AMERICAN SUPERCONDUCTOR CORP DE

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of American Superconductor Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of American Superconductor Corporation and its subsidiaries (the Company) as of March 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2024, based on criteria established inInternal Control—* Integrated Framework* issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated May 29, 2024 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate

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Overtime Revenue Recognition

As described in Notes 2 and 3 of the consolidated financial statements, for certain arrangements, such as contracts to perform research and development, prototype development contracts and certain customized product sales, the Company records revenues using the over-time method, measured by the relationship of costs incurred to total estimated contract costs. The ability to reliably estimate total costs at completion is challenging, especially on long-term prototype development contracts, and may require significant analysis and judgments by management, including evaluating customer change orders, to determine the appropriate amount of revenue to recognize.

We identified revenue recognition pertaining to customer contracts satisfied over time as a critical audit matter as there are significant judgments exercised by management in determining revenue recognition. Given the high degree of management judgment involved in analyzing the terms and conditions of the Company’s unique customer contracts and the various management cost estimates that are used in the revenue calculations, the audit effort required to evaluate management’s judgments in determining revenue recognition for the Company’s contracts was extensive and required a high degree of auditor judgment.

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

/s/ RSM US LLP

We have served as the Company's auditor since 2013.

Boston, Massachusetts

May 29, 2024

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

1. Nature of the Business and Operations and Liquidity

Nature of the Business and Operations

American Superconductor Corporation (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 orchestrate the rhythm and harmony of power on the grid™ and 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 megawatt-scale power flow.

These consolidated financial statements of the Company have been prepared on a going concern basis in accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and Exchange Commission’s (“SEC”) instructions to Form10-K. 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.

Liquidity

The Company has historically experienced recurring operating losses and as of* March 31, 2024*, the Company had an accumulated deficit of $1,066.7 million. In addition, the Company has historically experienced recurring negative operating cash flows. At* March 31, 2024*, the Company had cash and cash equivalents of $90.5 million. Cash provided by operations for the year ended* March 31, 2024* was $2.1 million.

In* January 2024,the Company filed a shelf registration statement on Form S-3 that will expirethree* years from the date on which it was declared effective,* March 15, 2027 (*the “Form S-3”). The Form S-3 allows the Company to offer and sell from time-to-time up to $250 million of common stock, debt securities, warrants or units comprised of any combination of these securities. The Form S-3 is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its future capital needs. The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

On* January 31, 2024,the Company entered into an underwriting agreement with Oppenheimer & Co. Inc., as a representative of the several underwriters named therein, relating to the issuance and sale (the"2024* Offering") of 6,210,000 shares of the Company's common stock at a public offering price of $11.25 per share. The net proceeds to the Company from the2024 Offering were approximately $65.2 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The2024 Offering closed on* February 14, 2024.*

In recent periods, the Company has experienced inflationary pressure in its supply chain and some delays in sourcing materials needed for its products resulting in some production disruption, both of which have increased the Company's cost of revenues and decreased gross margin. While the impact of inflation has been challenging, the Company has taken actions to limit this pressure, including adjusting the pricing of its products and services. Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine and Israel and Hamas, inflation, rising interest rates, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on the Company's business, financial condition and results of operation.

From time-to-time the Company* mayundertake restructuring activities in order to align the global organization in a manner that the Company believes will better position it to achieve its long-term goals. In January 2023,the Company undertook a reduction in force that involved approximately 5% of the global workforce. This restructuring resulted in $1.0 million of cash expenses, of which $1.0 million has been paid as of March 31,*2024, and is expected to result in annualized cost savings of approximately $5.0 million, which the Company began to realize in fiscal2023.

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The Company believes that based on the information presented above and its annual management assessment, it has sufficient liquidity to fund its operations and capital expenditures for the nexttwelve months following the issuance of the consolidated financial statements for the year ended* March 31, 2024*. The Company’s liquidity is highly dependent on its ability to increase revenues, its ability to control its operating costs, and its ability to raise additional capital, if necessary. The impact of global sources of instability, including the wars between Russia and Ukraine and Israel and Hamas, on the global financing markets* mayreduce the Company's ability to raise additional capital, if necessary, which could negatively impact the Company's liquidity. There can beno* 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. Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions are eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that arenot readily apparent from other sources. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, collectability of receivables, realizability of inventory, goodwill and intangible assets, contingent consideration, warranty provisions, stock-based compensation, tax reserves, and deferred tax assets. Provisions for depreciation are based on their estimated useful lives using the straight-line method. Some of these estimates can be subjective and complex and, consequently, actual results* maydiffer from these estimates under different assumptions or conditions. While for any given estimate or assumption made by the Company’s management there may*be other estimates or assumptions that are reasonable, the Company believes that, given the current facts and circumstances, it is unlikely that applying any such other reasonable estimate or assumption would materially impact the financial statements.

Cash Equivalents

Cash equivalents consist of highly liquid instruments with maturities ofthree 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 Level1 of the valuation hierarchy. Cash equivalents consist principally of certificates of deposits and money market accounts.

Accounts Receivable

Accounts receivable consist of amounts owed by commercial companies and government agencies. Accounts receivable are stated net of allowances for credit losses. The Company’s accounts receivable relate principally to a limited number of customers. As of* March 31, 2024*, Capital Power and INOX Wind Limited accounted for approximately 14% and 12% of the Company's accounts receivable balance, respectively, withno other customers accounting for greater than10% of the balance. As of* March 31,2023, Anovion LLC and Fuji Bridex PTE Ltd accounted for approximately 21% and 15% of the Company's accounts receivable balance, respectively, withno other customers accounting for greater than10% of the balance. Changes in the financial condition or operations of the Company’s customers mayresult in delayed payments or non-payments which would adversely impact its cash flows from operating activities and/or its results of operations. As such, the Company mayrequire collateral, advanced payment or other security based upon the customer history and/or creditworthiness. In determining the allowance for credit losses, the Company evaluates the collectability of accounts receivable based primarily on the probability of recoverability based on historical collection and write-off experience, the age of past due receivables, specific customer circumstances, and current economic trends. The Company hasnot* recorded an allowance for credit losses as of each of the years ended* March 31, 2024* and2023. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payment, additional allowances* may*be required. Failure to accurately estimate the losses for credit losses and ensure that payments are received on a timely basis could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

Inventory

Inventories include material, direct labor and related manufacturing overhead, and are stated at the lower of cost, determined on afirst-in,first-out basis, or net realizable value determined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company records inventory when it takes delivery and title to the product according to the terms of each supply contract.

Program costs* may*be deferred and recorded as inventory on contracts on which costs are incurred in excess of approved contractual amounts and/or funding, if future recovery of the costs is deemed probable.

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At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. Inventories that management considers excess or obsolete are reserved. Management considers forecasted demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written down and a new cost basis is established, it isnot written back up if demand increases.

For the fiscal years ended* March 31, 2024* and2023, the Company recorded inventory reserves of approximately $2.0 million and $1.5 million, respectively, based on evaluating its ending inventory on hand for excess quantities and obsolescence.

Leases

The Company determines whether a contract is or contains a lease at inception of a contract. The Company defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means that the Company has both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

Leases include all agreements in which the Company obtains control of a physical asset. Leases are captured on the balance sheet as both a right of use asset and associated lease liability and are valued based on the commencement of the Company's control of the asset, after being discounted by its incremental borrowing rate. The Company's lease portfolio is made up primarily of real estate leases for its various offices, but also include items such as vehicles, IT equipment and other miscellaneous tools and equipment needed for manufacturing. The Company's incremental borrowing rate was determined through an analysis to identify what rates it could obtain if the Company were to secure external financing for similar transactions, and includes considerations of both the market and its current credit ratings. An analysis is performed annually, or upon execution of any individually material agreement, to ensure that the rates being applied to newly acquired leases are still accurate.

The majority of the Company's leases are classified as operating leases, and therefore the expense is captured in operating loss from operations each period.

The Company has elected to exclude all leases of less thantwelve months from the balance sheet presentation. The Company has also elected a policy in which the Company willnot segregate lease components from non-lease components, so in the event the Company executes an agreement which includes a non-lease component its asset and liability recorded to the balance sheet will include the value of that non-lease component as well. This policy will be applied to all classifications of leases.

Property, Plant and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation and amortization. The Company accounts for depreciation and amortization using the straight-line method to allocate the cost of property, plant and equipment over their estimated useful lives as follows:

Expenditures for maintenance and repairs are expensed as incurred. Upon retirement or other disposition of assets, the costs and related accumulated depreciation are eliminated from the accounts and the resulting gain or loss is reflected in operating expenses.

Valuation of Long-Lived Assets

The Company periodically evaluates its long-lived assets, consisting principally of fixed assets and definite-lived intangible assets, for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-lived assets, the Company reviews the carrying value of its long-lived assets or asset group that is held and used, including intangible assets subject to amortization, for impairment whenever events and circumstances indicate that the carrying value of the assets* maynot* be recoverable. Under the held and used approach, the asset or asset group to be tested for impairment should represent the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company evaluates its long-lived assets whenever events or circumstances suggest that the carrying amount of an asset or group of assets* maynot* be recoverable from the estimated undiscounted future cash flows.

There wereno indicators requiring impairment testing on the Company's long-lived assets during the fiscal years ended* March 31, 2024* and2023.

Goodwill

Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated. The Company performs its annual assessment of goodwill on* February28th* of each fiscal year and whenever events or changes in circumstances or a triggering event indicate that the carrying amount* maynot* be recoverable. Determining whether a triggering event has occurred often involves significant judgment from management. An entity is permitted tofirst assess qualitatively whether it is necessary to perform a goodwill impairment test. The quantitative impairment test is required only if the entity concludes that it is more likely thannot that a reporting unit’s fair value is less than its carrying amount. The Company determines the fair value of a reporting unit, using a methodology which combines an income approach, using a discounted cash flow method, with a market approach. In evaluating whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount, an entity should consider the totality of all relevant events or circumstances that affect the fair value or carrying amount of a reporting unit. If the carrying value of a reporting unit exceeds the reporting unit’s fair value, then an impairment charge is recognized reducing the goodwill by the excess of the carrying amount over the fair value,not to exceed the total amount of the goodwill allocated to the that reporting unit. See Note4, "Goodwill" for further information and discussion.

The Company performed its annual assessment of goodwill on* February**29,* 2024 notingno triggering events from the analysis date to* March 31, 2024*, and determined that there wasno impairment to goodwill. Additionally, there wasno impairment identified for the fiscal year ended* March 31, 2023* based on the assessment performed in the prior fiscal year.

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Revenue Recognition

Revenue contracts are defined as an arrangement that creates enforceable rights and obligations of both parties where collection of the contract price is deemed probable. The Company records revenue based on afive-step model which includes confirmation of contract existence, identifying the performance obligations, determining the transaction price, allocating the contract transaction price to the performance obligations, and recognizing the revenue when (or as) control of goods or services is transferred to the customer. The transfer of control can occur at the time of delivery, installation or post-installation where applicable.

The Company's equipment and system product line includes certain contracts which donot meet the requirements of an exchange transaction and therefore donot fall within the scope of Accounting Standards Codification ("ASC")606.

For certain arrangements, such as contracts to perform research and development, prototype development contracts and certain customized product sales, the Company records revenues using the over-time method, measured by the relationship of costs incurred to total estimated contract costs. Over-time revenue recognition accounting is predominantly used on certain turnkey power systems installations for electric utilities and long-term prototype development contracts with the U.S. government. The Company follows this method when any of thethree following criteria are met: when the customer receives the benefits as they are performed, control transfers to the customer as the work is performed, or there isno alternative use to the Company and there is an enforceable right to payment through the life of the contract. However, the ability to reliably estimate total costs at completion is challenging, especially on long-term prototype development contracts, and could result in future changes in contract estimates. For contracts where reasonably dependable estimates of the revenues and costs cannot be made, the Company follows the point in time method. In addition, some contracts contain an element of variable consideration, including liquidated damages and/or penalties, which requires payment to the customer in the event that delivery timelines or milestones arenot met. The Company estimates the total consideration payable by the customer when the contracts contain variable consideration provisions, based on the most likely amount anticipated to be recognized for transferring the promised goods or services. As a result, the Company* mayconstrain revenue to the extent that a significant reversal in the amount of cumulative revenue recognized willnot* occur until the uncertainty associated with the variable consideration is subsequently resolved.

The Company enters into sales arrangements that* mayprovide for multiple performance obligations to a customer. Sales of certain products may*include extended warranty and support or service packages, and at times include performance bonds. As these contracts progress, the Company continually assesses the probability of a payout from the performance bond. Should the Company determine that such a payout is likely, the Company would record a liability. The Company would reduce revenue to the extent a liability is recorded. In addition, the Company enters into licensing arrangements that include training services.

Performance obligations are separated into more thanone unit of accounting when (1) the delivered element(s) have value to the customer on a stand-alone basis, and (2) the Company's promise to transfer the goods or services to the customer is separately identifiable from other promises in the contract. In general, revenues are separated between the different product shipments which have stand-alone value, and the various services to be provided. Revenue for product shipments is generally recognized at a point in time where control of the product is transferred to the customer, while revenues for the services are generally recognized over the period of performance. The Company identifies all goods and/or services that are to be delivered separately under a sales arrangement andallocates the transaction price to each distinct performance obligation using the respective standalone selling price ("SSP") which is determined primarily using the cost plus expected margin approach for products and a relief from royalty method for licenses. Revenue allocated to each performance obligation is recognized when, or as, the performance obligation is satisfied. The Company reviews SSP and the related margins at least annually. The Company has elected to recognize revenue based on the as invoiced practical expedient if there is a right to consideration from a customer in an amount that corresponds directly with the value of the Company's performance.

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The Company’s license agreements provide either for the payment of contractually determined paid-up front license fees or milestone based payments in consideration for the grant of rights to manufacture and/or sell products using its patented technologies or know-how. Some of these agreements provide for the release of the licensee from past and future intellectual property infringement claims. When the Company can determine that it hasno further obligations other than the grant of the license and that the Company has fully transferred the technology know-how, the Company recognizes the revenue under a point in time model. In other license arrangements, the Company* mayalso agree to provide training services to transfer the technology know-how. In these arrangements, the Company has determined that the licenses haveno* standalone value to the customer and arenot separable from training services as the Company can only fully transfer the technology know-how through the training component. Accordingly, the Company accounts for these arrangements as a single unit of accounting, and recognizes revenue over the period of its performance using the over-time method. Costs for these arrangements are expensed as incurred.

Existing customers are subject to ongoing credit evaluations based on payment history and other factors. If it is determined that collectability of any portion of the contract value isnot probable, an analysis of variable consideration will be performed using either the most likely amount or expected value method to determine the amount of revenue that must be constrained until the scenario causing the variability has been resolved. For contractual arrangements that involve variable consideration, the Company recognizes revenue for these amounts upon reaching the constraining event successfully. The Company doesnot generally provide for extended payment terms or provide its customers with a right of return.

Infrequently, the Company receives requests from customers to hold product being purchased from us for a valid business purpose. The Company recognizes revenues for such arrangements provided the transaction meets, at a minimum, the following criteria: a valid business purpose for the arrangement exists; risk of ownership of the purchased product has been transferred to the buyer; there is a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the product is ready for shipment; there areno continuing performance obligation in regards to the purchased product and these products have been segregated from the Company's inventories and cannot be used to fill other orders received. During the fiscal year ended* March 31, 2024* there wereno such held transactions. Revenues for the fiscal year ended* March 31,*2023 included $0.6 million from such held transactions.

The Company has elected to record taxes collected from customers on a net basis and doesnot include tax amounts in revenue or costs of revenue.

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.

Business Acquisitions

The Company accounts for acquisitions using the purchase method of accounting in accordance with ASC805, Business Combinations. The purchase price for each acquisition is allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Intangible assets, if identified, are also recorded at fair value. The excess purchase price over the estimated fair value of the net assets acquired is recorded as goodwill.

Determining the fair value of certain assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions as well as the use of specialists as needed.

The consideration for its acquisitions* mayinclude future payments that are contingent upon the occurrence of a particular event. The Company records a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date. The Company estimates the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and the likelihood of making related payments, refer to Note12* for further information regarding valuation methodology and assumptions. Each period the Company revalues the contingent consideration obligations associated with the acquisition to fair value and records changes in the fair value within the operating expenses in its consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed revenue risk premium and volatility, as well as changes in the stock price and assumed probability with respect to the attainment of certain financial and operational metrics, among others. Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period. Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the fair value of contingent consideration recorded at each reporting period.

Product Warranty

Warranty obligations are incurred in connection with the sale of the Company’s products. The Company provides assurance-type warranties on all product sales for a term of typicallyone tothree years, and extended service-type warranties at the customers’ option for an additional term ranging up tofour 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 service. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. Future warranty costs are estimated based on historical performance rates and related costs to repair given products. The accounting estimate related to product warranty involves judgment in determining future estimated warranty costs. Should actual performance rates or repair costs differ from estimates, revision to the estimated warranty liability would be required.

Research and Development Costs

Research and development costs are expensed as incurred.

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Income Taxes

The Company’s provision for income taxes is comprised of a current and a deferred portion. The current income tax provision is calculated as the estimated taxes payable or refundable on tax returns for the current fiscal year. The deferred income tax provision is calculated for the estimated future tax effects attributable to temporary differences and carry-forwards using expected tax rates in effect in the years during which the differences are expected to reverse.

Deferred income taxes are recognized for the tax consequences in future fiscal years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each fiscal year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce net deferred tax assets to the amount expected to be realized. The Company has provided a valuation allowance against its U.S. and Romania deferred income tax assets since the Company believes that it is more likely thannot that these deferred tax assets arenot currently realizable due to uncertainty around profitability in the future.

Accounting for income taxes requires atwo-step approach to recognizing and measuring uncertain tax positions. Thefirst step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely thannot that the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. Thesecond step is to measure the tax benefit as the largest amount that is more than50% likely of being realized upon ultimate settlement. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, butnot 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 includes interest and penalties related to gross unrecognized tax benefits within the provision for income taxes. See Note13, “Income Taxes,” for further information regarding its income tax assumptions and expenses.

Stock-Based Compensation

The Company accounts for stock-based payment transactions using a fair value-based method and recognizes the related expense in the results of operations.

Stock-based compensation is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The fair value of restricted stock awards is determined by reference to the fair market value of the Company’s common stock on the date of grant. The Company uses the Black-Scholes option pricing model to estimate the fair value of option awards with service and performance conditions. For awards with service conditions only, the Company recognizes compensation cost on a straight-line basis over the requisite service/vesting period. For awards with performance conditions, estimates of compensation cost are made based on the probable outcome of the performance conditions. The cumulative effect of changes in the probability outcomes are recorded in the period in which the changes occur.

Determining the appropriate fair value model and related assumptions requires judgment, including estimating stock price volatilities of the Company’s common stock and expected terms. The expected volatility rates are estimated based on historical and implied volatilities of the Company’s common stock. The expected term represents the average time that the options that vest are expected to be outstanding based on the vesting provisions and the Company’s historical exercise, cancellation and expiration patterns.

The Company estimates pre-vesting forfeitures when recognizing compensation expense based on historical and forward-looking factors. Changes in estimated forfeiture rates and differences between estimated forfeiture rates and actual experience* mayresult in significant, unanticipated increases or decreases in stock-based compensation expense from period to period. The termination of employment of certain employees who hold large numbers of stock-based awards may*also have a significant, unanticipated impact on forfeiture experience and, therefore, on stock-based compensation expense. The Company will update these assumptions on at least an annual basis and on an interim basis if significant changes to the assumptions are warranted.

The Company accountsfor share-based payments made to non-employeesin the same manner as other share-based payments for employees, with the measurement being based on the fair value at the grant date. The non-employee share based payments will be included within the Company's stock compensation currently reported.

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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. Diluted EPS is computed in periods of net income, 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 issuable shares. For the fiscal years ended* March 31, 2024* and2023, common equivalent shares of 809,949, and 1,421,771, respectively, werenot included in the calculation of diluted EPS as they were considered antidilutive. Of these,300,000 and 1,000,000, respectively, relate to shares associated with the derivative liability for which the contingency hasnot yet been met. The following table reconcilesthe numerators and denominators of the EPS calculation for the fiscal years ended* March 31, 2024* and2023 (in thousands except per share amounts):

Foreign Currency Translation

The functional currency of all the Company’s foreign subsidiaries is the U.S. dollar, except for AMSC Austria, for which the local currency (Euro) is the functional currency. The assets and liabilities of AMSC Austria are translated into U.S. dollars at the exchange rate in effect at the balance sheet date and income and expense items are translated at average rates for the period. Cumulative translation adjustments are excluded from net loss and shown as a separate component of stockholders’ equity. Net foreign currency gains and losses are included in other expense, net on the consolidated statements of operations and were net losses of $0.7 million and $0.1 million, for the fiscal years ended* March 31, 2024* and2023, respectively. The Company hasno restrictions on the foreign exchange activities of its foreign subsidiaries, including the payment of dividends and other distributions.

Risks and Uncertainties

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates and would impact future results of operations and cash flows.

The Company invests its available cash in high credit, quality financial instruments and invests primarily in investment-grade marketable securities, including, butnot limited to, government obligations, money market funds and corporate debt instruments.

Several of the Company’s government contracts are being funded incrementally, and as such, are subject to the future authorization, appropriation, and availability of government funding. The Company has a history of successfully obtaining financing under incrementally-funded contracts with the U.S. government and it expects to continue to obtain additional contract modifications in the year ending* March**31,* 2025 and beyond as incremental funding is authorized and appropriated by the government.

Contingencies

From time to time, the Company* maybe 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. Management reviews these estimates in each accounting period as additional information is known and adjusts the loss provision when appropriate. If the loss isnot* probable or cannot be reasonably estimated, a liability isnot recorded in the consolidated financial statements. If, with respect to a matter, it isnot both probable to result in liability and the amount of loss cannot be reasonably estimated, an estimate of possible loss or range of loss is disclosed unless such an estimate cannot be made. The Company doesnot recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred. See Note17, “Commitments and Contingencies,” for further information.

Disclosure of Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses, and derivatives. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, short-term debt, accounts payable, and accrued expenses due to their short nature approximate fair value at* March 31, 2024* and2023. The estimated fair values have been determined through information obtained from market sources and management estimates. Changes in fair value are recorded to other income (expense), net. The fair value for the contingent consideration is estimated using a Monte Carlo simulation and subject to revaluation at each balance sheet date. The fair value for the warrant arrangements was historically estimated by management based on various assumptions in a lattice model and was subject to revaluation at each balance sheet date. The Company classifies the estimates used to fair value these instruments as Level3 inputs. See Note5, “Fair Value Measurements” for a full discussion on fair value measurements.

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3. 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 afive-step model in accordance with ASC606. For its customer contracts, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) control of goods or services is transferred to the customer. For each of the fiscal years ended* March 31, 2024* and2023,80% of revenue was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

In the Company's equipment and system product line, each contract with a customer summarizes each product sold to a customer, which typically represents distinct performance obligations. 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, which is primarily upon delivery, as the Company has determined that this is the point in time that control transfers to the customer.

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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 haveno alternative use and for which a profit can be expected throughout the life of the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract then the revenue is recognized at a point in time. Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost plus expected margin approach. The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts. The transaction prices on these contracts are allocated based on an adjusted market approach which is 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 arenot 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 isnot assured and a contract doesnot exist under ASC606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there areno 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 isnot 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 typicallyone tothree years, and extended service-type warranties are available for purchase at the customer's option for an additional term ranging up tofour 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 exceedtwelve months; in such cases the long term amount will be assessed for materiality. As of* March 31, 2024and2023,* the Company's capitalized incremental contract costs werenot material. The Company has electednot to adjust the promised amount of consideration for the effects of a significant financing component if the period of financing istwelve months or less. The Company has elected to recognize revenue based on the as invoiced practical expedient if there is a right to consideration from a customer in an amount that corresponds directly with the value of the Company's performance.

The Company monitors costs to meet its obligations on its customer contracts. When it is evident that there is a loss expected on a contract, a contract loss is accrued in the period. During the year ended* March 31, 2023,several long-term contracts that were acquired from Neeltran, Inc. (“Neeltran”) were impacted by higher than planned costs due to required design changes and the impact of inflation on material costs, resulting in an increase to the contract loss accrual of $2.7 million in the year ended March 31,2023 which negatively impacted the Company's gross margins. At the end of March 31, 2024*these projects were completed and the contract loss accrual was relieved.

The Company’s contracts with customers donot 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 (in thousands):

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In the fiscal years ended* March 31, 2024*, and2023,37% and 45% of the Company’s revenues, respectively, were recognized from sales outside the United States. The Company maintains operations in Austria and the United States and sales and service support centers around the world.

As of* March 31, 2024* and* March 31, 2023*, 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 “Unbilled accounts receivable” and “Deferred program costs” (see Note6, “Accounts Receivable” and Note7, “Inventory” for a reconciliation to the consolidated balance sheets) and "Contract liabilities", which are included in the current portion and long term portion of “Deferred revenue” in the Company’s consolidated balance sheets, are as follows (in thousands):

The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations* mayvary significantly each reporting period based on the timing of major new contractual commitments. As of March 31, 2024*, the Company had outstanding performance obligations on existing contracts under ASC606 to be recognized in the next twelve months of approximately $139.9 million. There are also approximately $23.7 million of outstanding performance obligations to be recognized over a period ofthirteen tosixty months. The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated.

The following table sets forth customers who represented10% or more of the Company’s total revenues for the years ended* March 31, 2024* and2023:

4. Goodwill

The guidance under ASC805-30, Business Combinations, provides for the recognition of goodwill on the acquisition date measured as the excess of the aggregate consideration transferred over the net of the acquisition date amounts of net assets acquired and liabilities assumed. The Company's goodwill balance relates to the Neeltran acquisition in fiscal2021, the NEPSI acquisition in fiscal2020, and Infinia Technology Corporation acquisition in fiscal2017 and is reported in the Grid business segment.

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill isnot amortized but reviewed for impairment. Goodwill is reviewed annually on* February**28th* and whenever events or changes in circumstances indicate that the carrying value of the goodwill mightnot be recoverable. There wereno changes to Goodwill during either of the fiscal years ended* March 31, 2024* and2023.

The Company performed its annual assessment of goodwill on* February**29,* 2024 and notedno triggering events from the analysis date to* March 31, 2024* and determined that there wasno impairment to goodwill. Additionally, no impairment resulted from the assessment performed in the fiscal year ended* March 31, 2023*.

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5. 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 intothree broad levels as follows:

The Company provides a gross presentation of activity within Level3 measurement roll-forward and details of transfers in and out of Level1 and2 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 Level1 to Level2 or Level3 is made in the event that the related security is significant to total cash and investments. The Company didnot have any transfers of assets and liabilities from Level1, Level2 or Level3 of the fair value measurement hierarchy during the year ended* March 31, 2024*.

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.

Valuation Techniques

Cash Equivalents

Cash equivalents consist of highly liquid instruments with maturities ofthree 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 Level1 of the valuation hierarchy. Cash equivalents consist principally of certificates of deposits and money market accounts.

Contingent Consideration

Contingent consideration relates to the earnout payment set forth in the Stock Purchase Agreement governing the acquisition of Northeast Power Systems, Inc ("NEPSI") that provides that the selling stockholders* mayreceive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives over varying periods of up tofour* years following the NEPSI Acquisition Date which conclude in* Septemberof2024.* See Note12, "Contingent Consideration" for further discussion. The Company relied on a Monte Carlo method to determine the fair value of the contingent consideration on the closing of the acquisition of NEPSI and continues to revalue the fair value of the contingent consideration using the same method at each subsequent balance sheet date until the contingencies are resolved and the shares to be issued are determined, with the change in fair value recorded in the current period operating loss.

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of* March 31, 2024* and2023 (in thousands):

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

6. Accounts Receivable

Accounts receivable at* March 31, 2024* and* March 31, 2023* consisted of the following (in thousands):

7. Inventory

Inventory, net of reserves, at* March 31, 2024* and* March 31, 2023* consisted of the following (in thousands):

The Company recorded inventory write-downs of $2.0 million and $1.5 million for the fiscal years ended* March 31, 2024* and2023, respectively. These write-downs were based on the Company's evaluation on its inventory on hand for excess quantities and obsolescence.

Deferred program costs as of* March 31, 2024* and* March 31, 2023* primarily represent costs incurred on programs where the Company needs to complete performance obligations before the related revenue and costs will be recognized.

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8. Prepaid and Other Current Assets

During fiscal2022, the Company conducted an analysis as to whether it was entitled to employee retention credits (“ERC”) under the CARES Act as amended by the Taxpayer Certainty and Disaster Tax Relief Act of2020 and the American Rescue Plan Act of2021. Based on the analysis, the Company determined that it was entitled to an ERC of approximately $3.3 million related to payroll taxes paid in thefirst andsecond quarters of2021 and thefirst quarter of2020. The Company determined it met all the criteria required under the gross receipts test of the applicable Internal Revenue Service regulations related to ERCs.

As accounting for payroll tax credits arenot within the scope of ASC740, Income Taxes, the Company has chosen to account for the ERCs by analogizing to the International Accounting Standards Board IAS20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS20, an entity recognizes government grants only when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received. The Company evaluated its eligibility for the ERC and determined that it met all the criteria to claim a refundable tax credit against the employer portion of Social Security taxes for up to 70% of the qualified wages the Company paid to employees for thethree month periods ended* March 31, 2021and June 30, 2021and for up to 50% of the qualified wages the Company paid to employees for thethree* month period ended* March 31, 2020.*

The Company recorded a $3.3 million receivable in prepaid expenses and other current assets and a benefit of $1.8 million to cost of revenues, $0.8 million to selling, general, and administrative, and $0.7 million to research and development in the fiscal year ended* March 31,2023 for the ERC that is expected to be received based on the amended filings. During the year ended March 31,*2024, the Company received $3.0 million for the initial claims that were processed. The remaining balance is expected to be received during fiscal2024.

9. Property, Plant and Equipment

The cost and accumulated depreciation of property, plant and equipment at* March 31, 2024* and2023 are as follows (in thousands):

Depreciation expense was $2.3 million and $2.6 million, for the fiscal years ended* March 31, 2024* and2023, respectively.

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10. Intangible Assets

Intangible assets at* March 31, 2024* and2023 consisted of the following (in thousands):

The Company recorded intangible amortization expense of $2.2 million and $2.8 million, for the fiscal years ended* March 31, 2024* and2023, respectively. Additionally, the Company recorded less than$0.1 million related to intangible amortization related to backlog that is reported in cost of revenues for both the fiscal years ended* March 31, 2024* and2023.

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

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

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11. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at* March 31, 2024* and* March 31, 2023* consistedof the following (in thousands):

The Company generally provides aone tothree year warranty on its products, commencing upon 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):

12. Contingent Consideration

Contingent Consideration

On* October 1, 2020 (the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein. Pursuant to the terms of the NEPSI Stock Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued and outstanding (i) shares of capital stock of NEPSI, and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI's headquarters (the "NEPSI Acquisition"). NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power capacitor banks and harmonic filter banks for use on electric power systems. NEPSI is a wholly-owned subsidiary of the Company and is operated by its Grid business unit. The purchase price was $26.0 million in cash and 873,657 restricted shares of common stock of the Company. As part of the transaction, the selling stockholders mayreceive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up tofour* years following closing of the NEPSI Acquisition.

The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which is expected to require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC815, Derivatives and Hedging. As a result, for each period, the fair value of the contingent consideration will be remeasured and the resulting gain or loss will be recognized in operating expenses until the share amount is fixed.

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

The Company issued 399,999 shares of common stock, and cash in lieu of a fractional share of common stock, related to the achievement of specified revenue objectives at a fair value of $3.1 million in thetwelve months ended* March 31, 2024*. One specified revenue objective, which would have earned the selling stockholders 300,000 shares of Company common stock, wasnot achieved, leaving 300,000 shares of common stock remaining for potential issuance upon the achievement of the last specified revenue objective by* September 30, 2024.The Company recorded a loss of $4.9 million for the increase in the fair value of the contingent consideration in the year ended March 31,2024. The Company recorded a loss of $0.1 million for the increase in the fair value of the contingent consideration in the year ended March 31,*2023.

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13. Income Taxes

(Loss) income before income taxes for the fiscal years ended* March 31, 2024*, and2023 are provided in the table asfollows(in thousands):

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

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

The following is a summary of the principal components of the Company’s deferred tax assets and liabilities (in thousands):

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Under the Tax Cuts and Jobs Act of2017, taxpayers are required to capitalize and amortize expenses related for research and experimental as classified under Section174 beginning in2022. Amortization recovery for such costs arefive years for domestic expenditures andfifteen for foreign expenditures. As of* March 31, 2024*, the Company had approximately $18.4 million of research and experimental expenses that had been capitalized under Section174.

The Company has provided a full valuation allowance against its net deferred income tax assets in the U.S. and Romania since it is more likely thannot that its deferred tax assets willnot be realizable. After consideration of all the available evidence, both positive and negative, the Company has determined that a $177.1 million valuation allowance at* March 31, 2024* is necessary to reduce the deferred tax assets to the amount that will more likely thannot be realized which is a $6.5 million decrease from the $183.6 valuation allowance as of* March 31,*2023.

At* March 31, 2024*, the Company had aggregate net operating loss carryforwards in the U.S. for federal and state income tax purposes of approximately $682.7 millionand $197.2 million, respectively, which expire in the years ending* March 31,*2025 through2040. For U.S. federal tax purpose, approximately$103.1 million of federal net operating losses have an indefinite carryforward period. Included in the U.S. net operating loss are$3.5 million of acquired losses from Power Quality Systems, Inc. and $0.3 million of acquired losses from Infinia Technology Corporation. Research and development and other tax credit carryforwards amounting to approximately $10.6 million and $2.8 million are available to offset federal and state income taxes, respectively, and will expire in the years ending2025 through2041.

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

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

Section382 of the U.S. Internal Revenue Code of1986, as amended (the “IRC”), provides limits on the extent to which a corporation that has undergone an ownership change (as defined) can utilize any net operating loss ("NOL") and general business tax credit carryforwards it* mayhave. The Company updated its study in fiscal2023* to determine whether Section382 could limit the use of its carryforwards in this manner. After completing this study, the Company has concluded that the limitation willnot have a material impact on its ability to utilize its NOL carryforwards. If there were material ownership changes subsequent to the study, such changes could limit the Company's ability to utilize its NOL carryforwards.

The total amount of undistributed foreign earnings available to be repatriated at* March 31, 2024* was $2.2 million resulting in the recording of a$0.3 million deferred tax liability for foreign withholding taxes.

The Company hasnot recorded a deferred tax asset for the temporary difference associated with the excess of the tax greater than the book basis in its Romanian subsidiary as the future tax benefit isnot expected to reverse in the foreseeable future.

Accounting for income taxes requires atwo-step approach to recognizing and measuring uncertain tax positions. Thefirst step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely thannot that the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. Thesecond step is to measure the tax benefit as the largest amount that is more than50% likely of being realized upon ultimate settlement. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, butnot 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 didnot identify any uncertain tax positions at* March 31, 2024*. The Company didnot have any gross unrecognized tax benefits at* March 31, 2024* or2023.

There wereno reversals of uncertain tax positions in the fiscal years ended* March 31, 2024* and2023.

The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes. Any unrecognized tax benefits, if recognized, would favorably affect its effective tax rate in any future period. The Company doesnot expect that the amounts of unrecognized benefits will change significantly within the nexttwelve months.

The Company conducts business globally and, as a result, its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Major tax jurisdictions include the U.S. and Austria. All U.S. income tax filings for fiscal years ended* March**31,* 1997 through2023 remain open and subject to examination.

All fiscal years from the fiscal year ended* March 31,2022 through2024 remain open and subject to examination in Austria. Tax filings in Romania for the fiscal years ended March 31,*2019 through2024 remain open and subject to examination.

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14. Debt

As part of the acquisition of Neeltran, the Company identified four equipment financing agreements that Neeltran had entered into prior to the acquisition of Neeltran on* May 6, 2021.The current debt balance is less than $0.1 million, as of March 31,2024, and current and long-term debt balance was $0.1 million as of March 31,*2023.

15. Leases

Operating 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 lease 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 payment of real estate taxes and insurance. Many of these real estate leases haveone or more renewal options that allow the Company, at its discretion, to renew the lease for varying periods up tofive 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 thantwelve 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 consolidated balance sheets.

Finance*** Leases***

Finance lease right-of-use assets and lease liabilities are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease right-of-use assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease isnot readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease right-of-use assets and interest accretion on finance lease liabilities are recorded to depreciation expense and interest expense, respectively in the Company's consolidated statement of operations.

Supplemental balance sheet information related to leases at* March 31, 2024* and2023 are as follows (in thousands):

The costs related to the Company's finance lease arenot material. The costs related to the Company's operating leases for the fiscal years ended* March 31, 2024* and2023, are as follows (in thousands):

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

16. Stockholders’ Equity

Stock-Based Compensation Plans

As of* March 31, 2024*, the Company hadtwo active stock plans: the Amended and Restated2007 Director Stock Plan (the*“2007* Director Plan”) and the2022 Stock Incentive Plan (the*"2022* Plan"). On* August 2, 2022,the Company's stockholders approved the2022* Plan and amendments to the Company's2007 Director Plan. The2022 Plan authorizes the issuance of 1,150,000 shares of common stock. The amendment to the2007 Director Plan increased the total number of shares of common stock authorized for issuance under the2007 Director Plan from 280,000 shares to 430,000 shares.

The2022 Plan provides for the grant of incentive stock options intended to qualify under Section422 of the IRC of1986, as amended, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. In the case of options, the exercise price isno less than the fair market value of the common stock, as determined by (or in a manner approved by) the Board of Directors, on the date of grant. The contractual life of options is generally 10 years. Options generally vest over a 3-5 year period while restricted stock generally vests over a 3 year period. The2022 Plan replaced the Company’s2007 Stock Incentive Plan, as amended (the*“2007* Plan”).No further awards are granted under the2007 Plan following effectiveness of the2022 Plan; however, the terms and conditions of the2007 Plan continue to govern any outstanding awards granted thereunder.

The2007 Director Plan provides for the grant of nonstatutory stock options and stock awards to members of the Board of Directors who arenot also employees of the Company ("outside directors"). Under the terms of the2007 Director Plan, each outside director is granted an option to purchase shares of common stock with an aggregate grant date value equal to $40,000 upon his or her initial election to the Board with an exercise price equal to the fair market value of the Company’s common stock on the date of the grant. These options vest in equal annual installments over atwo-year period. In addition, each outside director is granted an award of shares of common stock on thethird business day following the last day of each fiscal year with an aggregate value equal to $50,000 using the closing price of the Company's common stocktwo business days following the last day of each fiscal year, subject to proration for any partial fiscal year of service.

As of* March 31, 2024*, the2022 Plan had 70,162 shares available for future issuance, and the2007 Director Plan had 122,796 shares available for future issuance. Additionally, any shares which are subject to awards previously granted under the2007 Plan that are forfeited or lapse unexercised and which following the effectiveness of the2022 Plan arenot issued under the2007 Plan will become available for issuance under the2022 Plan.

Stock-Based Compensation

The components of stock-based compensation for the years ended* March 31, 2024* and2023 were as follows (in thousands):

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested outstanding stock options was less than $0.1 million as of* March 31, 2024*. The total unrecognized compensation cost for unvested outstanding restricted stock was $4.7 million as of* March 31, 2024*. This expense will be recognized over a weighted-average expense period of approximately 1.6 years.

The following table summarizes stock-based compensation expense by financial statement line item for the fiscal years ended* March 31, 2024* and2023 (in thousands):

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

The Company didnot grant any stock options under the2007 Director Plan nor under the2022 Plan during the fiscal year ended* March 31, 2024*. The Company granted 20,564 stock options under the2007 Director Plan during the fiscal year ended* March 31,2023. The stock options granted during the fiscal year ended March 31,2023 will vest over 2 years. The weighted average assumptions used in the Black Scholes valuation model for stock options granted during the fiscal year ended March 31,*2023 are as follows:

The following table summarizes the restricted stock activity for the year ended* March 31, 2024*:

The total fair value of restricted stock that was granted during the fiscal years ended* March 31, 2024* and2023 was $4.8 million and $4.7 million, respectively. The total fair value of restricted stock that vested during the fiscal years ended* March 31, 2024* and2023 was $4.5 million and $2.6 million, respectively.

There were 213,000 perfor mance-based restricted shares awarded during the fiscal year ended* March 31, 2024* for which the performance conditions are deemed probable to be met and the expense is being recorded over athree-year vesting period. There were 200,000 performance-based restricted shares awarded during the fiscal year ended* March 31, 2023* for which the performance conditions are deemed probable to be met and the expense is being recorded over athree-year vesting period.

The remaining shares awarded vest upon the passage of time. For awards that vest upon the passage of time, expense is being recorded over the vesting period.

Employee Stock Purchase Plan

The Company maintains the2000 Employee Stock Purchase Plan, as amended (the "ESPP") which provides employees with the opportunity to purchase shares of common stock at a price equal to the market value of the common stock at the end of the offering period, less a 15% purchase discount. As of* March 31, 2024*, the ESPP had 66,221 shares available for future issuance. The Company recognized less than$0.1 million of compensation expense for both the fiscal years ended* March 31, 2024* and2023, related to the ESPP.

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17. Commitments and Contingencies

Purchase Commitments

The Company periodically enters into non-cancelable purchase contracts in order to ensure the availability of materials to support production of its products. Purchase commitments represent enforceable and legally binding agreements with suppliers to purchase goods or services. The Company periodically assesses the need to provide for impairment on these purchase contracts and records a loss on purchase commitments when required.

Lease Commitments

During the years ended* March 31, 2024* and2023, all lease costs were recorded in selling, general and administrative expense. See Note15, "Leases" for further details.

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 statementsnot misleading. If the loss isnot probable or cannot be reasonably estimated, a liability isnot 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* March 31, 2024*, the Company had $1.3 million of restricted cash included in long-term assets and $0.5 million of restricted cash included in current assets. As of* March 31,*2023, the Company had $0.6 million of restricted cash included in long term assets and $1.7 million of restricted cash included in current assets. These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts and long-term projects or collateral deposits. These deposits are held in interest bearing accounts.

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18. Employee Benefit Plans

The Company has implemented a defined contribution plan (the “Plan”) under Section401(k) of the IRC. Any contributions made by the Company to the Plan are discretionary. The Company has a stock match program under which the Company matched, in the form of Company common stock,50% of thefirst 6% of eligible contributions. The Company recorded expensesof $0.6 million in each of the fiscal years ended* March 31, 2024* and2023, and recorded corresponding charges to additional paid-in capital related to this program.

19. Restructuring

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic420, Exit or Disposal Cost Obligations (“ASC420”) and ASC Topic712, Compensation—Nonretirement Postemployment Benefits (“ASC712”). In accounting for these obligations, the Company is required to make assumptions related to the amounts of employee severance, benefits, and related costs and the time period over which leased facilities will remain vacant, sublease terms, sublease rates and discount rates. Estimates and assumptions are based on the best information available at the time the obligation arises. These estimates are reviewed and revised as facts and circumstances dictate; changes in these estimates could have a material effect on the amount accrued on the consolidated balance sheets.

On* January 24, 2023,the Company approved a plan to reduce its global workforce by approximately 5%, effective as of such date. The purpose of the workforce reduction was to reduce operating expenses to better align with the Company’s current revenues. In fiscal2022,* the Company recorded restructuring charges of $1.0 million as a result of this reduction in force, which was comprised of severance pay. All amounts related to these restructuring activities have been paid as of* March 31, 2024*.

The following table presents restructuring charges and cash payments during the year ended* March 31, 2024* and2023 (in thousands):

All restructuring charges discussed above are included within restructuring in the Company’s consolidated statements of operations. The Company includes accrued restructuring within accounts payable and accrued expenses in the consolidated balance sheets. The Company's restructuring charges relate primarily to the Grid business segment operations in the United States.

20. Business Segments

The Company reports its financial results intwo reportable business segments: Grid and Wind. In accordance with ASC280, Segment Reporting, the Company aggregates four operating segments intoone reporting segment for financial reporting purposes due to their similar operating and financial characteristics. The Company's operating segments reflect the way in which internally-reported financial information is used to make decisions and allocate resources.

Through the Company’s power grid offerings, the Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through its transmission planning services, power electronics, and superconductor-based systems. The sales process is enabled by transmission planning services that allow it to identify power grid congestion, poor power quality and other risks, which helps the Company determine how its solutions can improve network performance. These services often lead to sales of grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems. The Company also sells ship protection products to the U.S. Navy through its Grid business segment.

Through the Company’s wind power offerings, the Wind business segment enables manufacturers to field highly competitive wind turbines through its advanced power electronics and control system products, engineered designs, and support services. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of2 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.

Theoperating results for thetwo business segments are as follows (in thousands):

Total assets for thetwo business segments as of* March 31, 2024* and* March 31, 2023* are as follows (in thousands):

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 doesnot believe are specifically attributable or allocable to either of thetwo business segments have been excluded from the segment operating loss.

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Unallocated corporate expenses primarily consist of a loss on contingent consideration of$4.9 million, and stock-based compensation expense of $4.7 million in the fiscal year ended* March 31, 2024*. Unallocated corporate expenses consist of a loss on contingent consideration of $0.1 million, stock-based compensation expense of $4.7 million and a restructuring charge of $1.0 million in the year ended* March 31, 2023*.

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

21. Recent Accounting Pronouncements

In* June 2016**,* the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU2016-13 will provide more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the release of ASU2019-10 in* November 2019,the effective date, as long as the Company remained a smaller reporting company, was annual reporting periods beginning after December 15, 2022.As of April 1, 2023,the Company has adopted ASU2016*-13 and notedno material impact on its consolidated financial statements.

In* October 2021,the FASB issued ASU2021*-08, Business Combinations (Topic805*): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers*. The amendments in ASU2021-08 will improve the accounting for acquired revenue contracts with customers in a business combination. Following the release of ASU2021-08 in* October 2021,the effective date was annual reporting periods beginning after December 15, 2022.As of April 1, 2023,the Company has adopted ASU2021*-08 and notedno material impact on its consolidated financial statements.

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures*. The amendments in ASU2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. Following the release of ASU2023-07 in* November 2023,the effective date will be annual reporting periods beginning after December 15, 2024.As of March 31, 2024*, the Company is evaluating the impact on its consolidated financial statements.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*): Improvements to Income Tax Disclosures*. The amendments in ASU2023-09 address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. Following the release of ASU2023-09 in* December 2023,the effective date will be annual reporting periods beginning after December 15, 2024.As of March 31, 2024*, the Company is evaluating the impact on its consolidated financial statements.

In* March 2024,the FASB issued ASU2024*-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. The amendments in ASU2024-02 contain amendments to the Codification that remove references to various FASB Concepts Statements. Following the release of ASU2024-02 in* March 2024,the effective date will be annual reporting periods beginning after December 15, 2024.As of March 31, 2024,*the Company is evaluating any material impact on its consolidated financial statements.

22. Subsequent Events

The Company has performed an evaluation of subsequent events through the time of filing this Annual Report on Form10-K with the SEC, and has determined that there areno such events to report.

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