Revenue Recognition

April 1, 2018,

the Company adopted Accounting Standards Codification (“ASC”)

606,

Revenue from Contracts with Customers,

and all the related amendments and applied it to all contracts that were

not

completed as of

April 1, 2018

using the modified retrospective method.

The Company’s revenues in its Grid segment are derived primarily through enabling the transmission and distribution of power, providing planning services that allow it to identify power grid needs and risks, and developing ship protection systems for the U.S. Navy. The Company’s revenues in its Wind segment are derived primarily through supplying advanced power electronics and control systems, licensing its highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The Company records revenue based on a

five

-step model in accordance with ASC

606.

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. As of

June 30, 2019

% 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 represent distinct performance obligations. A contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost plus expected margin approach and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s product sales transfer control to the customer in line with the contracted delivery terms and revenue is recorded at the point in time when title and risk transfer to the customer, as the Company has determined that this is the point in time that control transfers to the customer.

The Company's equipment and system product line includes contracts which do

not

meet the requirements of an exchange transaction and therefore do

not

fall within the scope of ASC

606.

As these non-exchange transaction contracts are considered grant revenue and do

not

fall within any specific accounting literature, the Company follows guidance within ASC

606

by analogy to recognize grant revenue over time. In the

three

months ended

June 30, 2019

the Company recorded

$0.4

million in grant revenue, which is included in the Company’s Grid Revenue. There was

grant revenue in the prior year.

In the Company's service and technology development product line, there are several different types of transactions and each begins with a contract with a customer that summarizes each product sold to a customer, which typically represents distinct performance obligations. The technology development transactions are primarily for activities that have

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 are

not

deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists. The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts. The transaction prices of these agreements are calculated based on an adjusted market approach as specified in the contract. The Company reports royalty revenue for usage-based royalties when the sales have occurred. In circumstances when collectability is

not

assured and a contract does

not

exist under ASC

606,

revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are

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 which occurs based on the contracted delivery terms or when the requested service work has been completed. The transaction price for these goods is allocated based on the adjusted market approach considering similar transactions under similar circumstances. Service contracts are also derived from ongoing maintenance contracts and extended service-type warranty contracts. In these transactions, the Company is contracted to provide an ongoing service over a specified period of time. As the customer is consuming the benefits as the service is being provided the revenue is recognized over time ratably.

The Company’s policy is to

not

accept volume discounts, product returns, or rebates and allowances within its contracts. In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.

The Company provides assurance-type warranties on all product sales for a term of typically

one

two

years, and extended service-type warranties at the customers’ option for an additional term ranging up to

four

additional years. The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure. For all extended service-type warranties, the Company recognizes the revenue ratably over time during the effective period of the services.

The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with revenue-producing activities. The Company has elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized. The Company has elected to recognize incremental costs of obtaining a contract as expense when incurred except in contracts where the amortization period would exceed

twelve

months; in such cases the long term amount will be assessed for materiality. The Company has elected to

not

adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is

twelve

months or less.

The Company’s contracts with customers do

not

typically include extended payment terms and

may

include milestone billing over the life of the contract. Payment terms vary by contract type and type of customer and generally range from

days from delivery.

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

	Three Months Ended June 30, 2019
Product Line:	Grid		Wind
Equipment and systems	$	8,354	$	3,505
Services and technology development		1,501		410
Total	$	9,855	$	3,915

Region:
Americas	$	7,801	$	46
Asia Pacific		1,827		3,856
EMEA		227		13
Total	$	9,855	$	3,915

	Three Months Ended June 30, 2018
Product Line:	Grid		Wind
Equipment and systems	$	7,462	$	3,492
Services and technology development		1,467		186
Total	$	8,929	$	3,678

Region:
Americas	$	7,496	$	23
Asia Pacific		808		3,595
EMEA		625		60
Total	$	8,929	$	3,678

As of

June 30, 2019

and

June 30, 2018

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 Note

“Accounts Receivable” and Note

“Inventory” for a reconciliation to the condensed consolidated balance sheets) and contract liabilities, which are included in the current portion and long term portion of “deferred revenue” in the Company’s condensed consolidated balance sheets, are as follows:

	Unbilled Accounts Receivable			Deferred Program Costs			Contract Liabilities
Beginning balance as of March 31, 2018	$	3,016		$	2,567		$	21,937
Impact of adoption of ASC 606		—			(1,599	)		(2,657	)
Increases for costs incurred to fulfill performance obligations		—			1,132			—
Increase (decrease) due to customer billings		(3,221	)		—			4,281
Decrease due to cost recognition on completed performance obligations		—			(48	)		—
Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations		4,824			(9	)		(3,324	)
Other changes and FX impact		(16	)		34			(764	)
Ending balance as of June 30, 2018	$	4,603		$	2,077		$	19,473

	Unbilled Accounts Receivable			Deferred Program Costs			Contract Liabilities
Beginning balance as of March 31, 2019	$	2,213		$	318		$	15,521
Increases for costs incurred to fulfill performance obligations		0			771			0
Increase (decrease) due to customer billings		(1,584	)		0			10,857
Decrease due to cost recognition on completed performance obligations		0			(4	)		0
Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations		1,467			0			(7,761	)
Other changes and FX impact		(3	)		3			73
Ending balance as of June 30, 2019	$	2,093		$	1,088		$	18,690

The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations

may

vary significantly each reporting period based on the timing of major new contractual commitments. As of

June 30, 2019

, the Company had outstanding performance obligations on existing contracts under ASC

606

to be recognized in the next

twelve

months of approximately $

54.7

million. There are also approximately $

9.8

million of outstanding performance obligations to be recognized over a period of

thirteen

sixty

months. The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated. The

twelve

month performance obligations include anticipated shipments to Inox based on the

twelve

month rolling forecast provided by Inox on the multi-year supply contract. The quantities specified in any forecast provided by Inox related to the multi-year supply contract are firm and irrevocable for the

first

three

months of a

twelve

month rolling forecast. The timing of the performance obligations beyond the

twelve

month forecast provided by Inox are

not

determinable and therefore are

not

included in the total remaining performance obligations.

The following table sets forth customers who represented

10%

or more of the Company’s total revenues for the

three

months ended

June 30, 2019

and

2018

		Three Months Ended
	Reportable	June 30, 2019
	Segment	2019	2018
Inox Wind Limited	Wind	27%	25%
Vestas	Grid	<10%	36%
Micron Technology	Grid	25%	<10%