XML 29 R19.htm IDEA: XBRL DOCUMENT

Note 13 - Contingent Consideration

6 Months Ended

Sep. 30, 2023

Business Combination, Contingent Consideration [Text Block]

13. Contingent Consideration

Acquisition of NEPSI

On October 1, 2020 (the "NEPSI Acquisition Date"), the Company entered into a Stock Purchase Agreement (the "NEPSI Stock Purchase Agreement") with the selling stockholders named therein. 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 may receive up to an additional 1,000,000 shares of common stock of the Company upon the achievement of certain specified revenue objectives during varying periods of up to four years following closing of the NEPSI Acquisition. NEPSI has recognized revenues in excess of $75.0 million during the three years after the NEPSI Acquisition Date. As a result, the Company expects to issue 400,000 shares of common stock of the Company to the selling stockholders during the quarter ending December 31, 2023, upon certification of the achievement of specified earnout revenue objectives.

Contingent Consideration

The Company evaluated the NEPSI Acquisition earnout payment set forth in the NEPSI Stock Purchase Agreement, which is expected to require settlement in the Company's common stock, and determined the contingent consideration qualified for liability classification and derivative treatment under ASC 815, Derivatives and Hedging. As a result, for each period, the fair value of the contingent consideration will be remeasured and the resulting gain or loss will be recognized in operating expenses until the share amount is fixed.

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

		*September 30,*			*June 30,*
Fiscal Year 2023		*2023*			*2023*
Revenue risk premium		5.30	%		5.20	%
Revenue volatility		27.5	%		23	%
Stock Price	$	7.55		$	6.26
Payment delay (days)		80			80
Fair value (millions)	$	3.5		$	2.6

	*March 31,*			*December 31,*			*September 30,*			*June 30,*			*March 31,*
Fiscal Year 2022	*2023*			*2022*			*2022*			*2022*			*2022*
Revenue risk premium		5.30	%		5.30	%		5.20	%		6.60	%		6.50	%
Revenue volatility		25	%		25	%		25	%		30	%		33	%
Stock Price	$	4.91		$	3.68		$	4.38		$	5.18		$	7.61
Payment delay (days)		80			80			80			80			80
Fair value (millions)	$	1.3		$	0.9		$	1.1		$	1.4		$	1.2

The Company recorded net losses of $0.9 million and $2.2 million resulting from the increases in the fair value of the contingent consideration in the three and six months ended September 30, 2023, respectively. The Company recorded a net gain of $0.3 million and $0.1 million resulting from the decrease in the fair value of the contingent consideration in the three and six months ended September 30, 2022, respectively.