | (4,092 | ) | ||||||||||
Plus: change in fair value due to exercise of warrants | — | — | — | 83 | ||||||||||||
Net income (loss) - diluted | $ | (3,712 | ) | $ | (1,970 | ) | $ | (7,129 | ) | $ | (8,373 | ) | ||||
Denominator: | ||||||||||||||||
Weighted-average shares of common stock outstanding | 23,057 | 21,678 | 22,943 | 21,538 | ||||||||||||
Weighted-average shares subject to repurchase | (1,197 | ) | (1,022 | ) | (1,168 | ) | (952 | ) | ||||||||
Shares used in per-share calculation ― basic | 21,860 | 20,656 | 21,775 | 20,586 | ||||||||||||
Common stock warrants | — | 67 | — | 150 | ||||||||||||
Shares used in per-share calculation ― diluted | 21,860 | 20,723 | 21,775 | 20,736 | ||||||||||||
Net loss per share ― basic | $ | (0.17 | ) | $ | (0.04 | ) | $ | (0.33 | ) | $ | (0.21 | ) | ||||
Net loss per share ― diluted | $ | (0.17 | ) | $ | (0.10 | ) | $ | (0.33 | ) | $ | (0.40 | ) | ||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Numerator: | |||||||||||||||
| Net loss | $ | (4,248 | ) | $ | (2,768 | ) | $ | (26,782 | ) | $ | (20,448 | ) | |||
| Denominator: | |||||||||||||||
| Weighted-average shares of common stock outstanding | 20,889 | 14,203 | 19,189 | 14,175 | |||||||||||
| Weighted-average shares subject to repurchase | (940 | ) | (411 | ) | (575 | ) | (429 | ) | |||||||
| Shares used in per-share calculation ― basic | 19,949 | 13,792 | 18,614 | 13,746 | |||||||||||
| Shares used in per-share calculation ― diluted | 19,949 | 13,792 | 18,614 | 13,746 | |||||||||||
| Net loss per share ― basic | $ | (0.21 | ) | $ | (0.20 | ) | $ | (1.44 | ) | $ | (1.49 | ) | |||
| Net loss per share ― diluted | $ | (0.21 | ) | $ | (0.20 | ) | $ | (1.44 | ) | $ | (1.49 | ) | |||
| September 25, 2017 | |||
| Consideration | |||
| Cash | $ | 0.1 | |
| Equity (884,890 shares of common stock at $4.02 per share) | 3.6 | ||
| Contingent consideration | 0.6 | ||
| Total Consideration | $ | 4.3 | |
| Recognized amounts of identifiable assets acquired and liabilities assumed | |||
| Core technology and know-how | $ | 3.4 | |
| Working capital | 0.2 | ||
| Property, plant and equipment | 0.0 | ||
| Total identifiable net assets | $ | 3.6 | |
| Long-term deferred tax liability | 1.1 | ||
| Goodwill allocated | $ | 1.7 | |
5. Goodwill
The Company did not identify any triggering events in the period between the date of Acquisitionthree and December 31, 2017, whichsix months ended September 30, 2020, that would require subsequent interim impairment testing of goodwill. As such, the Company expects to perform its annual goodwill impairment test during the fourth quarter of fiscal 2017. The Company will compare the fair value of its reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the Company would record an impairment loss equal to the difference.
6. Fair Value Measurements
A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 | - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | |
Level 2 | - | Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). | |
Level 3 | - | Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. 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, but did transfer $0.7 million related to the contingent liability fromLevel 2 or Level 3 to Level 2 of the fair value measurement hierarchy during the three and ninesix months ended December 31, 2017. The fair value calculation at December 31, 2017 was based on actual observable stock price inputs following the sale of all of the related shares, in place of the Company's assumptions which had been used in the prior period.
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.
Total Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| December 31, 2017: | |||||||||||||||
| Assets: | |||||||||||||||
| Cash equivalents | $ | 17,944 | $ | 17,944 | $ | — | $ | — | |||||||
| Derivative liabilities: | |||||||||||||||
| Acquisition contingent consideration | $ | 687 | $ | — | $ | 687 | $ | — | |||||||
| Warrants | 455 | — | — | 455 | |||||||||||
| Total derivative liabilities | $ | 1,142 | $ | — | $ | 687 | $ | 455 | |||||||
| Total Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
| March 31, 2017: | |||||||||||||||
| Assets: | |||||||||||||||
| Cash equivalents | $ | 14,105 | $ | 14,105 | $ | — | $ | — | |||||||
| Derivative liabilities: | |||||||||||||||
| Warrants | $ | 1,923 | $ | — | $ | — | $ | 1,923 | |||||||
| Warrants | Acquisition Contingent Consideration | ||||||
| April 1, 2017 | $ | 1,923 | $ | — | |||
| Issuance of contingent consideration | — | 571 | |||||
| Mark to market adjustment | (1,468 | ) | 71 | ||||
| Settlement fees | — | 45 | |||||
| Balance at December 31, 2017 | $ | 455 | $ | 687 | |||
| Warrants | |||
| April 1, 2016 | $ | 3,227 | |
| Mark to market adjustment | (1,304 | ) | |
| Balance at March 31, 2017 | $ | 1,923 | |
Valuation Techniques
Cash Equivalents
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.
Marketable Securities
Marketable securities consist of certificates of deposit that are measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. The Company determines the appropriate classification of its marketable securities at the time of purchase and re-evaluates such classification as of each balance sheet date. All marketable securities are considered available for sale and are carried at fair value. Changes in fair value are recorded to other income (expense), net. The Company recognized $0.2 million and $0.1 million in unrealized losses on marketable securities, which is recorded in other income (expense), net, for the three and six months ended September 30, 2020 and less than a $0.1 million gain which was recognized during the three and six months ended September 30, 2020 upon the sale of one of the certificates of deposit. The Company did not recognize any gains or losses on marketable securities in the three and six months ended September 30, 2019. The Company periodically reviews the realizability of each short and long term marketable security when impairment indicators exist with respect to the security. If other than temporary impairment of value of the security exists, the carrying value of the security is written down to its estimated fair value.
Warrants
The Company issued the Hudson Warrants were issued in conjunction with a Securities Purchase Agreement (the “Purchase Agreement”) with Capital Ventures International (“CVI”) in April 2012, an equity offering to Hudson Bay Capital in November 2014 and issued warrants to purchase 58,823 shares of the Company's common stock in conjunction a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”Hercules Warrants”) in June 2012. The Hercules Warrants were exercised on April 8, 2019. The Hudson Warrants were partially exercised on November 13, 2019 and through subsequent amendments. See Note 11, “Debt,” and Note 12 “Warrants and Derivative Liabilities,” for additional information. Thesethe remaining unexercised warrants are subject to revaluation at each balance sheet date, and any change in fair value will be recorded as a change in fair value in derivatives and warrants untilexpired on November 13, 2019. As of September 30, 2020 the earlier of their exercise or expiration.
The Company relieshistorically relied on various assumptions in a lattice model to determine the fair value of warrants. The Company hashad valued the warrants within Level 3 of the valuation hierarchy. See Note 12, “Warrants and Derivative Liabilities,” for a discussion of the warrants and the valuation assumptions used.
The following table provides the Make Whole Provision set forth in the SPA that requires the Company to guarantee the purchase price of the acquisition should the aggregate proceeds of the resale of AMSC Shares sold by selling stockholders during the first 90 days after the effectiveness of the Resale Registration Statement be less than the agreed upon purchase price for such AMSC Shares (per the terms of the SPA) sold during such 90 day period. See Note 12, "Warrantsassets and Derivative Liabilities" and Note 4, “Acquisition and Related Goodwill” for further discussion. The Company reliedliabilities carried at fair value on a Black Scholes option pricing method to determine the fair valuerecurring basis, measured as of the contingent consideration on the date of acquisitionSeptember 30, 2020 and continued to revalue the fair value of the contingent consideration at each subsequent balance sheet date until the final settlement date, with the change in fair value recorded in the current period operating loss. This liability was settled on January 5, 2018.March 31, 2020 (in thousands):
Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs | |||||||||||||
September 30, 2020: | ||||||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 35,613 | $ | 35,613 | $ | — | $ | — | ||||||||
Marketable securities | $ | 10,191 | $ | 10,191 | $ | — | $ | — | ||||||||
| Total Carrying Value | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
March 31, 2020: | ||||||||||||||||
Assets: | ||||||||||||||||
Cash equivalents | $ | 19,394 | $ | 19,394 | $ | — | $ | — | ||||||||
Marketable securities | $ | 35,195 | $ | 35,195 | $ | — | $ | — | ||||||||
7. Accounts Receivable
Accounts receivable at December 31, 2017September 30, 2020 and March 31, 20172020 consisted of the following (in thousands):
September 30, 2020 | March 31, 2020 | |||||||
| Accounts receivable (billed) | $ | 10,865 | $ | 11,276 | ||||
| Accounts receivable (unbilled) | 5,968 | 5,711 | ||||||
| Less: Allowance for doubtful accounts | (23 | ) | — | |||||
Accounts receivable, net | $ | 16,810 | $ | 16,987 | ||||
The Company recorded allowance for doubtful accounts of less than $0.1 million for the three months and six months ended September 30, 2020 and no allowance for the three or six months ended September 30, 2019. The allowances are based on evaluation of customer accounts that are past due.
| December 31, 2017 | March 31, 2017 | ||||||
| Accounts receivable (billed) | $ | 10,379 | $ | 7,436 | |||
| Accounts receivable (unbilled) | 1,727 | 574 | |||||
| Less: Allowance for doubtful accounts | (54 | ) | (54 | ) | |||
| Accounts receivable, net | $ | 12,052 | $ | 7,956 | |||
8. Inventory
Inventory, net of reserves, at December 31, 2017September 30, 2020 and March 31, 20172020 consisted of the following (in thousands):
September 30, 2020 | March 31, 2020 | |||||||
| Raw materials | $ | 4,989 | $ | 10,739 | ||||
| Work-in-process | 2,283 | 1,345 | ||||||
| Finished goods | 5,269 | 5,260 | ||||||
| Deferred program costs | 1,614 | 1,631 | ||||||
Net inventory | $ | 14,155 | $ | 18,975 | ||||
| December 31, 2017 | March 31, 2017 | ||||||
| Raw materials | $ | 5,544 | $ | 4,263 | |||
| Work-in-process | 1,626 | 426 | |||||
| Finished goods | 7,931 | 8,016 | |||||
| Deferred program costs | 2,028 | 4,757 | |||||
| Net inventory | $ | 17,129 | $ | 17,462 | |||
The Company recorded inventory write-downs of $0.1$0.5 million and $0.4$0.1 million for the three and nine months ended December 31, 2017.September 30, 2020 and 2019, respectively. The Company recorded inventory write-downs of $0.4$1.3 million and $1.1$0.2 million for the three and ninesix months ended December 31, 2016.September 30, 2020 and 2019, respectively. These write downswrite-downs were based on evaluatingthe Company's evaluation of its inventory on hand for excess quantities and obsolescence.
Deferred program costs as of December 31, 2017September 30, 2020 and March 31, 20172020 primarily represent costs incurred on programs accounted for under contract accounting where the Company needs to complete development milestonesperformance obligations before the related revenue and costs will be recognized.
9. Property, Plant and Equipment
The cost and accumulated depreciation of property, plant and equipment at December 31, 2017September 30, 2020 and March 31, 20172020 are as follows (in thousands):
September 30, 2020 | March 31, 2020 | |||||||
| Construction in progress - equipment | $ | 718 | $ | 3,130 | ||||
| Equipment and software | 42,015 | 41,737 | ||||||
| Furniture and fixtures | 1,326 | 1,302 | ||||||
| Leasehold improvements | 6,114 | 2,477 | ||||||
| Property, plant and equipment, gross | 50,173 | 48,646 | ||||||
| Less accumulated depreciation | (42,033 | ) | (40,081 | ) | ||||
Property, plant and equipment, net | $ | 8,140 | $ | 8,565 | ||||
| December 31, 2017 | March 31, 2017 | ||||||
| Land | $ | 3,643 | $ | 3,643 | |||
| Construction in progress - equipment | 2,160 | 601 | |||||
| Buildings | 34,549 | 34,549 | |||||
| Equipment and software | 72,566 | 73,445 | |||||
| Furniture and fixtures | 1,048 | 1,201 | |||||
| Leasehold improvements | 498 | 2,442 | |||||
| Property, plant and equipment, gross | 114,464 | 115,881 | |||||
| Less accumulated depreciation | (77,780 | ) | (72,443 | ) | |||
| Property, plant and equipment, net | $ | 36,684 | $ | 43,438 | |||
Depreciation expense was $1.4$0.9 million and $8.9$1.0 million for the three and nine months ended December 31, 2017.September 30, 2020 and 2019, respectively. Depreciation expense was $1.7$1.8 million and $5.2$2.1 million for the three and ninesix months ended December 31, 2016. IncludedSeptember 30, 2020 and 2019, respectively. The decrease in depreciation expense for the nine months ended December 31, 2017 is $4.1 million of accelerated depreciation recorded to cost of revenues related to revised estimates of the remaining useful lives of certain pieces of manufacturing equipment. Constructionconstruction in progress - equipment primarily includesrelates to the completion of capital investments in the Company's newlyHTS equipment and leasehold improvements in the Company's leased facilityfacilities in Westminster and Ayer, Massachusetts.
10. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2017September 30, 2020 and March 31, 20172020 consisted of the following (in thousands):
September 30, 2020 | March 31, 2020 | |||||||
| Accounts payable | $ | 7,655 | $ | 10,045 | ||||
| Accrued inventories in-transit | 316 | 763 | ||||||
| Accrued other miscellaneous expenses | 2,383 | 1,986 | ||||||
| Advanced deposits | 691 | 666 | ||||||
| Accrued compensation | 4,349 | 5,683 | ||||||
| Income taxes payable | 967 | 933 | ||||||
| Accrued product warranty | 2,109 | 2,015 | ||||||
Total | $ | 18,470 | $ | 22,091 | ||||
| December 31, 2017 | March 31, 2017 | ||||||
| Accounts payable | $ | 5,626 | $ | 3,207 | |||
| Accrued inventories in-transit | 505 | 313 | |||||
| Accrued other miscellaneous expenses | 2,326 | 2,240 | |||||
| Accrued restructuring | 394 | — | |||||
| Accrued compensation | 3,792 | 5,042 | |||||
| Income taxes payable | 1,372 | 1,344 | |||||
| Accrued warranty | 1,471 | 2,344 | |||||
| Total | $ | 15,486 | $ | 14,490 | |||
The Company generally provides a one to three year warranty on its products, commencing upon installation.delivery or installation where applicable. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience.
Product warranty activity was as follows (in thousands):
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Balance at beginning of period | $ | 2,168 | $ | 1,606 | $ | 2,015 | $ | 1,545 | ||||||||
Change in accruals for warranties during the period | 148 | 71 | 384 | 156 | ||||||||||||
Settlements during the period | (207 | ) | (36 | ) | (290 | ) | (60 | ) | ||||||||
Balance at end of period | $ | 2,109 | $ | 1,641 | $ | 2,109 | $ | 1,641 | ||||||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Balance at beginning of period | $ | 1,852 | $ | 2,694 | $ | 2,344 | $ | 3,601 | |||||||
| Change in accruals for warranties during the period | 25 | 591 | 152 | 1,009 | |||||||||||
| Settlements during the period | (406 | ) | (608 | ) | (1,025 | ) | (1,933 | ) | |||||||
| Balance at end of period | $ | 1,471 | $ | 2,677 | $ | 1,471 | $ | 2,677 | |||||||
11. Income Taxes
The Company recorded income tax expenses of $0.6 million and $0.5 million in the three and nine months ended December 31, 2017, respectively. The Company recorded income tax benefitexpense of $0.1$0.2 million and expense of $1.0$0.4 million in the three and ninesix month periods ended September 30, 2020. The Company recorded income tax benefits of $0.3 million and $0.1 million in the three and six months ended December 31, 2016, 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 ninesix months ended December 31, 2017September 30, 2020 and did not have any gross unrecognized tax benefits as of March 31, 2017.2020.
12. Warrants and Derivative Liabilities
The Company accountsaccounted for its warrants and contingent consideration as liabilities due to certain adjustment provisions within the instruments, which requirerequired that they be recorded at fair value. The warrants arewere subject to revaluation at each balance sheet date and any change in fair value iswas recorded as a change in fair value of warrants until the earlier of its expiration or its exercise at which time the warrant liability will bewas reclassified to equity. The Company calculated the fair value of the warrants utilizing an integrated lattice model. The contingent consideration is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of contingent consideration until the earlier of its settlement or expiration. The Company determined the fair value of the contingent consideration utilizing a Black Scholes option pricing method upon acquisition and as of September 30, 2017. As of December 31, 2017, the actual amount due for the contingent consideration was determined according to the stated formula in the agreement. See Note 5,6, "Fair Value Measurements", for further discussion.
| Fiscal Year 17 | September 30, 2017 | June 30, 2017 | |
| Risk-free interest rate | 1.05% | 1.05% | |
| Expected annual dividend yield | — | — | |
| Expected volatility | 77.95% | 78.25% | |
| Term (years) | 0.01 | 0.26 | |
| Fair value | $— | $— | |
| Fiscal Year 16 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||
| Risk-free interest rate | 0.91% | 0.56% | 0.59% | 0.48% | 0.66% | ||||
| Expected annual dividend yield | — | — | — | — | — | ||||
| Expected volatility | 44.12% | 58.04% | 70.50% | 76.30% | 76.76% | ||||
| Term (years) | 0.51 | 0.76 | 1.01 | 1.26 | 1.51 | ||||
| Fair value | $— | $0.1 million | $0.2 million | $0.4 million | $0.4 million | ||||
Hercules Warrant
On December 19, 2014, the Company entered into a second amendment to the Loan and Security Agreement with Hercules (the "Hercules Second Amendment. See Note 11, “Debt” for additional information.Amendment"). In conjunction with the agreement,Hercules Second Amendment, the Company issued the Hercules Warrant to purchase 58,823 shares ofwhich replaced the Company’s common stock.First Warrant and the Second Warrant. The Hercules Warrant iswas exercisable at any time after its issuance at an exercise price of $7.85 per share, subject to certain price-based and other anti-dilution adjustments, including the equity offering in May 2017, the acquisition of Infinia Technology Corporation ("ITC") with common stock in September 2017 and expires on June 30, 2020.
| Fiscal Year 17 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||
| Risk-free interest rate | 1.98% | 1.56% | 1.58% | ||
| Expected annual dividend yield | — | — | — | ||
| Expected volatility | 69.11% | 63.97% | 67.76% | ||
| Term (years) | 2.46 | 2.72 | 2.97 | ||
| Fair value | $0.1 million | $0.1 million | $0.1 million | ||
| Fiscal Year 16 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||
| Risk-free interest rate | 1.55% | 1.57% | 0.97% | 0.86% | 1.08% | ||||
| Expected annual dividend yield | — | — | — | — | — | ||||
| Expected volatility | 66.51% | 67.28% | 67.98% | 68.34% | 70.25% | ||||
| Term (years) | 3.25 | 3.50 | 3.75 | 4.00 | 4.25 | ||||
| Fair value | $0.2 million | $0.2 million | $0.2 million | $0.3 million | $0.2 million | ||||
November 2014 Warrant
On November 13, 2014, the Company completed an offering of 909,090 units of the Company’s common stock with Hudson Bay Capital. Each unit consisted of one share of the Company’s common stock and 0.9 of a warrant to purchase one share of common stock, or a warrant to purchase in the aggregate 818,181 shares (the “November 2014 Warrant”).shares. The November 2014
| Fiscal Year 17 | December 31, 2017 | September 30, 2017 | June 30, 2017 | ||
| Risk-free interest rate | 1.87% | 1.49% | 1.44% | ||
| Expected annual dividend yield | — | — | — | ||
| Expected volatility | 65.86% | 65.64% | 67.21% | ||
| Term (years) | 1.87 | 2.12 | 2.37 | ||
| Fair value | $0.4 million | $0.8 million | $0.9 million | ||
| Fiscal Year 16 | March 31, 2017 | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | ||||
| Risk-free interest rate | 1.41% | 1.43% | 0.93% | 0.77% | 0.98% | ||||
| Expected annual dividend yield | — | — | — | — | — | ||||
| Expected volatility | 66.53% | 69.31% | 68.96% | 70.01% | 69.88% | ||||
| Term (years) | 2.62 | 2.87 | 3.12 | 3.37 | 3.62 | ||||
| Fair value | $1.8 million | $2.3 million | $2.3 million | $3.2 million | $2.6 million | ||||
13. Leases
On April 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) ("ASC 842"), using the modified retrospective approach. The Company evaluatedelected the ITC acquisition Make Whole Payment set forthpackage of practical expedients available in the SPA (see Note 5, "Fair Value Measurements" for further details), which ultimately required net settlement cash,standard and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815. Asas a result, did not reassess the lease classification of existing contracts or leases or the initial direct costs associated with existing leases. The Company did not elect the hindsight practical expedient and evaluated lease terms for each periodexisting leases. The Company has also elected the fair valuepractical expedient to not separate lease components and non-lease components and will account for the leases as a single lease component for all classes of leases.
All significant lease arrangements are recognized at lease commencement. Operating lease right–of-use assets and lease liabilities are recognized at commencement. The operating lease right-of-use asset includes any lease payments related to initial direct cost and prepayments and excludes any lease incentives. Lease expense is recognized on a straight-line basis over the contingent consideration was remeasuredlease term. The Company enters into a variety of operating lease agreements through the normal course of its business, but primarily real estate leases to support its operations. The real estate lease agreements generally provide for fixed minimum rental payments and the resulting gainpayment of real estate taxes and insurance. Many of these real estate leases have one or lossmore renewal options that allow the Company, at its discretion, to renew the lease for varying periods up to five years or to terminate the lease. Only renewal options or termination rights that the Company believed were likely to be exercised were included in the lease calculations.
The Company also enters into leases for vehicles, IT equipment and service agreements, and other leases related to its manufacturing operations that are also included in the right-of-use assets and lease liability accounts if they are for a term of longer than twelve months. However, many of these leases are either short-term in nature or immaterial. The Company has made the policy election to exclude short-term leases from the balance sheet.
The discount rate was recognized in operating expenses.
The Company did not identify any leases that are classified as financing leases.
Supplemental balance sheet information related to calculate the fair value of the contingent considerationleases at September 30, 2020 and March 31, 2020 are as follows:
September 30, 2020 | March 31, 2020 | |||||||
Operating Leases: | ||||||||
Right-of-use assets | $ | 3,907 | $ | 3,359 | ||||
| Total right-of-use assets | 3,907 | 3,359 | ||||||
Lease liabilities - ST | $ | 568 | $ | 439 | ||||
Lease liabilities - LT | 3,430 | 3,000 | ||||||
| Total operating lease liabilities | 3,997 | 3,439 | ||||||
| Weighted-average remaining lease term | 6.31 | 6.91 | ||||||
| Weighted-average discount rate | 6.79 | % | 7.08 | % | ||||
The costs related to the ITC acquisition:
| Fiscal Year 17 | September 30, 2017 | September 25, 2017 | |
| Risk-free interest rate | 1.09% | 1.09% | |
| Expected annual dividend yield | — | — | |
| Expected volatility | 66.54% | 65.71% | |
| Term (years) | 0.31 | 0.32 | |
| Fair value | $0.4 million | $0.6 million | |
Three Months Ended | Six Months Ended | |||||||
September 30, 2020 | September 30, 2020 | |||||||
Operating Leases: | ||||||||
Operating lease costs - fixed | $ | 214 | $ | 392 | ||||
Operating lease costs - variable | 28 | 55 | ||||||
Short-term lease costs | 510 | 678 | ||||||
Total lease costs | 752 | 1,125 | ||||||
Three Months Ended | Six Months Ended | |||||||
September 30, 2019 | September 30, 2019 | |||||||
Operating Leases: | ||||||||
Operating lease costs - fixed | $ | 178 | $ | 356 | ||||
Operating lease costs - variable | 27 | 46 | ||||||
Short-term lease costs | 176 | 214 | ||||||
Total lease costs | 381 | 616 | ||||||
The Company’s estimated minimum future lease obligations under the Company's common stock at a public offering price of $4.00 per share. The net proceeds to the Company from the Offering were approximately $14.7 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Offering closed on May 10, 2017. In addition, the Company granted the underwriters a 30-day option (the “Option”) to purchase up to an additional 600,000 shares of common stock at the public offering price. On May 24, 2017, the underwriters notified the Company that they had exercised their Option in full. The net proceeds to the Company from the Option were approximately $2.3 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The total net proceeds to the Company from the Offering and the Option were approximately $17.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Option closed on May 26, 2017.leases are as follows:
Operating Leases | ||||
Year ended March 31, | ||||
2021 | $ | 416 | ||
2022 | 791 | |||
2023 | 764 | |||
2024 | 709 | |||
2025 | 647 | |||
Thereafter | 1,597 | |||
Total minimum lease payments | 4,924 | |||
Less: interest | 927 | |||
Present value of lease liabilities | 3,997 | |||
14. Commitments and Contingencies
Legal Contingencies
From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.
Other
The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds. The Company is required to deposit an amount equivalent to some or all the face amount of the performance bonds into an escrow account until the termination of the bond. When the performance conditions are met, amounts deposited as collateral for the performance bonds are returned to the Company. 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 DecemberSeptember 30, 2020, and March 31, 2017,2020, the Company had $0.2$5.8 million of restricted cash included in long-term assets.assets and $0.5 million of restricted cash included in current assets, respectively. These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts.contracts and long-term projects, including the irrevocable letter of credit in the amount of $5.0 million to secure certain of the Company's obligations under the Subcontract Agreement with ComEd. These deposits are held in interest bearing accounts.
15. Restructuring
| Severance pay | |||
| and benefits | |||
| Accrued restructuring balance at April 1, 2017 | $ | — | |
| Charges to operations | 1,328 | ||
| Cash payments | (934 | ) | |
| Accrued restructuring balance at December 31, 2017 | $ | 394 | |
The Company reports its financial results in two reportable business segments: WindGrid and Grid.
Through the Company’s Windtec Solutions, the Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of 2 megawatts ("MWs") and higher. The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.
Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. The Company provides advanced power electronics and control system products, engineered designs, and support services. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of 2 megawatts ("MWs") and higher. The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.
The operating results for the two business segments are as follows (in thousands):
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Grid | $ | 16,347 | $ | 11,489 | $ | 34,062 | $ | 21,345 | ||||||||
Wind | 4,770 | 2,523 | 8,267 | 6,437 | ||||||||||||
| Total | $ | 21,117 | $ | 14,012 | $ | 42,329 | $ | 27,782 | ||||||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Operating loss: | ||||||||||||||||
| Grid | $ | (1,374 | ) | $ | (1,324 | ) | $ | (2,562 | ) | $ | (5,988 | ) | ||||
| Wind | (983 | ) | (2,398 | ) | (2,103 | ) | (3,721 | ) | ||||||||
| Unallocated corporate expenses | (849 | ) | (397 | ) | (1,758 | ) | (646 | ) | ||||||||
Total | $ | (3,206 | ) | $ | (4,119 | ) | $ | (6,423 | ) | $ | (10,355 | ) | ||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
| Wind | $ | 2,633 | $ | 18,248 | $ | 10,465 | $ | 36,822 | |||||||
| Grid | 12,300 | 8,900 | 24,439 | 22,178 | |||||||||||
| Total | $ | 14,933 | $ | 27,148 | $ | 34,904 | $ | 59,000 | |||||||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Operating loss: | |||||||||||||||
| Wind | $ | (1,684 | ) | $ | 1,044 | $ | (7,557 | ) | $ | (3,220 | ) | ||||
| Grid | (1,011 | ) | (4,491 | ) | (15,279 | ) | (15,068 | ) | |||||||
| Unallocated corporate expenses | (1,156 | ) | (613 | ) | (3,514 | ) | (2,266 | ) | |||||||
| Total | $ | (3,851 | ) | $ | (4,060 | ) | $ | (26,350 | ) | $ | (20,554 | ) | |||
The accounting policies of the business segments are the same as those for the consolidated Company. The Company’s business segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment revenues and segment operating loss. 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 stock-based compensation expense of $0.9$0.8 million and $0.6 $0.4 million in the three months ended December 31, 2017September 30, 2020 and 2016,2019, respectively. Unallocated corporate expenses primarily consist of stock-based compensation expense of $2.1$1.8 million and $2.3$0.6 million in the ninesix months ended December 31, 2017September 30, 2020 and 2016,2019, respectively. Additionally, a restructuring charge of $1.3 million is included in the nine months ended December 31, 2017, as well as losses for the change in fair value of the contingent consideration of $0.3 million and $0.1 million in the three and nine months ended December 31, 2017.
Total assets for the two business segments as of December 31, 2017September 30, 2020 and March 31, 20172020 are as follows (in thousands):
September 30, 2020 | March 31, 2020 | |||||||
Grid | $ | 40,358 | $ | 44,044 | ||||
Wind | 11,760 | 14,250 | ||||||
Corporate assets | 59,109 | 65,815 | ||||||
Total | $ | 111,227 | $ | 124,109 | ||||
| December 31, 2017 | March 31, 2017 | ||||||
| Wind | $ | 15,303 | $ | 18,346 | |||
| Grid | 36,165 | 31,060 | |||||
| Corporate assets | 45,303 | 50,838 | |||||
| Total | $ | 96,771 | $ | 100,244 | |||
| Three months ended December 31, | Nine months ended December 31, | ||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||
| Inox Wind Limited | 15 | % | 66 | % | 27 | % | 58 | % | |||
| Vestas Middle East S.L.U. | 27 | % | — | % | 11 | % | — | % | |||
| SSE Generation Ltd. | 17 | % | — | % | <10% | — | % | ||||
| Hidalgo Wind Farm LLC | <10% | 17 | % | <10% | <10% | ||||||
16. Recent Accounting Pronouncements
In June 2016, the FASB issued 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. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that year. Following the release of ASU 2019-10 in November 2019, the new effective date, as long as the Company remains a smaller reporting company, would be annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact, if any, that the adoption of ASU 2016-13 may have on its consolidated financial statements.In August 2016,2018, the FASB issued ASU 2016-15,
In January 2017,December 2019, the FASB issued ASU 2017-01,
17. Subsequent Events
The Company has performed an evaluation of subsequent events through the time of filing this Quarterly Report on Form 10-Q with the SEC and has determined that other than those disclosed above,the following information, there are no such events to report.
On October 1, 2020, the Company entered into 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 (i) shares of capital stock of NEPSI, and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI’s headquarters. 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 now a wholly-owned subsidiary of the Company and will be operated by the Grid business unit. The NEPSI purchase price was $26.0 million in cash on hand, including cash from the settlement of the Company's $25 million certificate of deposit during the three months ended September 30, 2020, and 873,657 restricted shares of common stock of the Company. The transaction also includes an earn-out opportunity with the potential for the issuance of up to an additional 1.0 million shares of common stock of the Company to the selling stockholders based on the achievement by NEPSI of certain revenue targets for the fiscal years ending March 31, 2021 through March 31, 2024. The Company assumed no debt in this transaction. NEPSI's results of operations will be included in the Company’s consolidated financial statements beginning on October 1, 2020.
On October 26, 2020, the Company completed the Offering of 3,670,000 shares of common stock of the Company at a public offering price of $15.00 per share. The net proceeds to the Company from the Offering were approximately $51.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. In addition, the Company has granted the underwriters a 30-day option to purchase up to an additional 550,500 shares of common stock at the public offering price.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that relate to future events or conditions, including without limitation, the statements in Part II, “Item 1A. Risk Factors” and in Part I under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, orthe timing of our resilient electric grid ("REG") system project with Commonwealth Edison Company, our prospective results of operations or financial position, the potential exercise of the option to purchase additional shares of our common stock by the underwriters to our October 26, 2020 offering of common stock (the “Offering”), and adoption of accounting changes may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of our common stock or cause actual results to differ materially from those indicated by such forward-looking statements. These important factors include, but are not limited to: A significant portion of our revenues are derived from a single customer, Inox; We have a history of operating losses, and negative operating cash flows, which may continue in the future and require us to secure additional financing in the future;future. Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter; Our financial conditionWe have a history of negative operating cash flows, and we may have an adverse effect on our customer and supplier relationships; Our successrequire additional financing in addressing the wind energy market is dependent on the manufacturers that license our designs; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; We rely upon third-party suppliers for the components and sub-assemblies of many of our Wind and Grid products, making us vulnerable to supply shortages and price fluctuations; Failure to successfully execute any move of our Devens, Massachusetts manufacturing facility or achieve expected savings or other anticipated benefits following any move could adversely impact our financial performance; We may not realize all of the sales expected from our backlog of orders and contracts; Our success depends upon the commercial use of high temperature superconductor products,future, which is currently limited, and a widespread commercial market for our products may not develop; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy; Our contracts with the U.S. government are subject to audit, modification or termination by the U.S. government and include certain other provisions in favor of the government, and additional funding of such contracts may not be approved by the U.S. Congress; Tax reform in the U.S.available to us; We may negatively affect our operating results; We have operations in and depend on sales in emerging markets, including India, and global conditions could negatively affect our operating resultsbe required to issue performance bonds or limitprovide letters of credit, which restricts our ability to expandaccess any cash used as collateral for the bonds or letters of credit; Changes in exchange rates could adversely affect our operations outsideresults of these markets; Our business and operations would be adversely impacted in the event of a failure or security breach of our information technology infrastructure;operations; If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and may lead investors and other users to lose confidence in our financial data; We may not realize all of the sales expected from our backlog of orders and contracts; Our contracts with the U.S. government are subject to audit, modification or termination by the U.S. 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 novel coronavirus (“COVID-19”) pandemic could adversely impact our business, financial condition and results of operations; Our financial condition may have an adverse effect on our customer and supplier relationships; We may experience difficulties re-establishing our HTS wire production capability in our Ayer, Massachusetts facility; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; Historically, a significant portion of our revenues have been derived from a single customer and if this customer’s business is negatively affected, it could adversely impact our business; Our success in addressing the wind energy market is dependent on the manufacturers that license our designs;Our business and operations would be adversely impacted in the event of a failure or security breach of our information technology infrastructure; Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise protect personal data, may adversely impact our business and financial results; We rely upon third-party suppliers for the components and subassemblies of many of our Grid and Wind products, making us vulnerable to supply shortages and price fluctuations, which could harm our business; Many of our revenue opportunities are dependent upon subcontractors and other business collaborators; If we fail to implement our business strategy successfully, our financial performance could be harmed; Problems with product quality or product performance may cause us to incur warranty expenses and may damage our market reputation and prevent us from achieving increased sales and market share; Many of our customers outside of the United States may be either directly or indirectly related to governmental entities, and we could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar worldwide anti-bribery laws outside the United States; We have had limited success marketing and selling our superconductor products and system-level solutions, and our failure to more broadly market and sell our products and solutions could lower our revenue and cash flow;We may acquire additional complementary businesses or technologies, which may require us to incur substantial costs for which we may never realize the anticipated benefits, such as in connection with our acquisition of Northeast Power Systems, Inc.; Our success depends upon the commercial adoption of the REG system, which is currently limited, and a widespread commercial market for our products may not develop; Adverse changes in domestic and global economic conditions could adversely affect our operating results; We have operations in, and depend on sales in, emerging markets, including India, and global conditions could negatively affect our operating results or limit our ability to expand our operations outside of these markets. Changes in India’s political, social, regulatory and economic environment may affect our financial performance; Our products face competition, which could limit our ability to acquire or retain customers; Our international operations are subject to risks that we do not face in the United States, which could have an adverse effect on our operating results; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy; Lower prices for other fuel sources may reduce the demand for wind energy development, which could have a material adverse effect on our ability to grow our Wind business; Unfavorable results of legal proceedings could have a material adverse effect on our business, operating results and financial condition; We may be unable to adequately prevent disclosure of trade secrets and other proprietary information;Our patents may not provide meaningful protection for our technology, which could result in us losing some or all of our market position; We face risks related to our intellectual property;technologies; We face risks related to our legal proceedings; We face risks related to our common stock; and the important factors discussed under the caption "Risk Factors" in Part 1. Item 1A of our Form 10-K for the fiscal year ended March 31, 2017,2020 and our other reports filed with the SEC. These and the important factors, discussed under the caption “Risk Factors” in Part 1. Item 1A of our Form 10-K for the fiscal year ended March 31, 2017 among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Any such forward-looking statements represent management’s estimates as of the date of this Quarterly Report on Form 10-Q. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
American Superconductor
Executive Overview
We are a leading system provider of megawatt-scale resiliency solutions that lowerorchestrate the costrhythm and harmony of wind power on the grid™, and enhancethat protect and expand the performancecapability of the U.S. Navy's fleet. In the power grid.grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems. In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced
Our wind and power gridsystem solutions help to improve energy efficiency, alleviate power grid capacity constraints, improve system resiliency, and increase the adoption of renewable energy generation. Demand for our solutions is driven by the growing needs for modernized smart grids that improve power reliability, security and quality, the U.S. Navy's effort to upgrade on-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy, and for modernized smart grids that improve power reliability, security and quality.energy. Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state, national and globalnational levels, including renewable portfolio standards, tax incentives and international treaties.
We manufacture products using two proprietary core technologies: PowerModulePowerModule™ programmable power electronic converters and our AmperiumAmperium® high temperature superconductor (“HTS”) wires. These technologies and our system-level solutions are protected by a broad and deep intellectual property portfolio consisting of hundreds of patents and licenses worldwide.
We operate our business under two market-facing business units: WindGrid and Grid.Wind. We believe this market-centric structure enables us to more effectively anticipate and meet the needs of wind turbine manufacturers,the U.S. Navy, electric utilities, industrial facilities, power generation project developers and electric utilities.
• | Grid. Through our Gridtec Solutions™, our Grid business segment enables electric utilities, industrial facilities and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability. We provide transmission planning services that allow us to identify power grid congestion, poor power quality, and other risks, which help us determine how our solutions can improve network performance. These services often lead to sales of our grid interconnection solutions for wind farms and solar power plants, power quality systems and transmission and distribution cable systems. We also sell ship protection products to the U.S. Navy through our Grid business segment. |
• | Wind. Through our Windtec Solutions™, our Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. We supply advanced power electronics and control systems, license our highly engineered wind turbine designs, and provide extensive customer support services to wind turbine manufacturers. Our design portfolio includes a broad range of drive trains and power ratings of 2 megawatts (“MW”) and higher. We provide a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility. |
Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are referring to the fiscal year beginning on April 1 of that same year. For example, fiscal 20172020 refers to the fiscal year beginning on April 1, 2017.2020. Other fiscal years follow similarly.
On September 25, 2017,October 31, 2018, we acquired Infinia Technology Corporationentered into a Subcontract Agreement with Commonwealth Edison Company (“ITC”ComEd”) (the “Subcontract Agreement”) for approximately $3.8 million as described belowthe manufacture and installation of the Company’s REG system within ComEd’s electric grid in Chicago, Illinois (the “Acquisition”“Project”). Located in Richmond, Washington, ITC is a technology firm founded in 2009 specializingAs provided in the design, developmentSubcontract Agreement, the Subcontract Agreement became effective upon the signing of an amendment by us and commercializationthe U.S. Department of cryo-coolersHomeland Security (“DHS”) to the existing contract (the “Prime Contract”) between us and DHS on June 20, 2019. Unless terminated earlier by us, ComEd or DHS according to the terms of the Subcontract Agreement, the term of the Subcontract Agreement will continue until we complete our warranty obligations under the Subcontract Agreement. Under the terms of the Subcontract Agreement, we have agreed, among other things, to provide the REG system and to supervise ComEd’s installation of the REG system in Chicago. As part of our separate cost sharing arrangement with DHS under the Prime Contract, we expect funding provided by DHS in connection with the Subcontract Agreement to be between $9.0 to $11.0 million, which represents the total amount of revenue we are expected to recognize over the term of the Subcontract Agreement and includes up to $1.0 million that we have agreed to reimburse ComEd for costs incurred by ComEd while undertaking its tasks under the Subcontract Agreement (the “Reimbursement Amount”). In addition, we are required to deliver an irrevocable letter of credit in the amount of $5.0 million to secure certain Company obligations under the Subcontract Agreement, which we have done, and deposited $5.0 million in an escrow account as collateral to secure such letter of credit. ComEd has agreed to provide the site and provide all civil engineering work required to support the installation, operation and integration of the REG system into ComEd’s electric grid. Other than the Reimbursement Amount, ComEd is responsible for its own costs and expenses. DHS’s approval to commence with construction was obtained on June 20, 2019. Substation work on the project began in late 2019 and we are on schedule to deliver the REG project hardware in late 2020. The REG system is expected to be operational in 2021.
On October 1, 2020, we entered into a wide range of applications.
The NEPSI purchase price was $26.0 million in cash on hand, including cash from the settlement of our $25 million certificate of deposit during the three months ended September 30, 2020, and 873,657 restricted shares of our common stock. As part of the transaction, in the future the selling stockholders may receive up to an additional 1,000,000 million restricted shares of our common stock upon the achievement of certain specified revenue objectives.
On October 26, 2020, we completed the Offering of 3,670,000 shares of our common stock at a public offering price of $15.00 per share. We received net proceeds of approximately $51.4 million after deducting underwriting discounts and commissions and estimated offering expenses. See Note 1, “Nature of the Business and Operations and Liquidity,” for further information about this offering.
In March 2020, the World Health Organization declared the disease caused by the novel coronavirus, COVID-19 to be a pandemic. COVID-19, has spread throughout the globe, including in the Commonwealth of Massachusetts where our headquarters are located, and in other areas where we have business operations. In response to the outbreak, we have followed the guidelines of the U.S. Centers for Disease Control and Prevention and applicable state government authorities to protect the health and safety of our employees, their families, our suppliers, our customers and our communities. While these existing measures and, COVID-19 generally, have not materially disrupted our business to date, any future actions necessitated by the COVID-19 pandemic may result in disruption to our business.
The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our business, liquidity, results of ITC's operations and financial condition will depend on future developments, which are included in our consolidated resultshighly uncertain and our Grid segment reporting fromcannot be predicted with confidence, including new information that may emerge concerning the date of acquisition, September 25, 2017. Assuming the Acquisition had occurred on April 1, 2017 and 2016, the impact on our consolidated results would not have been significant.
Critical Accounting Policies and Estimates
The preparation of the unaudited condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ under different assumptions or conditions. During the nine months ended December 31, 2017, we adopted ASU 2017-04, which provides for changes to the annual impairment testing of goodwill. See Note 4, "Acquisition and Related Goodwill" for further details. Aside from the adoption of ASU 2017-04, thereThere were no significant changes in the critical accounting policies that were disclosed in our Form 10-K for the fiscal 2016, whichyear ended on March 31, 2017.
Results of Operations
Three and ninesix months ended December 31, 2017September 30, 2020 compared to the three and ninesix months ended December 31, 2016
Revenues
Total revenues decreased 45%increased 51% and 41%52% to $14.9$21.1 million and $34.9$42.3 million for the three and ninesix months ended December 31, 2017,September 30, 2020, respectively, compared to $27.1$14.0 million and $59.0$27.8 million for the three and ninesix months ended December 31, 2016,September 30, 2019, respectively. Our revenues are summarized as follows (in thousands):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
| Wind | $ | 2,633 | $ | 18,248 | $ | 10,465 | $ | 36,822 | |||||||
| Grid | 12,300 | 8,900 | 24,439 | 22,178 | |||||||||||
| Total | $ | 14,933 | $ | 27,148 | $ | 34,904 | $ | 59,000 | |||||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Grid | $ | 16,347 | $ | 11,489 | $ | 34,062 | $ | 21,345 | ||||||||
Wind | 4,770 | 2,523 | 8,267 | 6,437 | ||||||||||||
Total | $ | 21,117 | $ | 14,012 | $ | 42,329 | $ | 27,782 | ||||||||
Our Grid business unit accounted for 77% and 80% of total revenues for the three and six months ended September 30, 2020, respectively, compared to 82% and 77% for the three and six months ended September 30, 2019, respectively. Our Grid business unit revenues increased 42% and 60% to $16.3 million and $34.1 million in the three and six months ended September 30, 2020, respectively, from $11.5 million and $21.3 million in the three and six months ended September 30, 2019, respectively. Grid business unit revenue in the three and six months ended September 30, 2020 was driven by stronger D-VAR, VVO and ship protection systems revenue.
Our Wind business unit accounted for 18%23% and 30%20% of total revenues for the three and ninesix months ended December 31, 2017,September 30, 2020, respectively, compared to 67%18% and 62%23% for the three and ninesix months ended December 31, 2016,September 30, 2019, respectively. Revenues in the Wind business unit decreased 86%unit increased 89% and 72%28% to $2.6$4.8 million and $10.5$8.3 million in the three and ninesix months ended December 31, 2017, respectively,September 30, 2020, from $18.2$2.5 million and $36.8$6.4 million in the three and ninesix months ended December 31, 2016, respectively.
| Three months ended December 31, | Nine months ended December 31, | ||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||
| Inox Wind Limited | 15 | % | 66 | % | 27 | % | 58 | % | |||
| Vestas Middle East S.L.U. | 27 | % | — | % | 11 | % | — | % | |||
| SSE Generation Ltd. | 17 | % | — | % | <10% | — | % | ||||
| Hidalgo Wind Farm LLC | <10% | 17 | % | <10% | <10% | ||||||
Cost of Revenues and Gross Margin
Cost of revenues decreased by 55% increased by 52% and 42% to $9.9$15.6 million and $31.8 million for the three and six months ended December 31, 2017,September 30, 2020, compared to $22.1$10.2 million and $22.4 million for the three and six months ended December 31, 2016.September 30, 2019. Gross margin was 34%26% and 25% for the three and six months ended December 31, 2017,September 30, 2020, compared to 27% and 19% for the three and six months ended December 31, 2016. September 30, 2019. The three month period remained relatively flat and there was an increase in the gross margin forin the threesix months ended December 31, 2017 September 30, 2020 which was due to increased royaltyhigher revenue and a more favorable product mix in the current year period.mix.
Operating Expenses
Research and development
Research and nine months ended December 31, 2017 by 1% to $3.0 million and $8.7 million from $3.0 million and $8.8 million for the three and nine months ended December 31, 2016. The decrease in development ("R&D expenses&D") expenses increased 13% in the three and nine months ended December 31, 2017 as comparedSeptember 30, 2020 to the prior year periods was primarily due to reduced compensation expense.
Selling, general, and $19.6administrative
Selling, general and administrative ("SG&A") expenses increased 9% in the three months ended September 30, 2020to $5.9 million from $5.4 million in the three and nine months ended December 31, 2016.September 30, 2019. The decreasesincrease in SG&A expensesexpense in the three and nine months ended December 31, 2017 were September 30, 2020 was due primarily to reducedhigher overall compensation expense than in the prior year period. Selling, general and administrative expenses increased 8% to $11.5 in the reduced use of outside service providers.
Amortization of acquisition related intangibles
We recorded amortization expense related to our core technology and know-how, trade names and trademark, and intangible assets of less than $0.1$0.1 million in each of the three monthsmonth periods ended December 31, 2017September 30, 2020 and 2016. We recorded amortization expense related to our core technology2019, respectively, and know-how, trade names and trademark intangible assets of less than $0.1 million and $0.1$0.2 million in the nine months ended December 31, 2017 and 2016, respectively.
Operating loss
Our operating loss is summarized as follows (in thousands):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Operating loss: | |||||||||||||||
| Wind | $ | (1,684 | ) | $ | 1,044 | $ | (7,557 | ) | $ | (3,220 | ) | ||||
| Grid | (1,011 | ) | (4,491 | ) | (15,279 | ) | (15,068 | ) | |||||||
| Unallocated corporate expenses | (1,156 | ) | (613 | ) | (3,514 | ) | (2,266 | ) | |||||||
| Total | $ | (3,851 | ) | $ | (4,060 | ) | $ | (26,350 | ) | $ | (20,554 | ) | |||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Operating loss: | ||||||||||||||||
Grid | $ | (1,374 | ) | $ | (1,324 | ) | $ | (2,562 | ) | $ | (5,988 | ) | ||||
Wind | (983 | ) | (2,398 | ) | (2,103 | ) | (3,721 | ) | ||||||||
Unallocated corporate expenses | (849 | ) | (397 | ) | (1,758 | ) | (646 | ) | ||||||||
Total | $ | (3,206 | ) | $ | (4,119 | ) | $ | (6,423 | ) | $ | (10,355 | ) | ||||
Our Grid segment generated operating losses of $1.0$1.4 million and $15.3$2.6 million in the three and ninesix months ended December 31, 2017, respectively,September 30, 2020, compared to $4.5$1.3 million and $15.1$6.0 million in the three and ninesix months ended December 31, 2016, respectively. September 30, 2019. The decreaseincrease in the Grid business unit operating loss in the three months ended December 31, 2017September 30, 2020 was due primarily to higher revenues and a more favorable product mix offset by increased D-VAR revenues compared tooverall compensation expense. The decrease in the prior year period. The increase in Grid business unit operating loss in the ninesix months ended December 31, 2017September 30, 2020 was due primarily to $4.1higher revenues and a more favorable product mix.
Our Wind segment generated operating losses of $1.0 million and $2.1 million of accelerated depreciation relatedin thethree and six months ended September 30, 2020, compared to revised estimates of$2.4 million and $3.7 million in the useful lives of certain pieces of manufacturing equipment.
Unallocated corporate expenses primarily consistconsisted of stock-based compensation expense of $0.9$0.8 million and $2.1 million for the three and nine months ended December 31, 2017, respectively, and $0.6 million and $2.3$0.4 million in the three and nine months ended December 31, 2016,September 30, 2020 and 2019 respectively. Additionally, a restructuring charge of $1.3 million, primarily for severance costs as a result of the restructuring action announced on April 4, 2017, is included in unallocatedUnallocated corporate expenses forprimarily consisted of stock-based compensation expense of $1.8 million and $0.6 million in the ninesix months ended December 31, 2017, as well as losses of $0.3 millionSeptember 30, 2020 and $0.1 million for the change in fair value of the contingent consideration in the three and nine months ended December 31, 2017,2019, respectively.
Change in fair value of warrants
There were no warrants outstanding in the three and six months ended September 30, 2020.The change in fair value of warrants resulted in gains of $0.4$1.1 million and $1.5$4.1 million in the three and ninesix months ended December 31, 2017, respectively, compared to gains of $0.1 million and $0.7 million in the three and nine months ended
Interest income, (expense), net, was income of less than $0.1 million in each of the three and nine months ended December 31, 2017, respectively, compared to expense of $0.1$0.2 million and $0.3$0.3 million in the three and ninesix months ended December 31, 2016, respectively. The decreaseSeptember 30, 2020, compared to $0.3 million and $0.8 million in interest expense wasthe three and six months ended September 30, 2019. The decreases in interest income in the three and six months ended September 30, 2020 were related to lower cash balances earning lower interest duerates than in the prior period, as well as interest recorded related to the maturitysale of both of our term loansthe Devens facility for the six months ended September 30, 2019 with Hercules Technology Growth Capital, Inc. (“Hercules”). Our Term Loan B maturedno such transaction in November 2016, and our Term Loan C matured in June 2017.
Other (expense)/income, net
Other (expense) income,expense, net, was expense of $0.3$0.5 million and $2.4$0.6 million in the three and ninesix months ended December 31, 2017, respectively,September 30, 2020, compared to other income, net of $0.9$1.5 million and $0.5$1.0 million in the three and ninesix months ended December 31, 2016, respectively. The increaseSeptember 30, 2019. The decreases in other expense,income, net, during the three and nine months ended December 31, 2017, was primarilywere driven by higher foreign currency losses.
Income Taxes
Income tax expense was $0.6$0.2 million and $0.5$0.4 in the three and six months ended September 30, 2020. Income tax benefit was $0.3 million and $0.1 million in the three and ninesix months ended December 31, 2017, respectively,September 30, 2019. The income tax expense is due primarily to taxes incurred in foreign jurisdictions.
Net loss
Net loss was $3.7 million and $7.1 million in the three and six months ended September 30, 2020, compared to income tax benefit of $0.1$0.8 million and expense of $1.0$4.4 million in the three and ninesix months ended December 31, 2016, respectively.September 30, 2019. The decrease increases in income tax expense duringnet loss were driven by the ninegain on fair value of warrants in the prior year period that did not recur in the six months ended December 31, 2017 was primarily due to the release of valuation allowances of $1.1 millionSeptember 30, 2020 as well as decreases in the nine months ended December 31, 2017other income as a result of the deferred tax liability purchase adjustment recorded as a result of the ITC Acquisition, for the difference in tax basis on the ITC net assets acquired.
Non-GAAP Measures
Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP measures included in this Form 10-Q, however, should be considered in addition to, and not as a substitute for or superior to the comparable measuremeasures prepared in accordance with GAAP.
We define non-GAAP net loss as net loss before sale of minority investments, stock-based compensation, amortization of acquisition-related intangibles, consumption of zero cost-basis inventory, changeschange in fair value of warrants, and contingent consideration, non-cash interest expense, tax effect of adjustments, and the other non-cash or unusual charges, indicated inand the table below.tax effect of those adjustments calculated at the relevant rate for our non-GAAP metric, if applicable. We believe non-GAAP net loss assists management and investors in comparing our performance across reporting periods on a consistent basis by excluding these non-cash or non-recurring charges and other items that we do not believe are indicative of our core operating performance. In addition, we use non-GAAP net loss as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net loss is set forth in the table below (in thousands, except per share data):
| Three months ended December 31, | Nine months ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net loss | $ | (4,248 | ) | $ | (2,768 | ) | $ | (26,782 | ) | $ | (20,448 | ) | |||
| Sale of minority investments | — | (325 | ) | (951 | ) | (325 | ) | ||||||||
| Stock-based compensation | 883 | 613 | 2,115 | 2,266 | |||||||||||
| Amortization of acquisition-related intangibles | 85 | 39 | 98 | 118 | |||||||||||
| Consumption of zero cost-basis inventory | (118 | ) | (478 | ) | (514 | ) | (1,118 | ) | |||||||
| Change in fair value of warrants and contingent consideration | (126 | ) | (101 | ) | (1,397 | ) | (667 | ) | |||||||
| Non-cash interest expense | — | 30 | 19 | 127 | |||||||||||
| Tax effect of adjustments | 19 | 77 | 142 | 179 | |||||||||||
| Non-GAAP net loss | $ | (3,505 | ) | $ | (2,913 | ) | $ | (27,270 | ) | $ | (19,868 | ) | |||
| Non-GAAP net loss per share | $ | (0.18 | ) | $ | (0.21 | ) | $ | (1.46 | ) | $ | (1.45 | ) | |||
| Weighted average shares outstanding - basic and diluted | 19,949 | 13,792 | 18,614 | 13,746 | |||||||||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (3,712 | ) | $ | (825 | ) | $ | (7,129 | ) | $ | (4,364 | ) | ||||
Stock-based compensation | 849 | 397 | 1,758 | 646 | ||||||||||||
Amortization of acquisition-related intangibles | 121 | 85 | 242 | 170 | ||||||||||||
Change in fair value of warrants | — | (1,145 | ) | — | (4,092 | ) | ||||||||||
Non-GAAP net loss | $ | (2,743 | ) | $ | (1,488 | ) | $ | (5,129 | ) | $ | (7,640 | ) | ||||
Non-GAAP net loss per share - basic | $ | (0.13 | ) | $ | (0.07 | ) | $ | (0.24 | ) | $ | (0.37 | ) | ||||
Non-GAAP net loss per share - diluted | $ | (0.13 | ) | $ | (0.07 | ) | $ | (0.24 | ) | $ | (0.37 | ) | ||||
Weighted average shares outstanding - basic | 21,860 | 20,656 | 21,775 | 20,586 | ||||||||||||
Weighted average shares outstanding - diluted | 21,860 | 20,723 | 21,775 | 20,736 | ||||||||||||
We incurred non-GAAP net losses of $3.5$2.7 million and $5.1 million or $0.18 per share,$0.13 and $27.3 million or $1.46$0.24 per share, for the three and ninesix months ended December 31, 2017,September 30, 2020, compared to non-GAAP net losses of $2.9$1.5 million and $7.6 million, or $0.21 per share,$0.07 and $19.9 million or $1.45$0.37 per share for the three and ninesix months ended December 31, 2016.September 30, 2019. The increasesdecrease in the six month non-GAAP net loss was due to lower operating loss driven by higher revenues and a more favorable product mix. The increase in both the three and nine month period ended December 31, 2017 werewas driven primarily by an increase inincreased net loss as previously discussed,a result of higher foreign currency losses during the three months ended September 30, 2020.
For a description and an adjustment for the salereconciliation of our minority investment in Blade Dynamics Limited, partially offset by decreased consumption of zero cost basis inventory and the gain resulting from the decreased value of the warrants and contingent consideration on the ITC acquisition in the three and nine months ended December 31, 2017.other non-GAAP financial measure, non-GAAP operating cash flow, see below under “Non-GAAP Financial Measure – Non-GAAP Operating Cash Flow.”
Liquidity and Capital Resources
We have experienced recurring operating losses, and as of December 31, 2017September 30, 2020, had an accumulated deficit of $982.3 million. In addition, we have experienced recurring negative operating cash flows and our Wind segment revenues decreased substantially in the nine months ended December 31, 2017 compared to the prior year period due to decreased demand from Inox. We cannot predict if and when this demand dislocation will be resolved. From April 1, 2011 through the date of this filing, we have reduced our global workforce substantially, including an 8% reduction in force, primarily affecting employees in our Devens, Massachusetts facility, effective April 4, 2017. We incurred restructuring charges of $1.3 million in cash severance expenses in the nine months ended December 31, 2017 in connection with the workforce reduction. We are currently moving our manufacturing and administrative operations from our facility in Devens, Massachusetts to a nearby, smaller-scale leased building in Ayer, Massachusetts, which is anticipated to reduce operating costs.
Our cash requirements depend on numerous factors, including if and when the Inox demand dislocation is resolved, the successful completion of our product development activities, our ability to commercialize our Resilient Electric Grid (“REG”)REG and ship protection system solutions, the rate of customer and market adoption of our products, collecting receivables according to established terms, and the continued availability of U.S. government funding during the product development phase of our Superconductors-based products.
As described above, on October 1, 2020, we acquired NEPSI. The NEPSI purchase price was $26.0 million in cash on hand, including cash from the settlement of our $25 million certificate of deposit during the three months ended September 30, 2020, and 873,657 restricted shares of common stock of the Company. As part of the transaction, the selling stockholders may receive additional restricted shares of common stock of the Company upon the achievement of certain specified revenue objectives in the future.
As described above, on October 26, 2020, we completed an offering of 3,670,000 shares of our common stock at a public offering price of $15.00 per share. We received net proceeds of approximately $51.4 million after deducting underwriting discounts and commissions and estimated offering expenses. In addition, we have granted the underwriters a 30-day option to purchase up to an additional 550,500 shares of common stock at the public offering price.
As of December 31, 2017,September 30, 2020, we had cash, cash equivalents, marketable securities and restricted cash of $22.3$57.7 million, compared to $27.7$66.1 million as of March 31, 2017,2020, a decrease of $5.5$8.3 million. Our cash and cash equivalents, and restricted cash are summarized as follows (in thousands):
| December 31, 2017 | March 31, 2017 | ||||||
| Cash and cash equivalents | $ | 22,113 | $ | 26,784 | |||
| Restricted cash | 165 | 960 | |||||
| Total cash, cash equivalents, and restricted cash | $ | 22,278 | $ | 27,744 | |||
September 30, 2020 | March 31, 2020 | |||||||
Cash and cash equivalents | $ | 41,246 | $ | 24,699 | ||||
| Marketable securities | 10,191 | 35,195 | ||||||
Restricted cash | 6,290 | 6,165 | ||||||
| Total cash, cash equivalents, marketable securities and restricted cash | $ | 57,726 | $ | 66,059 | ||||
For the ninesix months ended December 31, 2017,September 30, 2020, net cash used in operating activities was $20.2$6.6 million, compared to $10.5 million of cash used for the ninesix months ended December 31, 2016. The increaseSeptember 30, 2019 The decrease in net cash used in operations was due primarily to anthe overall impact of increased sales activities on the operating loss, and less cash collections from Inox,activities, partially offset by usage of inventory.
For the ninesix months ended December 31, 2017, net cash used in investing activities was $0.3 million, compared toSeptember 30, 2020, net cash provided by investing activities of $0.4 million for the nine months ended December 31, 2016. The increase in net cash used in investing activities was due primarily to increased purchases of property, plant and equipment related to the Devens facility move, partially offset by proceeds received from the final payment due from Blade Dynamics as well as releases of restricted cash in the nine months ended December 31, 2017.
For the six months ended September 30, 2020, net cash used in financing activities was primarily$0.6 million compared to $0.4 million in the six months ended September 30, 2019. The increase in net cash used in financing activities was due primarily to net proceeds of $17.0 million from the issuance of 4.6 million sharesrepurchase of common stock in May 2017,connection with no such equity offering inemployee tax obligations upon the prior year period. See the discussion regarding the May 2017 equity offering below.
As of December 31, 2017,September 30, 2020, we had $0.2$5.8 million of restricted cash included in long-term assets and $0.5 million of restricted cash included in current assets. These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts.contracts and long-term projects, including the irrevocable letter of credit in the amount of $5.0 million to secure certain of the Company's obligations under the Subcontract Agreement with ComEd. These deposits are held in interest bearing accounts.
We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months. In addition, we may seek to raise additional capital, which could be in the form of loans, convertible debt or equity, to fund our operating requirements and capital expenditures. We have no outstanding warrants as of September 30, 2020. Our liquidity is highly dependent on our ability to increase revenues, including our ability to collect revenues under our agreements with Inox, control our operating costs, and our ability to raise additional capital, if necessary. There can be no assurance that we will be able to raise additional capital on favorable terms or at all, or execute on any other means of improving our liquidity as described above. Additionally, the impact of the COVID-19 pandemic on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity.
Non-GAAP Financial Measure – Non-GAAP Operating Cash Flow
We define non-GAAP operating cash flow as operating cash flow before the Sinovel settlement (net of legal fees and expenses); and other unusual cash flows or items. We believe non-GAAP operating cash flow assists management and investors in comparing our operating cash flow across reporting periods on a consistent basis by excluding these non-recurring cash items that we do not believe are indicative of our core operating cash flow. A reconciliation of GAAP to non-GAAP operating cash flow is set forth in the table below (in thousands).
Six months ended | ||||||||
September 30, 2020 | September 30, 2019 | |||||||
Operating cash flow | $ | (6,553 | ) | $ | (10,485 | ) | ||
Sinovel settlement (net of legal fees and expenses) | — | 1,000 | ||||||
Non-GAAP operating cash flow | $ | (6,553 | ) | $ | (9,485 | ) | ||
Legal Proceedings
We are involved in legal and administrative proceedings and claims of various types. See Part II, Item 1, “Legal Proceedings,” for additional information. We record a liability in our consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate. If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, we estimate and disclose the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in our consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating transactions that are not required to be reflected on our balance sheet except as discussed below.
We occasionally enter into construction contracts that include a performance bond. As these contracts progress, we continually assess the probability of a payout from the performance bond. Should we determine that such a payout is probable, we would record a liability.
In addition, we have various contractual arrangements inunder which we have committed to purchase minimum quantities of goods or services have been committed to be purchased on an annual basis.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 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. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that year. Following the release of ASU 2019-10 in November 2019, the new effective date, as long as the Company remains a smaller reporting company, would be annual reporting periods beginning after December 15, 2022. We are currently evaluating the impact, if any, that the adoption of ASU 2016-13 may have on our consolidated financial statements.In August 2016,2018, the FASB issued ASU 2016-15,
In January 2017,December 2019, the FASB issued ASU 2017-01,
We do not believe that, outside of those disclosed here, there are any other recently issued accounting pronouncements that will have a material impact on our consolidated financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not Applicable
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017.September 30, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
Changes in Internal Control over Financial Reporting
There were no changes into our internal controlcontrols over financial reporting during the quarter ended December 31, 2017September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
LEGAL PROCEEDINGS |
None
RISK FACTORS |
There have been no material changes in the nine months ended December 31, 2017 to the risk factors described in Part I, Item IA of our Annual Report on Form 10-K for the fiscal year ended March 31, 2017,2020, filed with the SEC on May 25, 2017.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The Company’s stock repurchase activity during the three months ended September 30, 2020
Month | Total Number | Average | Total Number of | Approximate | ||||
July 1, 2020 - July 31, 2020 | 25,546 | $9.74 | — | — | ||||
| August 1, 2020 - August 31, 2020 | 3,627 | $12.28 | — | — | ||||
| September 1, 2020 - September 30, 2020 | 0 | $0.0 | — | — | ||||
Total | 29,173 | $10.06 | — | — |
(a) During the three months ended September 30, 2020, we purchased shares in connection with our stock-based compensation plans, whereby shares of our common stock were tendered by employees for payment of applicable statutory tax withholdings.
DEFAULTS UPON SENIOR SECURITIES |
None
MINE SAFETY DISCLOSURES |
Not Applicable
OTHER INFORMATION |
None
ITEM 6. | EXHIBITS |
EXHIBIT INDEX
| Incorporated by Reference | ||||||||||||
Exhibit Number |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed/Furnished Herewith |
10.1 | 8-K | 000-19672 | 10.1 | 10/5/20 | ||||||||
31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
| XBRL Instance Document.*** |
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101.SCH |
| XBRL Taxonomy Extension Schema Document. *** |
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101.CAL |
| XBRL Taxonomy Calculation Linkbase Document. *** |
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101.DEF |
| XBRL Definition Linkbase Document. *** |
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101.LAB |
| XBRL Taxonomy Label Linkbase Document. *** |
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101.PRE |
| XBRL Taxonomy Presentation Linkbase Document. *** |
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_________________________
* | Filed herewith |
** | Furnished herewith |
*** | ||||||||||||
Submitted electronically herewith |
Attached as Exhibits 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheet as of December 31, 2017September 30, 2020 and March 31, 20172020 (ii) Condensed Statements of Operations and Income for the three and ninesix months ended December 31, 2017September 30, 2020 and 2016,2019, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and ninesix months ended December 31, 2017September 30, 2020 and 2016,2019, (iv) Condensed Consolidated Statements of Cash Flows for the ninesix months ended December 31, 2017September 30, 2020 and 2016,2019, and (v) Notes to Condensed Consolidated Financial Statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AMERICAN SUPERCONDUCTOR CORPORATION | ||||
Date: | November 4, 2020 | By: | /s/ John W. Kosiba, Jr. | |
John W. Kosiba, Jr. | ||||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) | ||||