2. Acquisition

Acquisition of Comtrafo

On  December 5, 2025, the Company entered into the Stock Exchange Agreement with the selling stockholders named therein. Pursuant to the terms of the Stock Exchange Agreement and concurrently with entering into such agreement, AMSC Brazil, the Company's wholly-owned subsidiary, directly or indirectly acquired all of the issued and outstanding shares of capital stock of Comtrafo. Additionally, the Company has agreed to pay the selling stockholders of the Comtrafo Acquisition an additional amount up to an additional 382.5 million Brazilian Real of cash upon the achievement of specified EBITDA objectives during the three years following the Comtrafo Acquisition Date. This contingent consideration is recorded as a liability based on a Monte Carlo simulation to determine fair value at the time of issuance. Comtrafo is a Brazil-based manufacturer of large power and distribution transformers primarily for utility customers and also for industrial customers. The acquisition will expand the Company's global footprint into Latin America. 

The Comtrafo Acquisition has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations. The Company allocated the purchase price on a preliminary basis using the information available as of  December 5, 2025 to the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, and revisions of provisional estimates of fair values of deferred taxes, contingent consideration and intangible asset balances. Changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill. 

The total purchase price of approximately $202.9 million includes the fair value of the Company's common stock issued at closing, contingent consideration and cash paid, as follows (in millions except share data and per share):

At the Comtrafo Acquisition Date, in addition to the $88.3 million cash, the Company valued the Company's common stock at $33.01 per share, which was the opening price on that date. Comtrafo Acquisition costs of $1.2 million were included in selling, general, and administrative ("SG&A") for the fiscal year ended  March 31, 2026. 

During the quarter ended  March 31, 2026 the Company determined adjustments were required to the opening balance sheet to correct immaterial errors in the allocation and recording of the purchase price reflected in the table below. The debt was subsequently paid in the quarter ended  March 31, 2026 and the restricted cash balance was released in the quarter ended March 31, 2026. The following table summarizes the allocation of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed and related deferred income taxes in connection with the Comtrafo Acquisition as of the Comtrafo Acquisition Date as previously reported in the period ended  December 31, 2025 and after the adjustments for the immaterial errors recorded in the quarter ended  March 31, 2026 (in millions):

Based on further review by management, a measurement period adjustment of $0.4 million was recorded to increase accounts receivable and reduce deferred tax assets by $3.0 million with an offsetting increase to goodwill, increasing the total goodwill to $125.3 million.  

The fair value of the financial assets acquired includes receivables with a fair value of $6.9 million. The gross amount due is $10.5 million, of which $3.6 million is expected to be uncollectible. The Company adjusted the fair value for receivables that exceeded a year. 

Inventory includes a $1.5 million adjustment to step-up the inventory balance to fair value consistent with the purchase price allocation. The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling cost and a normal profit margin on those manufacturing and selling efforts. The inventory step-up adjustment increased cost of revenue $0.8 million in the fiscal year ended  March 31, 2026, as the inventory was sold.

Backlog of $2.6 million was evaluated using the multi period excess earnings method under the income approach. The contracts do not provide for any guarantees to source all future requirements from the Company. The amortization method being utilized is economic consumption estimated over a sixteen-month period with the expense being allocated to cost of revenues. 

Customer relationships of $7.9 million relate to customers currently under contract and was based on a multi period excess earnings method under the income approach. The method of amortization being utilized is the economic consumption over 5 years with the expense being allocated to SG&A. 

Goodwill represents the value associated with the acquired workforce and expected synergies related to the business combination of the two companies. Goodwill resulting from the Comtrafo Acquisition was assigned to the Company's Grid segment. Goodwill recognized in the Comtrafo Acquisition is not deductible for tax purposes. The $1.1 million of deferred tax asset is primarily related to net operating losses and basis difference of inventory, offset by basis difference of intangibles and property, plant, and equipment.

Acquisition of NWL

On August 1, 2024, the Company acquired all of the issued and outstanding shares of capital stock of Megatran. Megatran's wholly-owned subsidiary, NWL, Inc. ("NWL"), is a U.S.-based global provider of engineered power conversion solutions for demanding industrial and military applications.

The Acquisition has been accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations. The Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the Acquisition Date. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill.

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

At the Acquisition Date, in addition to the $30.0 million cash, the Company valued the Company’s common stock, using $24.16 per share, which was the closing price on the day prior to the day that the Company acquired Megatran. Acquisition costs of $1.1 million were included in SG&A for the fiscal year ended  March 31, 2025.

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

The fair value of the financial assets acquired includes receivables with a fair value of $16.1 million. The gross amount due is $16.9 million, of which $0.8 million is expected to be uncollectible.

Inventory includes a $0.7 million adjustment to step up the inventory balance to fair value consistent with the purchase price allocation. The fair value was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling cost and a normal profit margin on those manufacturing and selling efforts. The inventory step up adjustment increased cost of revenue $0.7 million for the fiscal year ended  March 31, 2025 as the inventory was sold.

Backlog of $0.7 million was evaluated using the multi period excess earnings method under the income approach. The contracts with customers do not provide for any guarantees to source all future requirements from the Company. The amortization method being utilized is economic consumption estimated over an eight-month period with the expense being allocated to cost of revenues.

Customer relationships of $1.3 million relates to customers currently under contract and was determined based on a multi period excess earnings method under the income approach. The method of amortization being utilized is straight line over 10 years, as the results were not materially different from the economic consumption method, with the expense being allocated to SG&A.

Goodwill represents the value associated with the acquired workforce and expected synergies related to the business combination of the two companies. Goodwill resulting from the Acquisition was assigned to the Company’s Grid business segment. Goodwill recognized in the Acquisition is not deductible for tax purposes. The Company has finalized its purchase price allocation for the NWL Acquisition, and there were no changes to net assets and goodwill recorded by the Company as of August 1, 2025. 

Pro forma Operating Results (Unaudited)

The pro forma consolidated statement of operations for the fiscal years ended  March 31, 2026 and 2025 presented as if the acquisitions of Comtrafo and NWL had occurred on April 1, 2024, is unaudited and is as follows:

The pro forma amounts include the historical operating results of the Company, NWL, and Comtrafo with appropriate adjustments that give effect to acquisition related costs, income taxes, intangible amortization resulting from the Acquisitions and certain conforming accounting policies of the Company. The pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Acquisitions and related transactions had been completed at the beginning of the applicable periods presented. In addition, the pro forma amounts are not necessarily indicative of operating results in future periods.

In the consolidated results for the fiscal year ended  March 31, 2026, Comtrafo and AMSC Brazil's operations are included in the Company's consolidated results from the Acquisition Date of December 5, 2025. Comtrafo and AMSC Brazil contributed $21.9 million of revenue and $3.2 million in net loss for the Company for the fiscal year ended March 31, 2026. Amortization expense of $1.7 million is included for the fiscal year ended March 31, 2026, as a result of the Comtrafo acquired intangible assets. In addition, $0.8 million for the step-up basis assigned to acquired inventory was charged to cost of revenues for the fiscal year ended March 31, 2026. AMSC Brazil includes a $4.2 million loss for the change in fair value on the contingent consideration in the fiscal year ended March 31, 2026.