AMSC

AMSC Stockholders,

Fiscal 2020 was a year of significant growth and diversification
for AMSC. We executed on our strategy, both organically and
through acquisition. We expanded our Grid product offering,
extended our geographic and market reach and accelerated our
path toward profitability. We enhanced our presence in
profitable markets and established predictable revenue streams
for our Grid business. Our Grid business itself is now larger than
the entire business was just two years ago.

In fiscal 2020, we grew our Grid business by more than 40% -
our sixth year in a row of growth in our Grid segment. This
exceeded our own expectations and is testament to our team’s
execution. Grid revenue in fiscal year 2020 was more than 80%
of our business. We also concluded a successful equity offering
in October 2020, raising net proceeds of just over $50 million.
This additional equity capital is expected to support our efforts
to grow our Grid business in fiscal 2021 and beyond. We
ended the year with a strong balance sheet, including a cash
balance of over $80 million and no debt.

In October 2020, we also announced the acquisition of
Northeast Power Systems, Inc. (NEPSI), a New York-based
manufacturer of capacitor banks and harmonic filters. In May
2021, we acquired Neeltran, Inc. (Neeltran), a Connecticut-
based private company that supplies rectifiers and transformers
into the industrial market. The acquisitions of NEPSI and
Neeltran directly align with our strategic priorities to accelerate
profitable growth independent of our wind business, broaden
our product offerings, and expand both market reach and
content-per-sale in our Grid segment.

Importantly, these two acquisitions should play an important role
in accelerating us to positive operating cash flow on a sustainable
basis and position us for more dramatic growth in the years
ahead. That being said, we believe there are additional growth
opportunities in our Grid business.

In fiscal 2020 we proved our capabilities and established a
foothold in the global off-shore wind market. We completed
our first production order from our South Korea-based
customer, Doosan Heavy Industries Construction Co., Ltd, for
our 5 MW class Electronic Control Systems (ECS). This order
represented our entry into the off-shore wind market with our
5 MW class wind turbine. We continue to focus on expanding
our addressable market to additional off-shore applications.

During this past year we saw uncertainty in the Indian wind
market and at Inox and we expect that this will continue in
fiscal 2021. But, we have diversified our business through Grid
and are growing our overall revenue without Inox. We stand
ready to support Inox as they need support commissioning new
turbines or need new stock of 2 MW ECS. We are hopeful that
fiscal 2021 will be the year that Inox begins transitioning to our
3 MW ECS platform.

Our Ship Protection System (SPS) is the U.S. Navy’s baseline
degaussing design for the San Antonio class ship platform LPD.
The San Antonio Class was our first design win with the U.S.
Navy. In fiscal 2020, we announced our SPS delivery contracts
with Huntington Ingalls Industries through its Ingalls
Shipbuilding division for deployment on LPD 31 and with the
U.S. Navy for deployment on LPD 29. These represent our third
and fourth orders for SPS. We are working very closely with the
U.S. Navy and our supply chain to ensure timely delivery of our
SPS orders. We are prepared for the next SPS order and are
planning for concurrent manufacture of multiple SPS orders.
We see opportunities to sell our SPS to allied Navies as well and
are actively working to make that happen.

Fiscal 2020 was a strategically important year for REG. We
completed the fabrication of the Resilient Electric Grid (REG)
system for ComEd utilizing AMSC’s proprietary Amperium®
superconductor wire and delivered it to the site in Chicago on
time. We have introduced our REG product to many other
utilities across the country, and we believe the energization and
operation of this first REG system in Chicago could be a catalyst
for other utilities to begin deploying our “state-of-the-art”
solution. With the first system deployed, we believe that future
deployments of REG may be de-risked.

Shortly before the start of fiscal 2020, the World Health
Organization declared the coronavirus (COVID-19) outbreak to
be a pandemic. The emergence of COVID-19 created both
operational challenges and macroeconomic concerns for all
businesses, however we believe AMSC demonstrated that we
can operate effectively through this challenging environment.
We were early to implement physical separation protocols at
our manufacturing sites. As a result, we have not missed a beat
in production. We are focused on strong customer service and
product quality. We have also been focusing on cost, and that
means establishing a broader component supply chain for our
systems. The global supply chain we have put in place provides
us with the flexibility to source key components from multiple
sources.

We are a resilient company that has overcome crisis before. Our
factories have remained open and have been operational
throughout the pandemic. Our strong balance sheet allows us
to navigate this period of uncertainty and is expected to enable
us to capitalize on the long-term opportunities driving our
industry when conditions normalize. The initiatives we have
undertaken have put AMSC in a strong position to continue to
weather the pandemic crisis. This is something unique about
our company. We are aggressively managing that which we can
control.

In fiscal 2021, we intend to continue to execute our strategy of
delivering a more sustainable and diversified business. Our
culture is inherently innovative, always striving to be accountable
to our customers, and constantly collaborating. We try to hire
the best and brightest and we listen to and learn from the
markets we serve. I am grateful for our team’s commitment and
delivery on a successful fiscal 2020.

We are executing on our vision to create a Supergrid and a
Supership - a Supergrid that enables more renewables on and
resiliency for our power grid and a Supership that allows for
greater resiliency and operational capability for our fleet. We
provide the control technology that helps orchestrate the
rhythm and harmony of power on the grid™ and protects and
expands the capability and resiliency of the U.S. Navy’s fleet.
We will continue to work hard to deliver resiliency to our power
grid and Naval fleets, and hopefully that is music to the ears of
the markets we serve.

I look forward to reporting to you again following the
completion of fiscal 2021.

Daniel Patrick McGahn
Chairman, President and Chief Executive Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2021
OR

For the Transition Period from

to
Commission file number 000-19672

American Superconductor Corporation

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction
of Incorporation or Organization)

114 East Main Street
Ayer, Massachusetts
(Address of Principal Executive Offices)

04-2959321
(IRS Employer
Identification Number)

01432
(Zip Code)

Registrant’s telephone number, including area code:
(978) 842-3000
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)

Name of each exchange on which registered

AMSC

Nasdaq Global Select Market

Title of each class

Common Stock,
$0.01 par value per share

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act

of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes È No ‘

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ‘
Non-accelerated filer È

‘
Accelerated filer
Smaller reporting company È
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with

any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ‘

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant on September 30, 2020, based on the

closing price of the shares of Common Stock on the Nasdaq Global Select Market on that date ($14.48 per share) was $318.9 million.

Number of shares outstanding of the registrant’s Common Stock, as of May 28, 2021 was 28,016,716

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the annual meeting of stockholders scheduled to be held on July 30, 2021, to be filed with the

Securities and Exchange Commission (the “SEC”), are incorporated by reference in answer to Part III of this Form 10-K.

AMERICAN SUPERCONDUCTOR CORPORATION

Item

INDEX

PART I

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . .
7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . .
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . .
14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

4
18
32
32
32
32

33
34
35
50
51
92
92
94
94

95
95

95
95
95

15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96
96

PART IV

2

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Annual Report
that relate to future events or conditions, including without limitation, the statements in Part I, “Item 1A. Risk
Factors” and in Part II under “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and located elsewhere herein regarding industry prospects, our addressable markets, our
competitive position, the benefits of our acquisitions, the ongoing impact of the COVID-19 pandemic on our
business, financial results and financial condition, expectations for when our products become operational,
capabilities and potential uses of our products, or our prospective results of operations or financial position,
may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,”
“anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements.
Such forward-looking statements represent management’s current expectations and are inherently uncertain.
There are a number of important factors that could materially impact the value of our common stock or cause
actual results to differ materially from those indicated by such forward-looking statements. Such factors include
the important factors discussed under the caption “Risk Factors” in Part 1. Item 1A of this Form 10-K for the
fiscal year ended March 31, 2021, which among others, could cause actual results to differ materially from those
indicated by forward-looking statements made herein and presented elsewhere by management from time to time.
Any such forward-looking statements represent management’s estimates as of the date of this Annual Report on
Form 10-K. While we may elect to update such forward-looking statements at some point in the future, we
disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking
statements should not be relied upon as representing our views as of any date subsequent to the date of this
Annual Report on Form 10-K.

3

Item 1.

BUSINESS

Overview

PART I

American Superconductor Corporation (together with its subsidiaries, “AMSC®” or the “Company”) was
founded on April 9, 1987. We are 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. Our system level products leverage the Company’s proprietary “smart materials” and “smart software and
controls” to provide enhanced resiliency and improved performance of megawatt-scale power flow.

In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project

developers to connect, transmit and distribute smarter, cleaner and better power through our power electronics
and superconductor-based systems as well as our transmission planning services. We protect and expand the
capability of the U.S. Navy surface fleet with advanced superconductor-based systems which provide superior
performance advantages to the traditional methods of mine field protection. In the wind power market, we enable
manufacturers to field highly competitive wind turbines through our advanced power electronics and control
system products, engineering, and support services. Our power grid and wind products and services provide
exceptional reliability, security, efficiency, and affordability to our customers.

Our power system solutions help to improve energy efficiency, alleviate power capacity and other

constraints, improve system resiliency, and increase the adoption of renewable energy generation. Demand for
our solutions is driven by: the growing needs for modernized grids that improve power reliability, security, and
quality, the U.S. Navy’s effort to upgrade in-board power systems to support fleet electrification, and the need
for increased renewable sources of electricity, such as wind and solar energy. Concerns about these factors have
led to increased spending by corporations and the military, as well as supportive government regulations and
initiatives on local, state and national levels, including renewable portfolio standards, tax incentives, and
international treaties.

On October 1, 2020, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with
the selling stockholders named therein. Pursuant to the terms of the Stock Purchase Agreement and concurrently
with entering into such agreement, we acquired all of the issued and outstanding (i) shares of capital stock of
Northeast Power Systems, Inc., a New York corporation (“NEPSI”), and (ii) membership interests of Northeast
Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI’s
headquarters (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. As a result of this
transaction, NEPSI became a wholly-owned subsidiary and is operated by our Grid business segment.

On May 6, 2021, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the

selling stockholders named therein. Pursuant to the terms of the Stock Purchase Agreement and concurrently
with entering into such agreement, we acquired all of the issued and outstanding (i) shares of capital stock of
Neeltran, Inc., a Connecticut corporation (“Neeltran”) and (ii) Neeltran International, Inc., a Connecticut
corporation (“International”). Neeltran, Inc., is a U.S. based corporation that supplies rectifiers and transformers
to industrial customers. As a result of this transaction, Neeltran became a wholly-owned subsidiary and is
operated by our Grid business segment.

Market opportunities

We provide solutions that address three key drivers of our business:

•

•

•

the evolving electric grid;

the electrification of the Naval fleet; and

the global demand for renewable energy.

4

Our power system products address five market opportunities (areas):

•

Transmission grid. We provide complete systems that enable electric utilities and renewable energy
project developers to connect and transmit power with exceptional efficiency, reliability, security and
affordability. We provide planning services that allow us to identify power grid congestion, poor power
quality, and other risks, which help us determine how our solutions can improve network performance.
These services often lead to sales of our grid interconnection solutions and power quality systems for
wind farms and solar power plants.

• Distribution grid. We provide a direct-connect power quality system that is installed on the primary

distribution network in communities, business parks, or wherever enhanced power quality is beneficial
and is designed to increase the reliability and resiliency of the distribution grid to serve the needs of
modern energy consumers. Our systems save utilities time and money by avoiding costly options to
strengthen the distribution grid.

• Urban Grid Infrastructure. We design systems to increase the reliability, security and capacity of the

urban grid infrastructure. Today, many urban substations are not networked and can only power a small
section of a city. Our power dense technology based on proprietary smart materials allows for the inter-
connection of substations, controlling the high fault currents that naturally result from such
interconnections. If one substation is compromised, other substations help increase capacity and
reliability. Our system allows instantaneous power outage recovery, potentially doubling to
quadrupling a city’s reliability and resiliency while minimizing grid investment. We design systems
that leverage existing grid assets while protecting cities against storms, outages, and cyber- and
physical attacks.

• Marine protection systems. We sell advanced degaussing systems to the U.S. Navy. Our degaussing
system creates a magnetic signature around a ship to mask the ship against sea mines and torpedoes.
Our degaussing system is comprised of much smaller, lighter and higher performing HTS cable coils
eliminating 50-80% of the system weight and reducing overall energy consumption versus copper-
based degaussing systems.

• Wind Power. Our solutions enable manufacturers to field wind turbines with exceptional power output,
reliability, and affordability. We supply advanced power electronics and control systems, license our
highly engineered wind turbine designs, and provide extensive customer support services to wind
turbine manufacturers. Our design portfolio includes a broad range of drive trains and power ratings of
2 megawatts (“MW”) and higher. We provide a broad range of power electronics and software-based
control systems that are highly integrated and designed for optimized performance, efficiency, and grid
compatibility.

Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are
referring to the fiscal year beginning on April 1 of that same year. For example, fiscal 2020 refers to the fiscal
year that began on April 1, 2020. Other fiscal years follow similarly.

Competitive strengths

We believe our competitive strengths position us well to execute on our growth plans in the markets we

serve.

• Differentiated technologies. Our products leverage the Company’s proprietary smart materials and

smart software and controls to provide enhanced resiliency and improved performance of megawatt-
scale power flow. Conventional conductors of electricity, such as aluminum and copper wire, lose
energy due to resistance. Using a compound of yttrium barium copper oxide (“YBCO”), we
manufacture and provide high-temperature superconductor (“HTS”) wire that can conduct many times
more electricity than conventional conductors with minimal power loss. Our proprietary Amperium®

5

superconductor wire was engineered to allow us to tailor the product via laminations to meet the
electrical and mechanical performance requirements of widely varying end-use applications, including
power cables and fault current limiters for the Grid market. Our PowerModule™ power converters are
based on proprietary software and hardware combinations and are used in a broad array of applications,
including our D-VAR® grid interconnection and voltage control systems, as well as our wind turbine
electrical control systems. Our unique proprietary cooler technology enables our ship protection
systems (“SPS”) to perform in harsh environmental conditions in a quiet and efficient manner.

•

•

Turnkey systems. We have developed full system solutions that we sell directly to customers. This
business model leverages our applications expertise, drives value beyond the wire and enables us to
recognize revenue and take ownership over the marketing and sales of the full systems.

Scalable, low-cost manufacturing platform. Our manufacturing of proprietary wind turbine electrical
control systems and power electronics products are primarily assembly operations with minimal fixed
costs. We can increase the production of these products at costs that we believe are low relative to our
competitors. Our proprietary manufacturing technique for Amperium superconductor wire is modular
in nature, which allows us to expand manufacturing capacity at a relatively low incremental cost.

• Robust patent position and engineering expertise. We have an extensive portfolio of awarded patents
and patent applications worldwide and have rights through exclusive and non-exclusive licenses to
additional patents and patent applications worldwide. We believe our technology and manufacturing
knowledge base, customer and product expertise and patent portfolio provide a strong competitive
position.

• Unique solutions for the markets we serve. We believe we provide wind turbine manufacturers with a
unique and integrated approach of wind turbine design and engineering, customer support services and
power electronics and control systems. We also believe we are the only company in the world that is
able to provide transmission planning services, grid interconnection and voltage control systems, as
well as superconductor-based distribution systems for power grid operators. This unique scope of
supply provides us with greater insight into our customers’ evolving needs and greater cross-selling
opportunities.

Strategy

Building on these competitive strengths, we plan to focus on driving revenue growth and enhancing our

operating results through the objectives defined below.

• Provide solutions from power generation to delivery. From the generation source to the distribution

system, we focus on providing best-in-class engineering, support services, technologies and solutions
that make the world’s power supplies smarter, cleaner and more resilient.

• Focus on “megawatt-scale” power offerings. Our research, product development, and sales efforts
focus on megawatt-scale offerings ranging from designs of power electronics for large wind turbine
platforms to systems that stabilize power flows, integrate renewable power into the grid and carry
power to and from transmission and distribution substations.

• Product innovation. We have a strong record of developing unique solutions for megawatt-scale power
applications and will continue our focus on investing in innovation. Recently, our product development
efforts have included our Resilient Electric Grid (“REG”) system for the electricity grid, SPS for the
U.S. Navy, and D-VAR Volt Var Optimization (“VVO”).

• Provide resiliency and protection capabilities. Our products provide resiliency and protection

capabilities that support an evolving power grid and protect the navy fleet from rising global threats.

• Pursue Emerging Overseas Markets and Serve Key Markets Locally. We focus our sales efforts on

overseas markets that are investing aggressively in renewable energy and power grid projects. As part

6

of our strategy, we serve our key target markets with local sales and field service personnel, which
enables us to understand market dynamics and more effectively anticipate customer needs while also
reducing response time. We currently serve target markets such as Australia, Canada, China, India,
Korea, South Africa, the United Kingdom, Jordan, Mexico and the United States.

Grid market overview

It is widely believed that the electricity grids around the world require modernization through widespread
technology upgrades if they are to maintain reliability while solving rapidly evolving challenges such as more
frequent severe weather, threats of physical- and cyber-attacks, expanded renewable generation (both large and
small scale) and new types of customer loads such as electric vehicles. In fact, a series of reports written by the
Electric Power Research Institute (“EPRI”) in 2016 emphasize the need for increased resiliency, flexibility and
connectivity in electric grids. According to the EPRI reports, the number of geophysical, meteorological,
hydrological, and climatological events in the U.S. rose to an all-time high of 247 events in 2010 – up from
approximately 200 in 2009 and less than 200 in all years combined from 1980 to 2010. Available data further
indicate that the existing U.S. electrical grid has been stressed by U.S. wind power generation increasing from
6 Gigawatts (“GW”) in 2003 to 122 GW in 2020, and photovoltaics (“PV”) power generation increasing from
almost zero in 2003 to nearly 98 GW as of the end of 2020.

Growth in both wind power and PV is expected to continue with the vast majority of such intermittent
generation sources unsupported by energy storage, placing stress on the power grid. Finally, the Edison Electric
Institute estimates that the number of electric vehicles on the road in the U.S. is projected to reach 18.7 million in
2030, up from more than 1.0 million at the end of 2018. These facts and the dependence on the safety, security
and economy of the electricity grid have prompted broad recognition worldwide of the need to modernize and
enhance the reliability and security of power grids.

The Biden Administration’s new Energy Plan, if enacted, could positively impact the demand for our new

energy power systems solutions. The new Energy Plan intends to reform and extend the tax incentives that
generate energy efficiency and clean energy jobs as well as to develop financing mechanisms that leverage
private sector dollars to maximize investment in the clean energy revolution. The Biden Administration plans to
spur the installation of tens of thousands of wind turbines in his first term – including thousands of turbines off
the U.S. coasts. We plan to seek to collaborate with top tier wind turbine manufacturers to provide new wind
farm connectivity to the U.S. power grid.

The new Presidential administration also intends to spur the installation of millions of solar panels –
including utility-scale, rooftop, and community solar systems. Our systems are primarily focused on addressing
renewable energy installations for project developers and wind turbine manufacturers. Because solar power is
dynamic and intermittently variable in nature, distribution grids will need to enhance their network’s capabilities
to accommodate this new resource, while maintaining efficiency and power quality for their customers. Our
systems offers electric utilities superior power quality, environmental benefits, and significant cost-savings over
traditional solutions.

The President’s Energy Policy also focuses on the next generation of electric grid transmission and

distribution, which has been the heart of our long-term growth strategy. We believe our new energy power
systems products are well suited to address this enormous challenge.

Power grid operators worldwide face various challenges, including:

• Resiliency. As our electricity mix changes with the proliferation of renewables and distributed

generation, so does the need to strengthen the electric grid. New technologies such as the addition of
electric vehicles on U.S. roads and urbanization create new challenges for power grid operators.

7

•

Stability. Power grid operators are confronting power quality and stability issues arising from
intermittent renewable energy sources and from the capacity limitations of transmission and overhead
distribution lines and underground cables.

• Reliability. Traditional transmission lines and cables often reach their reliable voltage stability limit
well below their thermal threshold. Driving more power through a power grid when some lines and
cables are operating above their voltage stability limit during times of peak demand can cause either
unacceptably low voltage in the power grid (a brownout) or risk of a sudden, uncontrollable voltage
collapse (a blackout).

• Capacity. The traditional way to enable increases in power grid capacity without losing voltage

stability is to install more overhead power lines and underground cables. However, permitting new
transmission and distribution lines can take 10 years or more due to various public policy issues, such
as environmental, aesthetic, and health concerns. In urban and metropolitan areas, installing additional
conventional underground copper cables is similarly challenging, since many existing underground
corridors carrying power distribution cables are already filled to their physical capacity and cannot
accommodate any additional conventional cables. In addition, adding new conduits requires excavation
to expand existing corridors or create new corridors, which are costly and disruptive undertakings.

• Efficiency. Most overhead lines and underground cables use traditional conductors such as copper and
aluminum, which lose power due to electrical resistance. At transmission voltage, electrical losses
average about 7% in the United States and other developed nations, but can exceed 20% in some
locations due to the distance of the line, quality of the conductor, and the power grid’s architecture and
characteristics, among other factors.

•

Security. Catastrophic equipment failures caused by aging equipment, physical and cyber events, and
weather-related disasters can leave entire sections of an urban environment without power for hours or
days. It can be difficult to recover from extended power outages in urban load centers, worsening
situations where the personal safety of residents and the economic health of businesses are threatened.

Our solutions for the power quality and grid infrastructure market

We address these challenges in the grid market by providing services and solutions designed to increase the

power grid’s capacity, resiliency, reliability, security and efficiency. Our solutions orchestrate the rhythm of
power on the grid. Our solutions include:

• D-VAR® Systems. Our D-VAR system is a system that consists of power electronics and other static

components used for controlling power flow and voltage in the AC transmission system. Our D-VAR
system aims to increase controllability and power transferability of a network, which allows more
effective utilization of existing assets, and reduces the need for new transmission lines and facilities to
increase electricity availability. The power that flows through AC networks comprises both real power,
measured in watts, and reactive power, measured in Volt Amp Reactive (“VARs”). In simple terms,
reactive power is required to support voltage in the power network. D-VAR systems can provide the
reactive power needed to stabilize voltage on the grid. These systems also can be used to connect wind
farms and solar power plants to the power grid seamlessly as well as to protect certain industrial
facilities against voltage swells and sags. Our D-VAR sales process begins with our group of
experienced transmission planners working with power grid operators, renewable energy developers,
and industrial system operators to identify power grid constraints and determine how our solutions
might improve network performance. These services often lead to sales of grid interconnection
solutions for wind farms and solar power plants, and power quality systems for utilities and heavy
industrial operations.

•

actiVAR® Systems. Our actiVAR system is a fast-switching medium-voltage reactive compensation
solution that utilizes passive, fast-switching, and transient-free switching devices. The actiVAR

8

mitigates voltage sags and reduces large inrush currents associated with starting large medium-voltage
motors across-the-line. Large motors require significant amounts of reactive power to start. The flow of
VARs across the power system network results in voltage sags which cause power quality issues to
nearby utility customers, as well as a reduction in the motors ability to start. Traditional solutions to
solve these problems utilize complex and costly adjustable speed drives and synchronous transfer
switchgear solutions. The actiVAR replaces these items at a fraction of the cost. The solution is
prevalent in the pump and compressors stations utilized in industrial industries. Our actiVAR sales
process begins with the Engineering and Procurement Companies during feasibility. We identify viable
projects for this solution and assist with performance and rating calculations, which eventually lead to
the adaption and purchase of the actiVAR solution.

•

armorVAR™ Systems. Our armorVAR systems consists of conventionally switched medium-voltage
metal-enclosed capacitor banks and harmonic filters banks. These systems are installed for reactive
compensation, power factor correction, loss reduction, utility bill savings, and mitigation of common
power quality concerns related to power converter-based generation and load devices. They are utilized
in all industries including renewables, industrial, utility, commercial, mining, and petro-chemical
industries. Our armorVAR systems also support the base VAR requirements of renewable power plants
and can include fully integrated D-VAR and D-VAR VVO solutions to form more advanced hybrid
solutions that are more economical and easier to install.

• D-VAR VVO®. Our D-VAR VVO serves the distribution power grid market. VVO is designed to be a
direct-connect 15 kilovolt class power quality system for a utility’s distribution network to optimally
control voltage as distribution networks are increasingly impacted by distributed generation, such as
roof top and community solar. We believe VVO has the potential to save utilities time and money by
avoiding costly options to increase the reliability and resiliency of the distribution grid and to allow
utilities to build a “plug ‘n play” network to serve the demands of modern energy consumers. Our
VVO target markets are electric distribution grids incorporating distributed generation, including where
utility grid modernization attributes such as the following are applicable: mandated efficiency
upgrades, mass adoption of rooftop solar, community solar, utility-owned micro-grids, variable load
conditions on the distribution grid and voltage regulations alternatives.

• REG Systems. Our REG system has two primary applications that increase the reliability and the

capacity of the urban infrastructure. For applications focused on reliability improvement, the REG
system is used in a “ring” or “loop” configuration to interconnect nearby urban substations. This
enables urban utilities to share transmission connections and excess station capacity, while controlling
the high fault currents that naturally result from such interconnections, providing protection against the
adverse effects that follow the loss of critical substation facilities in urban areas. We believe a utility
installing our REG system could double or quadruple its reliability (e.g. N-1 to N-2, or greater) by
networking substations, which is a solution that utilities would generally not consider when using
conventional technology due to the disruptive nature and economic disadvantages of conventional
technology in urban settings. For applications focused on capacity improvement, the REG system can
be used in a “branch” configuration. In this application, the REG system connects an existing large
urban substation with a new, much smaller, and more simplified substation within the city at a lower
cost. The smaller urban substation does not need large power transformers and takes up much less
space, thereby significantly reducing real estate, construction, and other related costs in the urban area.
The key component to the REG system is a breakthrough cable system that combines very high-power
handling capacity with fault current limiting characteristics—features that are attributable to our
proprietary Amperium HTS wire.

Marine market overview

Defense spending has increased over the past six years as the U.S. military moves to rebuild and retool for
competition against other great powers. In March 2021, the Department of Defense submitted the Navy’s 2021

9

shipbuilding plan to Congress, covering government fiscal years 2022 to 2051, which if fully carried out, would
represent the largest naval buildup since the Reagan Administration in the 1980s.

In September 2020, the Navy’s fleet numbered 290 battle force ships—aircraft carriers, submarines, surface

combatants, amphibious ships, combat logistics ships, and some support ships. The Navy’s 2021 shipbuilding
plan reflects its 2016 force structure assessment and sets a goal of building and maintaining a fleet of 355 battle
force ships.

Since WWII, the Navy fleet has protected its warfare vessels with copper-based degaussing systems. Our
HTS-based degaussing system provides world class mine protection while reducing the weight of the degaussing
system by 50-80%, and reducing energy consumption.

We believe that our HTS systems are an enabling technology for the Navy in its mission to create an
all-electric ship (Super Ship). Our HTS-based SPS degaussing system has been designed into the San Antonio-
class amphibious warfare ship platform, starting with LPD 28. AMSC and the U.S. Navy have collaborated on
AMSC’s advanced HTS-based ship protection systems. The core components of the ship protection system are
common and transferable to other applications being targeted for ship implementation.

Navy fleets worldwide face various challenges, including:

• Power Capacity. Today’s Navy continues to see increased demand for more power applied from both

on and off the ship (shore power). This need is driven by many factors, including the continued
development of high-power density advanced weapons systems and sensors. Many power dense
applications that naval engineers are working on today are already relying on the independent
development of improved power distribution systems for its implementation. Free Electron Lasers,
High Power Radar, Laser Self Defense Systems, Electro Magnetic Rail Guns and Active Denial
(Directed Energy) systems are just a few of the Navy applications that we believe will demand higher
capacity and more efficient energy transfer before deployment to a platform in the fleet can be realized.

•

Space and Weight Limitations. Advances in sensors and weapons for modern ship applications are
expected to drive the need for new power solutions to be light and compact, for weapons’ power draw
to be more efficiently cooled and for easing installation on new ships and enabling upgrades on
existing ones.

• Efficiency. Increased power demands for routine (peace time) operations are straining the conventional

copper based power cable systems that are currently used. The copper cables are very heavy,
cumbersome, and hard to handle. The weight of the cables requires a coordinated effort between a crew
on the pier and a crew on the ship. In many instances, handling these cables requires the use of a crane
or a boom truck to extend them from the pier-side power substations up to the ship’s connection point.
More efficient, compact, lighter weight power transfer and distribution systems are expected to be
required for tomorrow’s Navy to satisfy its future mission requirements.

Our solutions for the marine market

Each Navy ship can be thought of as having its own power grid. We provide advanced ship protection
systems, power management, and power generation systems that are designed to help fleets increase system
efficiencies, enhance warfare capabilities, and boost reliability, performance and security. Our systems support
the Navy’s mission to “electrify the fleet”. Our systems allow for the ship to generate a large amount of electrical
power and distribute the power through an in-board power system to a propulsion motor by way of a much
smaller, lighter, and higher performing HTS cable system, enabling a more advanced, reliable, and secure
solution with a smaller footprint. Our solutions include:

•

Ship Protection Systems. The primary focus of our SPS has been degaussing systems. These systems
reduce a naval ship’s magnetic signature, making it much more difficult for a mine to detect and

10

damage a ship. Traditionally made of heavy copper wire, degaussing is required on all U.S. Navy
combat ships. Our HTS advanced degaussing system is lightweight, compact, and often outperforms its
conventional counterpart. This HTS system is estimated to enable 50-80% reduction in total degaussing
system weight, offering significant potential for fuel savings or options to add different payloads. The
core components of a degaussing system are transferable to other applications being targeted for ship
implementation. Our SPS has been designed into the San Antonio class of amphibious assault
vessels. We are also seeking opportunities to propagate SPS throughout the surface fleet, creating a
relatively long-term revenue stream.

•

In Board Power Delivery Systems. We are working on expanding HTS technology into the fleet
through a variety of applications, including in board power flow and management. The Navy continues
to see increased demand for more power. This need is driven by many factors, including the continued
development of high power density advanced weapons systems and sensors. Many power dense
applications that naval engineers are working on today are already relying on improved power
distribution systems for their implementation and deployment. Free Electron Lasers, High Power
Radar, Laser Self Defense Systems, Electro Magnetic Rail Guns and Active Denial (Directed Energy)
systems are just a few of the Navy applications that will demand higher capacity and more efficient
energy transfer before deployment to a platform in the fleet can be realized. Continued space and
weight limitations for these ship applications are expected to drive the need for new power solutions to
be light and compact, easing installation on new ships and enabling upgrades on existing ones. Our
HTS power cables enable high density energy transfer at unsurpassed efficiency levels in a compact,
lightweight package.

• Power Generation Systems. We are also working on expanding HTS technology into the fleet through a
variety of applications including power generation and electric propulsion. The same HTS technology
used in SPS and in board power delivery systems when applied to rotating machines results in high
power density motors and generators. This enables dramatically more power to be produced in the
same machinery space used for conventional systems, which in turn affords the Navy additional power
for high energy density weapons without significant structural changes to the ship.

• Propulsion systems. Our development work in power generation systems for the Navy extends to

HTS-based electric power propulsion. In board power delivery systems and power generation systems,
when applied to high power density motors, enable the transition to electric propulsion. This is
expected to make new ships more fuel-efficient. Our technology and systems allow the Navy to free up
space for additional war-fighting capability.

Wind market overview

The global energy mix is transitioning towards an increasing amount of renewable energy, including wind

power. Wind power is unlimited in supply and its generation is a zero-emission process. Wind power has become
a major pillar of power supply throughout the world. Wind power is expected to play a key role in the
achievement of the objectives of the Paris Climate Change agreement and the Sustainable Development Goals.

According to GlobalData, a research firm, approximately 84 GW of wind generation capacity were added

worldwide in calendar 2020, as compared to 59 GW in calendar 2019. GlobalData anticipates that more than
87 GW of additional capacity will be added in 2021.

According to GlobalData, annual wind installations in India for calendar 2020 were 1.7 GW and for

calendar 2021 are estimated to be 3 GW.

Several factors are expected to drive the future growth in the wind power market, including substantial
government incentives and mandates that have been established globally, technological improvements, turbine
cost reductions, the development of the offshore wind market, and increasing cost competitiveness with existing

11

power generation technologies. Technological advances, declining turbine production cost and fluctuating prices
for some fossil fuels continue to increase the competitiveness of wind versus traditional power generation
technologies.

Our solutions for the wind market

We address the challenges of the wind power market by designing and engineering wind turbines, providing
extensive support services to wind turbine manufacturers, and manufacturing and selling critical components for
wind turbines.

• Electrical Control Systems. We provide full electrical control systems (“ECS”) to manufacturers of
wind turbines designed by us. Our ECS regulate voltage, control power flows and maximize wind
turbine efficiency, among other functions. To date, we have shipped enough core electrical components
and complete ECS to power over 16,000 Megawatts (“MW”) of wind power. We believe our ECS
represent approximately 5-10% of a wind turbine’s bill of materials.

• Wind Turbine Designs. We design and develop entire state-of-the-art onshore and offshore wind
turbines with power ratings of 2 MWs and higher for manufacturers who are in the business of
producing wind turbines or who plan to enter the business of manufacturing wind turbines. These
customers typically pay us licensing fees, and in some cases royalties, for wind turbine designs, and
purchase from us the ECS needed to operate the wind turbines.

• Customer Support Services. We provide extensive customer support services to wind turbine
manufacturers. These services range from providing designs for customers’ wind turbine
manufacturing plants to establishing and localizing their supply chains and training their employees on
proper wind turbine installation and maintenance. We believe these services enable customers to
accelerate their entry into the wind turbine manufacturing market and lower the cost of their wind
turbine platforms.

Our approach to the wind energy markets allows our customers to use our world-class turbine engineering

capabilities while minimizing their research and development costs. These services and our advanced ECS
provide our customers with the ability to produce standardized or next-generation wind turbines at scale for their
local market or the global market quickly and cost-effectively. Our team of highly experienced engineers works
with clients to customize turbine designs specifically tailored to local markets while providing ongoing access to
field services support and future technological advances.

Customers

We serve customers globally through a localized sales and field service presence in our core target
markets. We have served over 100 customers in the grid market since our inception, including Commonwealth
Edison, YMC Incorporated, the U.S. Navy, SSE plc in the United Kingdom, Consolidated Power Projects (Pty)
Ltd in South Africa, Fuji Bridex in Singapore, Vestas Wind Systems A/S in Denmark, and Ergon Energy in
Australia. Additionally, our sales personnel in the United States are supported by manufacturers’ sales
representatives. We have designed wind turbines for and licensed wind turbine designs to wind turbine
manufacturing customers including Inox Wind Limited (“Inox”) in India and Doosan Heavy Industries
(“Doosan”) in Korea.

In fiscal 2020, EPC Services Company accounted for 13% of our total revenues. In fiscal 2019, Department

of Homeland Security accounted for 10% of our total revenues. In fiscal 2018, Inox accounted for 34% of total
revenues. No other customer accounted for more than 10% of our total revenues in each of fiscal 2020, 2019, and
2018.

12

Facilities and Manufacturing

Our primary facilities and their primary functions are as follows:

• Ayer, Massachusetts — Corporate headquarters; Grid and Wind segment manufacturing, and research

and development

• Westminster, Massachusetts — Grid segment manufacturing

•

Pewaukee, Wisconsin — Grid segment research and development

• Richland, Washington — Grid segment research and development

• Klagenfurt, Austria —Wind segment project engineering, customer support and research and

development

• Queensbury, New York — Grid segment manufacturing

• New Milford, Connecticut—Grid segment manufacturing

Our global footprint also includes sales and/or field service offices in Australia, India, South Korea, the
United Kingdom and McLean, VA. During fiscal 2020 we closed facilities in Romania and China following the
move of our Wind manufacturing to corporate headquarters.

The principal raw materials used in the manufacture of the Company’s products are nickel, silver, yttruim,
copper, brass, and stainless steel. Major components are insulated gate bi-polar transistors, heatsinks, inductors,
enclosures, transformers, and printed circuit boards. Most of these raw materials are available from multiple
sources in the United States and world markets. Generally, the Company believes that adequate alternative
sources are available for the majority of its key raw material and purchased component needs, however, the
Company is dependent on a single or limited number of suppliers for certain materials and components.

Sales and Marketing

Our strategy is to serve customers locally in our core target markets through a direct sales force operating
out of sales offices worldwide. In addition, we utilize manufacturers’ sales representatives in the United States
and Canada to market our products to utilities in North America. The sales force also leverages business
development staff for our various offerings as well as our team of wind turbine engineers and power grid
transmission planners, all of whom help to ensure that we have an in-depth understanding of customer needs and
provide cost-effective solutions for those needs.

Segments

We segment our operations into two market-facing business units: Grid and Wind. We believe this market-

centric structure enables us to more effectively anticipate and meet the needs of power generation project
developers, the Navy’s ship protection systems, electric utilities and wind turbine manufacturers.

Competition

We face competition in various aspects of our technology and product development. We believe that
competitive performance in the marketplace depends upon several factors, including technical innovation, range
of products and services, product quality and reliability, customer service and technical support.

We face competition from other companies offering FACTS systems similar to our D-VAR products. These
include adaptive VAR compensators, Dynamic voltage restorers (“DVRs”), and STATCOMs produced by ABB,
Siemens, RXHK, NR Electric Co,. and Ingeteam, and battery-based uninterruptable power supply (“UPS”)
systems offered by various companies around the world.

13

With our HTS-based REG product, we are offering a new approach that provides alternatives to utilities for
power system design. Therefore, we believe that we compete with traditional approaches such as new full-sized
substations, overhead and underground transmission, and urban power transformers.

We believe we are currently the only company that can offer HTS-based SPS products that have been fully
qualified for use aboard U.S. Navy surface combatants. Therefore, the primary competition for our SPS products
is currently coming from defense contractors that provide the copper-based systems that our lighter, more
efficient HTS versions have been developed to replace. Companies such as L3, Excelis, Raytheon, and Textron
have the bulk of the copper-based business today.

Our power module conversion equipment and our electrical control systems are designed and integrated into

our wind turbine designs in a way to achieve maximum performance of the turbine. Typically, we are the
exclusive provider of the power module conversion equipment and electrical control systems for our wind
turbine designs. As a result, our power conversion equipment and electrical control systems see limited
competition. Other companies that serve the wind turbine components industry include ABB, and Semikron. We
also face indirect competition in the wind energy market from global manufacturers of wind turbines, such as
Siemens Gamesa, General Electric, and Suzlon. We face competition for the supply of wind turbine engineering
design services from design engineering firms such as Aerodyn.

Patents, licenses and trade secrets

Patent Background

An important part of our business strategy is to develop a strong worldwide patent position in all of our
technology areas. Our intellectual property (“IP”) portfolio includes both patents we own and patents we license
from others. We devote substantial resources to building a strong patent position. Together with the international
counterparts of our patents and patent applications, we own an extensive portfolio of patents and patent
applications worldwide and have rights through exclusive and non-exclusive licenses. We believe that our current
patent position, together with our ability to obtain licenses from other parties to the extent necessary, will provide
us with sufficient proprietary rights to develop and sell our products. However, for the reasons described below,
we cannot assure you that this will be the case.

Despite the strength of our patent position, a number of U.S. and foreign patents and patent applications of
third parties relate to our current products, to products we are developing, or to technology we are now using in
the development or production of our products. We may need to acquire licenses to those patents, contest the
scope or validity of those patents, or design around patented processes or products as necessary. If companies
holding patents or patent applications that we need to license are competitors, we believe the strength of our
patent portfolio will improve our ability to enter into license or cross-license arrangements with these companies.
We have already successfully negotiated cross-licenses with several competitors.

Failure to obtain all necessary patents, licenses and other IP rights upon reasonable terms could significantly

reduce the scope of our business and have a material adverse effect on our results of operations. We do not now
know the likelihood of successfully contesting the scope or validity of patents held by others. In any event, we
could incur substantial costs in challenging the patents of other companies. Moreover, third parties could
challenge some of our patents or patent applications, and we could incur substantial costs in defending the scope
and validity of our own patents or patent applications whether or not a challenge is ultimately successful.

Grid Patents

We have received patents and filed a significant number of additional patent applications on power quality

and reliability systems, including our D-VAR products. Our products are covered by patents and patents pending
worldwide on both our systems and power converter products. The patents and applications focus on inventions
that significantly improve product performance and reduce product costs, thereby providing a competitive
advantage.

14

HTS Patents

Since the discovery of high temperature superconductors in 1986, rapid technical advances have

characterized the HTS industry, which in turn have resulted in a large number of patents, including overlapping
patents, relating to superconductivity. As a result, the patent situation in the field of HTS technology and
products is unusually complex. We have obtained licenses to patents and patent applications covering some HTS
materials. We currently have non-exclusive rights to a fundamental U.S. patent (U.S. 8,060,169 B1) covering
2G and similar HTS wire and applications and may elect in the future to allow our rights under this license to
lapse. However, we may have to obtain additional licenses to HTS materials.

We are focusing on the production of our Amperium wire, and we intend to continue to maintain a
leadership position in 2G HTS wire through a combination of patents, licenses and proprietary expertise. In
addition to our owned patents and patent applications in 2G HTS wire, we have obtained licenses from (i) MIT
for the MOD process we use to deposit the YBCO layer, and (ii) Alcatel-Lucent on the YBCO material.

We have extensive patents and patents pending covering applications of HTS wire, such as HTS fault
current limiting technology including our fault current limiting cable, HTS rotating machines and ship protection
systems. Since the superconductor rotating machine and the fault current limiting cable applications are relatively
new, we believe that we have a particularly strong patent position in these areas. At present, we believe we have
the world’s broadest and most fundamental patent position in superconductor rotating machines technology. We
have also filed a series of patents on our concept for our proprietary fault current limiting technology. However,
there can be no assurance that that these patents will be sufficient to assure our freedom of action in these fields
without further licensing from others. See Part I, Item 1A, “Risk Factors,” for more information regarding the
status of the commercialization of our Amperium wire products.

Wind Patents

Under our Windtec™ Solutions brand, we design a variety of wind turbine systems and license these
designs, including expertise and patent rights, to third parties for an upfront fee, plus in some cases, future
royalties. Our wind turbine designs are covered by patents and patents pending worldwide on wind turbine
technology. We have patent coverage on the unique design features of our blade pitch control system, which
ensures optimal aerodynamic flow conditions on the turbine blades and improves system efficiency and
performance. The pitch system includes a patented SafetyLOCK™ feature that causes the blades to rotate to a
feathered position to prevent the rotor blades from spinning during a fault.

Trade Secrets

Some of the important technology used in our operations and products is not covered by any patent or patent
application owned by or licensed to us. However, we take steps to maintain the confidentiality of this technology
by requiring all employees and all consultants to sign confidentiality agreements and by limiting access to
confidential information. We cannot provide any assurance that these measures will prevent the unauthorized
disclosure or use of that information. In addition, we cannot provide any assurance that others, including our
competitors, will not independently develop the same or comparable technology that is one of our trade secrets.

Human Capital

We provide a safe and positive work environment for our employees that emphasizes respect for individuals
and high standards of integrity. The health and safety of our employees is of utmost importance to us. During the
COVID-19 pandemic, we have taken proactive measures to safeguard our employees and their families and the
communities in which we live and work. We implemented social distancing policies at our locations around the
world, maintained rigorous cleaning schedules, enabled non-manufacturing personnel to work from home and
suspended all unnecessary local and international business travel. Recognizing and respecting our global
presence, we strive to maintain a diverse and inclusive workforce everywhere we operate. As of March 31, 2021,
we employed 225 persons. None of our employees is represented by a labor union.

15

We believe our employees are the foundation of our success and that our future growth depends, in part, on
our ability to continue to attract and retain the best and brightest talent, including key management professionals,
scientists, engineers, researchers, manufacturing personnel, and marketing and sales professionals. In order for us
to attract the best talent, we provide a collaborative, inclusive and innovative work environment, competitive
compensation, and opportunities for our employees to grow. We are focused on continuing to build an inclusive
culture that inspires leadership, encourages innovative thinking, and supports the development and advancement
of all.

Our human capital management objectives include attracting, incentivizing, and integrating our existing and

future employees. We strive to attract and retain talented employees by offering competitive compensation and
benefits that support their health and financial well-being. We use a combination of fixed and variable pay
including base salary, bonuses, performance awards and stock- based compensation. The principal purposes of
our equity incentive plans are to attract, retain and motivate employees through the granting of stock-based
compensation awards. We offer employees benefits that vary by country and are designed to address local laws
and cultures and to be competitive in the marketplace.

Available information

Our internet address is www.amsc.com. We are not including the information contained in our website as

part of, or incorporating it by reference into, this document. We make available, free of charge, through our
website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after we electronically file such materials with, or furnish such materials to, the SEC.

We intend to disclose on our website any amendments to, or waivers of, our Code of Business Conduct and

Ethics that are required to be disclosed pursuant to the SEC or the rules of the Nasdaq Stock Market, LLC.

Information about our Executive Officers

The table and biographical summaries set forth below contain information with respect to our executive

officers as of the date of this filing:

Name

Daniel P. McGahn . . . . . . . . . . . . . . . . . . . . . . .

John W. Kosiba, Jr.

. . . . . . . . . . . . . . . . . . . . . .

Age

49

48

Position

President, Chief Executive Officer and Chairman

Senior Vice President, Chief Financial Officer and
Treasurer

Daniel P. McGahn joined us in December 2006 and has been chief executive officer and a member of our

board of directors since June 2011 and chairman of the board since July 2018. He previously served as president
and chief operating officer from December 2009 to June 2011, as senior vice president and general manager of
our AMSC Superconductors business unit from April 2008 until December 2009, as vice president of our AMSC
Superconductors business unit from March 2007 to April 2008 and as vice president of strategic planning and
development from December 2006 to March 2007. From 2003 to 2006, Mr. McGahn served as executive vice
president and chief marketing officer of Konarka Technologies. We believe Mr. McGahn’s qualifications to sit
on our board of directors include his extensive experience with our company, including serving as our president
since 2009, experience in the power electronics industry and strategic planning expertise gained while working in
senior management as a consultant for other public and private companies.

16

John W. Kosiba, Jr. was appointed senior vice president, chief financial officer and treasurer effective
April 4, 2017. Mr. Kosiba joined us as managing director, finance operations, in June 2010. He then served as
vice president, finance operations, from September 2011 to May 2013. Prior to his appointment as senior vice
president and chief financial officer, Mr. Kosiba served most recently as senior vice president, Gridtec solutions
and finance operations, where he was responsible for (i) overseeing finance and accounting operations,
budgeting, strategic planning and financial planning and analysis for the company, and (ii) managing the
day-to-day business operations of our Gridtec solutions’ business segment. From January 2008 until June 2010,
Mr. Kosiba served as division director and controller of Amphenol Aerospace, a division of Amphenol
Corporation and a manufacturer of interconnect products for the military, commercial aerospace and industrial
markets. In this role, Mr. Kosiba was responsible for overseeing finance, accounting, budgeting, audit and all
aspects of financial planning and analysis for the division.

17

Item 1A. RISK FACTORS

Risks Related to Our Financial Performance

We have a history of operating losses, which may continue in the future. Our operating results may
fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal
quarter.

We were not profitable in fiscal 2020 and have recorded net losses in two of the last three fiscal

years. While we did report net income of $26.8 million for the fiscal year ended March 31, 2019, it was largely as
a result of the receipt of payments from Sinovel Wind Group Co. Ltd. pursuant to the terms of the Settlement
Agreement described further herein. We may not be profitable in fiscal 2021 or future years.

There is currently substantial uncertainty in our business, which makes it difficult to evaluate our business

and future prospects. In addition, our operating results historically have been difficult to predict and have at times
fluctuated from quarter to quarter due to a variety of factors, many of which are outside of our control. As a
result of all of these factors, comparing our operating results on a period-to-period basis may not be meaningful,
and you should not rely on our past results as an indication of our future performance. In addition, we have in the
past, and may continue to, provide public guidance on our expected operating and financial results for future
periods. Such guidance is comprised of forward-looking statements subject to the risks and uncertainties
described in this Annual Report on Form 10-K and in our other public filings and statements. Our actual results
may not always be in line with or exceed the guidance we have provided. If our revenue or operating results fall
below the expectations of investors or any securities analysts that follow our company in any period or we do not
meet our guidance, the trading price of our common stock would likely decline.

Our operating expenses do not always vary directly with revenue and may be difficult to adjust in the short

term. As a result, if revenue for a particular quarter is below our expectations, we may not be able to
proportionately reduce operating expenses for that quarter, and therefore such a revenue shortfall would have a
disproportionate effect on our operating results for that quarter.

We have a history of negative operating cash flows, and we may require additional financing in the future,

which may not be available to us.

As of March 31, 2021, we had approximately $80.7 million of cash, cash equivalents, marketable securities

and restricted cash, and during the fiscal year ended March 31, 2021, we used $8.7 million in cash for our
operating activities. We have historically experienced net losses, although we did report net income of
$26.8 million for the fiscal year ended March 31, 2019. We plan to continue to closely monitor our expenses and,
if required, will further reduce operating costs and capital spending to enhance liquidity.

Our liquidity is highly dependent on our ability to profitably grow our revenues, control our operating costs,

and secure additional financing, if required. We may require additional capital to conduct our business and
adequately respond to future business challenges or opportunities, including, but not limited to, the need to
develop new products or enhance existing products, maintain or expand research and development projects,
collateralize performance bonds or letters of credit, and the need to build inventory or to invest other cash to
support business growth. In order to raise additional capital, we may offer shares of our common stock or other
securities convertible into or exchangeable for our common stock. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the ownership interest of each of our existing
stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that
adversely affect the rights of our common stockholders.

In the event that additional liquidity is required, there can be no assurance that such financing would be
available or, if available, that such financing could be obtained upon terms acceptable to us, which would have a
material adverse effect on our business, financial condition and prospects.

18

We may be required to issue performance bonds or provide letters of credit, which restricts our ability to

access any cash used as collateral for the bonds or letters of credit.

While we have been required to provide performance bonds in the form of surety bonds or other forms of

security and letters of credit in the past, the size of the bonds and letters of credit was not material. In recent
years, we have entered into contracts that require us to post bonds and to deliver letters of credit of significant
magnitude. For example, as part of the agreement with Commonwealth Edison Company (“ComEd”) to install
the Resilient Electric Grid (“REG”) system in Chicago, we delivered an irrevocable letter of credit in the amount
of $5.0 million to secure certain of our obligations under the Subcontract Agreement and deposited $5.0 million
in an escrow account as collateral to secure such letter of credit. Similarly, in many other instances, we have been
required to deposit cash in escrow accounts as collateral for these instruments, which is unavailable to us for
general use for significant periods of time. Should we be unable to obtain performance bonds or letters of credit
in the future, significant future potential revenue could become unavailable to us. Further, should our working
capital situation deteriorate, we would not be able to access the restricted cash to meet working capital
requirements.

Changes in exchange rates could adversely affect our results of operations.

Currency exchange rate fluctuations could have an adverse effect on our revenues and results of operations,

and we could experience losses with respect to hedging activities. In fiscal 2020, 41% of our revenues were
recognized from sales outside of the United States. In addition, approximately 17% of our revenues in fiscal 2020
were derived under sales contracts where prices were denominated in the Euro. Unfavorable currency
fluctuations could require us to increase prices to foreign customers, which could result in a lesser number of
orders, and therefore lower revenues, from such customers. Alternatively, if we do not adjust the prices for our
products in response to unfavorable currency fluctuations, our results of operations could be adversely affected.
In addition, most sales made by our foreign subsidiaries are denominated in the currency of the country in which
these products are sold, and the currency they receive in payment for such sales could be less valuable at the time
of receipt as a result of exchange rate fluctuations. However, we cannot be certain that our efforts will be
adequate to protect us against significant currency fluctuations or that such efforts will not expose us to
additional exchange rate risks.

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce

accurate and timely financial statements could be impaired and may lead investors and other users to lose
confidence in our financial data.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable
financial statements. In the quarter ended December 31, 2020, we identified a material weakness in our internal
control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of the
financial statements will not be prevented or detected on a timely basis.

In connection with the preparation of our financial statements for the Quarterly Report on Form 10-Q for the

quarter ended December 31, 2020, we identified that a material weakness in our internal control over financial
reporting existed, relating to our failure to maintain proper controls, processes and procedures over the initial
purchase accounting and the continuing fair value accounting associated with the acquisition of Northeast Power
Systems, Inc. (“NEPSI”) and related assets (the “NEPSI Acquisition”) that were adequately designed,
documented and executed to support the accurate and timely reporting of our financial results. Specifically, the
modeling assumptions and the calculation performed by our third-party valuation specialist as it relates to fair
value accounting for contingent consideration on the purchase accounting for the NEPSI Acquisition included
errors resulting in a $1.3 million overstatement in both the fair value of the earnout payment and the preliminary
estimated purchase price paid to NEPSI that we failed to detect, which were reflected in Exhibit 99.3 of our Form
8-K/A filed with the SEC on December 14, 2020. Subsequently, we made post-closing adjustments necessary to
properly reflect the fair value of the contingent consideration liability in the financial statements.

19

Our management, with the oversight of our audit committee, took additional measures to remediate the

underlying causes of the material weakness, which included the development and implementation of new
procedures, policies, and processes, including revising precision level of management review controls and
gaining additional assurance regarding timely completion of our outside service providers’ quality control
procedures. Although the material weakness was remediated during the quarter ended March 31, 2021, if our
remedial measures are insufficient to address the material weakness, or if additional material weaknesses or
significant deficiencies in our internal control over financial reporting are discovered or occur in the future, our
consolidated financial statements may contain material misstatements and we could be required to restate our
financial results.

If we are unable to maintain effective internal controls, we may not have adequate, accurate or timely
financial information, and we may be unable to meet our reporting obligations or comply with the requirements
of the SEC or the Sarbanes-Oxley Act of 2002, which could result in the imposition of sanctions, including the
inability of registered broker dealers to make a market in our common stock, or an investigation by regulatory
authorities. Any such action or other negative results caused by our inability to meet our reporting requirements
or to comply with legal and regulatory requirements or by our disclosure of an accounting, reporting or control
issue could adversely affect the trading price of our securities and our business. Significant deficiencies or
material weaknesses in our internal control over financial reporting could also reduce our ability to obtain
financing or could increase the cost of any financing we obtain.

Risks Related to Our Operations

We may not realize all of the sales expected from our backlog of orders and contracts.

We cannot assure you that we will realize the revenue we expect to generate from our backlog in the periods

we expect to realize such revenue, or at all.

In addition, the backlog of orders, if realized, may not result in profitable revenue. Backlog represents the
value of contracts and purchase orders received for which delivery is expected in the next twelve months. Our
customers have the right under some circumstances and with some penalties or consequences to terminate,
reduce or defer firm orders that we have in backlog. In addition, our government contracts are subject to the risks
described below. If our customers terminate, reduce or defer firm orders, we may be protected from certain costs
and losses, but our sales will nevertheless be adversely affected, and we may not generate the revenue we expect.

Although we strive to maintain ongoing relationships with our customers, there is an ongoing risk that they

may cancel orders or reschedule orders due to fluctuations in their business needs or purchasing budgets.

This has had, and may continue to have, an adverse effect on our ability to grow our revenues. In addition,
current and future suppliers may be less likely to grant us credit, resulting in a negative impact on our working
capital and cash flows.

Our contracts with the U.S. government are subject to audit, modification or termination by the U.S.

government and include certain other provisions in favor of the government. The continued funding of such
contracts remains subject to annual congressional appropriation, which, if not approved, could reduce our
revenue and lower or eliminate our profit.

As a company that contracts with the U.S. government, we are subject to financial audits and other reviews

by the U.S. government of our costs and performance, accounting, and general business practices relating to
these contracts. Based on the results of these audits, the U.S. government may adjust our contract-related costs
and fees. We cannot be certain that adjustments arising from government audits and reviews would not have a
material adverse effect on our results of operations.

20

Our U.S. government contracts customarily contain other provisions that give the government substantial
rights and remedies, many of which are not typically found in commercial contracts, including provisions that
allow the government to:

•

•

•

•

obtain certain rights to the intellectual property that we develop under the contract;

decline to award future contracts if actual or apparent organizational conflicts of interest are
discovered, or to impose organizational conflict mitigation measures as a condition of eligibility for an
award;

suspend or debar us from doing business with the government or a specific government agency; and

pursue criminal or civil remedies under the False Claims Act, False Statements Act and similar
remedy provisions unique to government contracting.

All of our U.S. government contracts, as well as certain of our contracts with third parties that are dependent

on U.S. government contracts, can be terminated by the U.S. government for its convenience, including our
contract with the Department of Homeland Security (“DHS”) to deploy our REG system in ComEd’s electric
grid in Chicago, Illinois (“Project REG”). Termination-for-convenience provisions typically provide only for our
recovery of costs incurred or committed, and for settlement of expenses and profit on work completed prior to
termination. In addition to the right of the U.S. government to terminate its contracts with us, U.S. government
contracts are conditioned upon the continuing approval by the U.S. Congress of the necessary spending to honor
such contracts. Congress often appropriates funds for a program on a fiscal year basis even though contract
performance may take more than one year. Consequently, at the beginning of many major governmental
programs, contracts often may not be fully funded, and additional monies are then committed to the contract only
if, as and when appropriations are made by the U.S. Congress for future fiscal years. In addition, government
shutdowns could prevent or delay such contracts from being funded.

We cannot be certain that our U.S. government contracts, including our contract for Project REG, or our
contracts with third parties that relate to projects for the U.S. government will not be terminated or suspended in
the future. The U.S. government’s termination of, or failure to fully fund, one or more of our contracts would
have a negative impact on our operating results and financial condition. Further, in the event that any of our
government contracts are terminated for cause, it could affect our ability to obtain future government contracts
which could, in turn, seriously harm our ability to develop our technologies and products.

The COVID-19 pandemic could adversely impact our business, financial condition and results of

operations.

Since March 2020, COVID-19 has spread throughout the globe, including in the Commonwealth of
Massachusetts where our headquarters are located, and in other areas where we have business operations. In
response to the outbreak, we have followed the guidelines of the U.S. Centers for Disease Control and Prevention
(“CDC”) and applicable state government authorities to protect the health and safety of our employees, their
families, our suppliers, our customers and our communities. While these existing measures, and COVID-19
generally, have not materially disrupted our business to date, any future actions necessitated by the COVID-19
pandemic may result in disruption to our business.

Our suppliers may become adversely impacted by the COVID-19 pandemic. As a result, we could face
delays or difficulty sourcing products, which could negatively affect our business and financial results. Even if
we are able to find alternate sources for such products, they may cost more, which could adversely impact our
profitability and financial condition.

Inox’s ability to perform under the supply contract has been and may continue to be hampered by the
prolonged impacts of the COVID-19 pandemic. Our other customers may become adversely impacted by the
prolonged impacts of the COVID-19 pandemic. As a result of the deterioration in economic conditions, our

21

customers and potential customers may reduce demand for our products, decrease their spending or reconsider
orders, all of which would adversely affect our business, operating results and financial condition.

The COVID-19 pandemic continues to evolve. The extent to which the outbreak impacts our business,
liquidity, results of operations and financial condition will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the duration of the pandemic, the location, duration
and magnitude of future waves of infection, new mutations of the virus, timing, effectiveness and adoption of
vaccines, travel restrictions and social distancing in the United States and other countries, the duration and extent
of business closures or business disruptions and the effectiveness of actions taken to contain and treat the
disease. If we, our customers or suppliers experience prolonged shutdowns or other business disruptions, our
business, liquidity, results of operations and financial condition and the trading price of our common stock are
likely to be materially adversely affected, and our ability to access the capital markets may be limited.

Changes in U.S. Government Defense Spending Could Negatively Impact Our Financial Position, Results

of Operations, Liquidity and Overall Business.

We have several contracts with the U.S. government, including defense-related programs with the U.S.
Department of Defense. Changes in U.S. government defense spending for various reasons, including as a result
of potential changes in policy positions or priorities that may result from the recent U.S. presidential and
congressional election, could negatively impact our results of operations, financial condition and liquidity. Our
programs are subject to U.S. government policies, budget decisions and appropriation processes which are driven
by numerous factors including: (1) geopolitical events; (2) macroeconomic conditions; and (3) the ability of the
U.S. government to enact relevant legislation, such as appropriations bills. In recent years, U.S. government
appropriations have been affected by larger U.S. government budgetary issues and related legislation. In prior
years, the U.S. government has been unable to timely complete its budget process before the end of its fiscal
year, resulting in governmental shut-downs or providing only enough funds for U.S. government agencies to
continue operating at prior-year levels. Significant changes in U.S. government defense spending or changes in
U.S. government priorities, policies and requirements could have a material adverse effect on our results of
operations, financial condition and liquidity.

We rely upon third-party suppliers for the components and subassemblies of many of our Grid and Wind
products, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

Many of our components and subassemblies are currently manufactured for us by a limited number of

qualified suppliers. Any interruption in the supply of components or subassemblies, or our inability to obtain
substitute components or subassemblies from alternate sources at acceptable prices in a timely manner, could
impair our ability to meet the demand of our customers, which would have an adverse effect on our business and
operating results.

In order to minimize costs and time to market, we have and will continue to identify local suppliers that
meet our quality standards to produce certain of our subassemblies and components. These efforts may not be
successful. In addition, any event which negatively impacts our supply, including, among others, wars, terrorist
activities, natural disasters and outbreaks of infectious disease, including the COVID-19 pandemic, could delay
or suspend shipments of products or the release of new products or could result in the delivery of inferior
products. Our revenues from the affected products would decline or we could incur losses until such time as we
are able to restore our production processes or put in place alternative contract manufacturers or suppliers. Even
though we carry business interruption insurance policies, we may suffer losses as a result of business
interruptions that exceed the coverage available under our insurance policies.

Uncertainty surrounding our prospects and financial condition may have an adverse effect on our customer

and supplier relationships.

Our relationships with our customers and suppliers are predicated on the belief that we will continue to
operate. Our customers, particularly in the utility industry, are generally risk averse and may not enter into sales

22

contracts with us if there is uncertainty regarding our ability to support working capital needs of large-scale
projects.

We may experience difficulties re-establishing our HTS wire production capability in our Ayer,

Massachusetts facility.

As part of our effort to increase manufacturing efficiency, we moved from our former manufacturing facility
located in Devens, Massachusetts to our smaller-scale leased facility located in Ayer, Massachusetts. Moving our
HTS wire manufacturing operations to a different plant involves various risks, including the inability to
commence HTS wire manufacturing within the cost and time frame estimated and the inability to produce a high-
quality product with an acceptable yield and cost. Failure to successfully commence the manufacturing of our
HTS wire due to these and other unforeseen risks could adversely affect our ability to meet customer demand for
our products and could increase the cost of production versus projections, both of which could adversely impact
our operating and financial results.

Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could

significantly damage our business and prospects.

We have attracted a highly skilled management team and specialized workforce, including scientists,
engineers, researchers, manufacturing, personnel, and marketing and sales professionals. Hiring and retaining
good personnel for our business is challenging, and highly qualified technical personnel are likely to remain a
limited resource for the foreseeable future. We may not be able to hire the necessary personnel to implement our
business strategy. In addition, we may need to provide higher compensation or more training to our personnel
than we currently anticipate. Moreover, any officer or employee can terminate his or her relationship with us at
any time. Losing the services of any of our executive officers or key employees could materially and adversely
impact our business.

Historically, a significant portion of our revenues have been derived from a single customer. If this

customer’s business is negatively affected, it could adversely impact our business.

Revenues from Inox are supported by a supply contract to purchase, and a license to make, use and supply,
wind turbine ECS. Inox has been active in the new central and state government auction regime in India and has
over 1,350 MW of orders from the first four Solar Energy Corporation of India Limited (“SECI”) central
government auctions, and 50 MW from the Maharashtra state government auction. However, we cannot predict if
and how successful Inox will be in executing on these orders or in obtaining new orders under the new central
and state auction regime. In addition, Inox’s ability to perform under the supply contract has been and may
continue to be hampered by the prolonged impacts of the COVID-19 pandemic. Since March 2020, India’s
manufacturing facilities have been closed at the direction of India’s government and are expected to remain
closed for so long as the impacted regions remain highly affected by COVID-19. Any failure by Inox to succeed
under this regime, or any delay in Inox’s ability to deliver its wind turbines, could result in fewer ECS shipments
to Inox. Inox has historically failed to post letters of credit and take delivery of forecasted ECS quantities. If Inox
again fails to post letters of credit and take delivery of forecasted ECS quantities, cancels, does not otherwise
fully perform under the supply contract or discontinues future purchases from us under the supply contract, then
our business, operating results and financial position could be adversely affected.

Our success in addressing the wind energy market is dependent on the manufacturers that license our

designs.

Because an important element of our strategy for addressing the wind energy market involves the license of
our wind turbine designs to manufacturers of those systems, the financial benefits to us from our products for the
wind energy market are dependent on the success of these manufacturers in selling wind turbines based on our
designs. We may not be able to enter into marketing or distribution arrangements with third parties on financially

23

acceptable terms, or at all, and third parties may not be successful in selling our products or applications
incorporating our products.

Our business and operations would be adversely impacted in the event of a failure or security breach of our

information technology infrastructure.

We rely upon the capacity, reliability, and security of our information technology hardware and software
infrastructure and our ability to expand and update this infrastructure in response to our changing needs. Any
failure to manage, expand, and update our information technology infrastructure or any failure in the operation of
this infrastructure could harm our business. In addition, the costs associated with updating and securing our
information technology infrastructure are likely to increase as such security measures become more complex,
which may harm our operating results and financial condition.

Despite our implementation of security measures, our systems are vulnerable to damages from computer

viruses, natural disasters, unauthorized access and other similar disruptions. Our business is also subject to
break-ins, sabotage, and intentional acts of vandalism by third parties as well as employees. Our business
activities in China may increase our risks to such breaches. Any system failure, accident, or security breach could
result in disruptions to our operations. To the extent that any disruption or security breach results in a loss or
damage to our data, or inappropriate disclosure of confidential information, it could harm our reputation, result in
substantial remediation costs, lead to lost revenues and litigation, increase our insurance premiums and have
other adverse effects on our business.

Failure to comply with evolving data privacy and data protection laws and regulations or to otherwise

protect personal data, may adversely impact our business and financial results.

We are subject to many rapidly evolving privacy and data protection laws and regulations in Europe and
around the world. This requires us to operate in a complex environment where there are significant constraints on
how we can process personal data across our business. The European General Data Protection Regulation (the
“GDPR”), which became effective in May 2018, has established stringent data protection requirements for
companies doing business in or handling personal data of individuals in the European Union. The GDPR imposes
obligations on data controllers and processors including the requirement to maintain a record of their data
processing and to implement policies and procedures as part of their mandated privacy governance framework.
Breaches of the GDPR could result in substantial fines, which in some cases could be up to four percent of our
worldwide revenue. In addition, a breach of the GDPR or other data privacy or data protection laws or
regulations could result in regulatory investigations, reputational damage, orders to cease/change our use of data,
enforcement notices, as well potential civil claims including class action type litigation. There is a risk that we
may be subject to fines and penalties, litigation and reputational harm if we fail to properly process or protect the
data or privacy of third parties or comply with the GDPR, CCPA or other applicable data privacy and data
protection regimes.

Many of our revenue opportunities are dependent upon subcontractors and other business collaborators.

Many of the revenue opportunities for our business involve projects, such as the installation of

superconductor cables in power grids and electrical system hardware in wind turbines, in which we collaborate
with other companies, including suppliers of cryogenic systems, manufacturers of electric power cables and
manufacturers of wind turbines. As a result, most of our current and planned revenue-generating projects involve
business collaborators on whose performance our revenue is dependent. If these business collaborators fail to
deliver their products or perform their obligations on a timely basis or fail to generate sufficient demand for the
systems they manufacture, our revenue from the project may be delayed or decreased, and we may not be
successful in selling our products.

24

If we fail to implement our business strategy successfully, our financial performance could be harmed.

Our future financial performance and success are dependent in large part upon our ability to implement our

business strategy successfully. Our business strategy envisions several initiatives, including driving revenue
growth and enhancing operating results by increasing customer adoption of our products by targeting high-
growth segments with commercial and system-level products. We may not be able to implement our business
strategy successfully or achieve the anticipated benefits of our business plan. If we are unable to do so, our long-
term growth and profitability may be adversely affected. Even if we are able to implement some or all of the
initiatives of our business plan successfully, our operating results may not improve to the extent we anticipate, or
at all. In addition, to the extent we have misjudged the nature and extent of industry trends or our competition,
we may have difficulty in achieving our strategic objectives. Any failure to implement our business strategy
successfully may adversely affect our business, financial condition and results of operations. In addition, we may
decide to alter or discontinue certain aspects of our business strategy at any time.

Our ability to implement our business strategy could also be affected by a number of factors beyond our
control, such as increased competition, legal developments, government regulation, general economic conditions,
including as a result of the COVID-19 pandemic, or increased operating costs or expenses.

Problems with product quality or product performance may cause us to incur warranty expenses and may

damage our market reputation and prevent us from achieving increased sales and market share.

Consistent with customary practice in our industry, we guarantee our products and/or services to be free

from defects in material and workmanship under normal use and service. We generally provide a one- to three-
year warranty on our products, commencing upon installation. A provision is recorded upon revenue recognition
to cost of revenues for estimated warranty expense based on historical experience. The possibility of future
product failures or issues related to services we provided could cause us to incur substantial expenses to repair or
replace defective products or re-perform such services potentially in excess of our reserves. Furthermore,
widespread product failures may damage our market reputation and reduce our market share and cause sales to
decline.

Many of our customers outside of the United States may be either directly or indirectly related to

governmental entities, and we could be adversely affected by violations of the United States Foreign Corrupt
Practices Act and similar worldwide anti-bribery laws outside the United States.

The U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws in non-U.S. jurisdictions
generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for
the purpose of obtaining or retaining business. Many of our customers outside of the United States are, either
directly or indirectly, related to governmental entities and are therefore subject to such anti-bribery laws. Our
policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have
experienced governmental corruption to some degree, and in certain circumstances strict compliance with anti-
bribery laws may conflict with local customs and practices. Our internal control policies and procedures may not
always protect us from reckless or criminal acts committed by our employees or agents. Violations of these laws,
or allegations of such violations, could disrupt our business and result in a material adverse effect on our
business, results of operations and financial condition.

We have had limited success marketing and selling our superconductor products and system-level solutions,
and our failure to more broadly market and sell our products and solutions could lower our revenue and cash
flow.

To date, we have had limited success marketing and selling our superconductor products and system-level
solutions. Once our products and solutions are ready for widespread commercial use, we will have to develop a
marketing and sales organization that will effectively demonstrate the advantages of our products over more

25

traditional products, competing superconductor products and other technologies. We may not be successful in our
efforts to market this technology and we may not be able to establish an effective sales and distribution
organization.

We may decide to enter into arrangements with third parties for the marketing or distribution of our

products, including arrangements in which our products, such as Amperium wire, are included as a component of
a larger product, such as a power cable system. By entering into marketing and sales alliances, the financial
benefits to us of commercializing our products will be dependent on the efforts of others.

We may acquire additional complementary businesses or technologies, which may require us to incur

substantial costs for which we may never realize the anticipated benefits.

Our recent acquisitions require substantial integration and management efforts. As a result of any additional
acquisition we pursue, management’s attention and resources may be further diverted from our other businesses.
An acquisition may also involve the payment of a significant purchase price, which could reduce our cash
position or dilute our stockholders and require significant transaction-related expenses.

Achieving the benefits of any acquisition involves additional risks, including:

•

•

•

•

•

difficulty assimilating acquired operations, technologies and personnel;

inability to retain management and other key personnel of the acquired business;

changes in management or other key personnel that may harm relationships with the acquired
business’s customers and employees;

unforeseen liabilities of the acquired business;

diversion of management’s and employees’ attention from other business matters as a result of the
integration process;

• mistaken assumptions about volumes, revenues and costs associated with the acquired business,

including synergies;

•

limitations on rights to indemnity from the seller;

• mistaken assumptions about the overall costs of equity or debt used to finance the acquisition; and

•

unforeseen difficulties operating in new product areas, with new customers, or in new geographic
areas.

We cannot provide any assurance that we will realize any of the anticipated benefits of any acquisition,
including our NEPSI Acquisition in October 2020, and Neeltran, Inc. acquisition completed in May 2021, and if
we fail to realize these anticipated benefits, our operating performance could suffer.

Risks Related to Our Markets

Our success depends upon the commercial adoption of the REG system, which is currently limited, and a

widespread commercial market for our products may not develop.

To date, there has been no widespread commercial use of the REG system. It is uncertain whether a robust

commercial market for those new and unproven products will ever develop.

In addition, we believe in-grid demonstrations of REG systems are necessary to convince utilities and power

grid operators of the benefits of this technology. Even if a project is funded, completion of projects can be
delayed as a result of other factors. It is possible that the market demands we currently anticipate for our REG
system will not develop and that they will never achieve widespread commercial acceptance. In such event, we

26

would not be able to implement our strategy, and our results of operations could be reduced or eliminated. Even
if a commercial market for our REG systems were to develop, commercial terms requested by utilities and power
grid operators relating to bonding requirements, limitations of liability, warranty periods, or other contractual
provisions, may not be acceptable to us, which could impede our ability to enter into contractual arrangements
for the sale of our REG system.

Adverse changes in domestic and global economic conditions could adversely affect our operating results.

We have become increasingly subject to the risks arising from adverse changes in domestic and global
economic conditions. In recent years, and particularly in fiscal 2020 as a result of the COVID-19 pandemic, the
state of both the domestic and global economies has been uncertain due to the difficulty in obtaining credit, and
financial market volatility. Adverse credit conditions in the future could have a negative impact on our ability to
execute on future strategic activities. In addition, if credit is difficult to obtain in the future, some customers may
delay or reduce purchases. Similarly, inflationary pressures may increase our costs or force us to increase prices
for our products. These events could result in reductions in sales of our products, longer sales cycles, slower
adoption of new technologies, increased accounts receivable and inventory write-offs and increased price
competition. Any of these events would likely harm our business, results of operations and financial condition.

We have operations in, and depend on sales in, emerging markets, including India, and global conditions

could negatively affect our operating results or limit our ability to expand our operations outside of these
markets. Changes in India’s political, social, regulatory and economic environment may affect our financial
performance.

We have operations in India and in recent years a significant portion of our total revenues has been derived

from customers in this market. Our financial performance depends upon our ability to carry on our operations
and sell our products in markets such as India, as well as other emerging markets around the world. We are, and
will continue to be, subject to financial, political, economic and business risks in connection with our operations
and sales in these emerging markets. In addition to the business risks inherent in developing and servicing these
markets, economic conditions may be more volatile, legal and regulatory systems less developed and predictable,
and the possibility of various types of adverse governmental action more pronounced in emerging markets. In
addition, inflation, fluctuations in currency and interest rates, competitive factors, civil unrest, public health
emergencies and labor problems could affect our revenues, expenses and results of operations. Our operations
could also be adversely affected by acts of war, terrorism or the threat of any of these events as well as
government actions such as controls on imports, exports and prices, tariffs, new forms of taxation, or changes in
fiscal regimes and increased government regulation in the countries in which we operate or service customers.
Unexpected or uncontrollable events or circumstances in any of these markets could have a material adverse
effect on our financial results and cash flows.

Our financial performance could be affected by the political and social environment in India. In recent
years, India has experienced civil unrest and terrorism and has been involved in conflicts with neighboring
countries. The potential for hostilities between India and Pakistan has been high in light of tensions related to
recent terrorist incidents in India and the unsettled nature of the regional geopolitical environment, including
events in and related to Afghanistan and Iraq.

With respect to our activities in all emerging markets, we may be impacted by issues with managing foreign

sales operations, including long payment cycles, potential difficulties in accounts receivable collection and,
especially from significant customers, fluctuations in the timing and amount of orders. The adverse effect of any
of these issues on our business could be increased due to the concentration of our business with a small number
of customers. Operations in foreign countries also expose us to risks relating to difficulties in enforcing our
proprietary rights, currency fluctuations and adverse or deteriorating economic conditions. If we experience
problems with obtaining registrations, compliance with foreign country or applicable U.S. laws, or if we
experience difficulties in payments or intellectual property matters in foreign jurisdictions, or if significant
political, economic or regulatory changes occur, our results of operations would be adversely affected.

27

Our products face competition, which could limit our ability to acquire or retain customers.

The markets for our products are competitive and many of our competitors have substantially greater

financial resources and research and development, manufacturing and marketing capabilities than we do. In
addition, as our target markets develop, other large industrial companies may enter these fields and compete with
us.

We face competition from other companies offering FACTS systems similar to our D-VAR products. These
include adaptive VAR compensators, Dynamic voltage restorers (“DVRs”), and STATCOMs produced by ABB,
Siemens, RXHK, NR Electric Co,. and Ingeteam, and battery-based uninterruptible power supply (“UPS”)
systems offered by various companies around the world.

With our HTS-based REG product, we are offering a new approach that provides alternatives to utilities for
power system design. Therefore, we believe that we compete with traditional approaches such as new full-sized
substations, overhead and underground transmission, and urban power transformers.

We believe we are currently the only company that can offer HTS-based SPS products that have been fully
qualified for use aboard U.S. Navy surface combatants. Therefore, the primary competition for our SPS products
is currently coming from defense contractors that provide the copper-based systems that our lighter, more
efficient HTS versions have been developed to replace. Companies such as L3, Excelis, Raytheon, and Textron
have the bulk of the copper-based business today.

As the HTS wire, superconductor electric motors and generators, and power electronic systems markets

develop, other large industrial companies may enter those fields and compete with us. If we are unable to
compete successfully, it may harm our business, which in turn may limit our ability to acquire or retain
customers.

With respect to our Wind business, other companies that serve the wind turbine components industry

include ABB, Hopewind, and Semikron. We also face indirect competition in the wind energy market from
global manufacturers of wind turbines, such as Siemens Gamesa, General Electric, and Suzlon. We face
competition for the supply of wind turbine engineering design services from design engineering firms such as
Aerodyn.

Our international operations are subject to risks that we do not face in the United States, which could have

an adverse effect on our operating results.

In recent years, a substantial amount of our consolidated revenues were recognized from customers outside

of the United States. For example, 41% of our revenues in fiscal 2020 and 51% of our revenues in fiscal
2019 were recognized from sales outside the United States. We also manufacture certain of our products and
purchase a portion of our raw materials and components from suppliers in other foreign countries. Our
international operations are subject to a variety of risks that we do not face in the United States, including:

•

•

•

potentially longer payment cycles for sales in foreign countries and difficulties in collecting accounts
receivable;

difficulties in staffing and managing our foreign offices and the increased travel, infrastructure and
legal compliance costs associated with multiple international locations;

additional withholding taxes or other taxes on our foreign income and repatriated cash, and tariffs or
other restrictions on foreign trade or investment, including export duties and quotas, trade and
employment restrictions;

•

imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements;

28

•

•

•

increased exposure to foreign currency exchange rate risk;

reduced protection for intellectual property rights in some countries; and

natural disasters, pandemics, political unrest, war or acts of terrorism.

Trade tensions between the U.S. and China, as well as those between the U.S. and Canada, Mexico and
other countries have been escalating in recent years. For example, the prior U.S. presidential administration
imposed tariffs on products imported from China in recent years, which had an impact on our products and
supplies imported from China to the U.S., and the Chinese government countered with additional retaliatory
tariffs on U.S. manufactured goods. We cannot predict whether the United States or any other country will
impose new quotas, tariffs, taxes or other trade barriers upon the importation or exportation of our products or
gauge the effect that new barriers would have on our financial position or results of operations. These new tariffs
or any additional tariffs or other trade barriers may cause our costs to increase, our products to be less
competitive, and our business, results of operations and financial position to be materially adversely affected.

Our overall success in international markets depends, in part, upon our ability to succeed in differing legal,
regulatory, economic, social and political conditions. We may not be successful in developing and implementing
policies and strategies that will be effective in managing these risks in each country where we do business or
conduct operations. Our failure to manage these risks successfully could harm our international operations and
reduce our international sales, thus lowering our total revenue and increasing losses.

Growth of the wind energy market depends largely on the availability and size of government subsidies,

economic incentives and legislative programs designed to support the growth of wind energy.

At present, the cost of wind energy exceeds the cost of conventional power generation in many locations

around the world. Various governments have used different policy initiatives to encourage or accelerate the
development and adoption of wind energy and other renewable energy sources. Renewable energy policies are in
place in the European Union, certain countries in Asia, including India, China, Japan and South Korea, and many
of the states in Australia and the United States. Examples of government sponsored financial incentives include
capital cost rebates, feed-in tariffs, tax credits, net metering and other incentives to end-users, distributors,
system integrators and manufacturers of wind energy products to promote the use of wind energy and to reduce
dependency on other forms of energy. In the United States, various legislation and regulations designed to
support the growth of wind energy have been implemented or proposed by the federal government, such as the
Production Tax Credit for Renewable Energy (“PTC”) and the Clean Power Plan. Governments, including the
U.S. government, may decide to reduce or eliminate these economic incentives, or curtail legislative programs
supportive of wind energy technologies for political, financial or other reasons. Any reductions in, or
eliminations of, government subsidies, economic incentives or favorable legislative programs before the wind
energy industry reaches a sufficient scale to be cost-effective in a non-subsidized marketplace could reduce
demand for our products and adversely affect our business prospects and results of operations.

Lower prices for other fuel sources may reduce the demand for wind energy development, which could have

a material adverse effect on our ability to grow our Wind business.

The wind energy market is affected by the price and availability of other fuels, including nuclear, coal,

natural gas and oil, as well as other sources of renewable energy. To the extent renewable energy,
particularly wind energy, becomes less cost-competitive due to reduced government targets, increases in the cost
of wind energy, as a result of new regulations, and incentives that favor alternative renewable energy, cheaper
alternatives or otherwise, demand for wind energy and other forms of renewable energy could decrease. Slow
growth or a long-term reduction in the demand for renewable energy could have a material adverse effect on our
ability to grow our Wind business.

29

Risks Related to Our Technologies

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent

protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely, in part, on
confidentiality agreements with our employees, contractors, consultants, outside scientific collaborators and other
advisors to protect our trade secrets and other proprietary information. These agreements may not effectively
prevent disclosure of confidential information and may not provide an adequate remedy in the event of
unauthorized disclosure of confidential information. In addition, others may independently discover our trade
secrets or independently develop processes or products that are similar or identical to our trade secrets and courts
outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could
be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade
secret protection could adversely affect our competitive business position.

Our patents may not provide meaningful protection for our technology, which could result in us losing

some or all of our market position.

We own or have licensing rights under many patents and pending patent applications. However, the patents
that we own or license may not provide us with meaningful protection of our technologies and may not prevent
our competitors from using similar technologies for a variety of reasons, such as:

•

•

•

the patent applications that we or our licensors file may not result in patents being issued;

any patents issued may be challenged by third parties; and

others may independently develop similar technologies not protected by our patents or design around
the patented aspects of any technologies we develop.

Moreover, we could incur substantial litigation costs in defending the validity of or enforcing our own
patents. We also rely on trade secrets and proprietary know-how to protect our intellectual property. However,
our non-disclosure agreements and other safeguards may not provide meaningful protection for our trade secrets
and other proprietary information. If the patents that we own or license or our trade secrets and proprietary
know-how fail to protect our technologies, our market position may be adversely affected.

There are a number of technological challenges that must be successfully addressed before our

superconductor products can gain widespread commercial acceptance, and our inability to address such
technological challenges could adversely affect our ability to acquire customers for our products.

Many of our superconductor products are in the early stages of commercialization, while others are still

under development. There are a number of technological challenges that we must successfully address to
complete our development and commercialization efforts for superconductor products. We will also need to
improve the performance and reduce the cost of our Amperium wire to expand the number of commercial
applications for it. We may be unable to meet such technological challenges or to sufficiently improve the
performance and reduce the costs of our Amperium wire. Delays in development, as a result of technological
challenges or other factors, may result in the introduction or commercial acceptance of our superconductor
products later than anticipated.

Third parties have or may acquire patents that cover the materials, processes and technologies we use or

may use in the future to manufacture our Amperium products, and our success depends on our ability to
license such patents or other proprietary rights.

We expect that some or all of the HTS materials, processes and technologies we use in designing and

manufacturing our products are or will become covered by patents issued to other parties, including our

30

competitors. The owners of these patents may refuse to grant licenses to us, or may be willing to do so only on
terms that we find commercially unreasonable. If we are unable to obtain these licenses, we may have to contest
the validity or scope of those patents or re-engineer our products to avoid infringement claims by the owners of
these patents. It is possible that we will not be successful in contesting the validity or scope of a patent, or that we
will not prevail in a patent infringement claim brought against us. Even if we are successful in such a proceeding,
we could incur substantial costs and diversion of management resources in prosecuting or defending such a
proceeding.

Our technology and products could infringe intellectual property rights of others, which may require costly

litigation and, if we are not successful, could cause us to pay substantial damages and disrupt our business.

In recent years, there has been significant litigation involving patents and other intellectual property rights in

many technology-related industries. There may be patents or patent applications in the United States or other
countries that are pertinent to our products or business of which we are not aware. The technology that we
incorporate into and use to develop and manufacture our current and future products, including the technologies
we license, may be subject to claims that they infringe the patents or proprietary rights of others. The success of
our business will also depend on our ability to develop new technologies without infringing or misappropriating
the proprietary rights of others. Third parties may allege that we infringe patents, trademarks or copyrights, or
that we misappropriated trade secrets. These allegations could result in significant costs and diversion of the
attention of management. If a successful claim were brought against us and we are found to infringe a third
party’s intellectual property rights, we could be required to pay substantial damages, including treble damages if
it is determined that we have willfully infringed such rights, or be enjoined from using the technology deemed to
be infringing, or using, making or selling products deemed to be infringing. If we have supplied infringing
products or technology to third parties, we may be obligated to indemnify these third parties for damages they
may be required to pay to the patent holder and for any losses they may sustain as a result of the infringement. In
addition, we may need to attempt to license the intellectual property right from such third party or spend time and
money to design around or avoid the intellectual property. Any such license may not be available on reasonable
terms, or at all. An adverse determination may subject us to significant liabilities and/or disrupt our business.

Risks Related to Our Common Stock

Our common stock has experienced, and may continue to experience, market price and volume fluctuations,

which may prevent our stockholders from selling our common stock at a profit and could lead to costly
litigation against us that could divert our management’s attention.

The market price of our common stock has historically experienced volatility and may continue to
experience such volatility in the future. Factors such as our financial performance, liquidity requirements,
technological achievements by us and our competitors, the establishment of development or strategic
relationships with other companies, strategic acquisitions, new customer orders and contracts, and our
introduction of commercial products may have a significant effect on the market price of our common stock. The
stock market in general, and the stock of high technology companies, in particular, have, in recent years,
experienced extreme price and volume fluctuations, which are often unrelated to the performance or condition of
particular companies, such as in connection with the ongoing coronavirus outbreak. Such broad market
fluctuations have and could continue to adversely affect the market price of our common stock. Due to these
factors, the price of our common stock may decline, and investors may be unable to resell their shares of our
common stock for a profit. Following periods of volatility in the market price of a particular company’s
securities, securities class action litigation has often been brought against that company. In the past, we have
been subject to a number of class action lawsuits which were filed against us on behalf of certain purchasers of
our common stock. If we become subject to additional litigation of this kind in the future, it could result in
additional litigation costs, a damages award against us and the further diversion of our management’s attention.

31

General Risk Factors

Unfavorable results of legal proceedings could have a material adverse effect on our business, operating

results and financial condition.

From time to time, we may become subject to legal proceedings and claims that arise in or outside the
ordinary course of business. Results of legal proceedings cannot be predicted with certainty. Our insurance
coverage may be insufficient, our assets may be insufficient to cover any amounts that exceed our insurance
coverage, and we may have to pay damage awards or otherwise may enter into settlement arrangements in
connection with such claims. Any such payments or settlement arrangements in legal proceedings could have a
material adverse effect on our business, operating results or financial condition. Regardless of merit, legal
proceedings could result in substantial costs and significantly and adversely impact our reputation and divert
management’s attention and resources, which could have a material adverse effect on our business, operating
results or financial condition. In addition, such lawsuits may make it more difficult to finance our operations.

Item 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

Item 2.

PROPERTIES

Our corporate headquarters, Grid and Wind manufacturing operations are located in a leased 88,000-square-

foot facility in Ayer, Massachusetts. Additionally, we have Grid manufacturing operations located in a leased
77,500 square-foot facility in Westminster, Massachusetts as well as an owned 35,000 square-foot facility in
Queensbury, New York.

We also occupy leased facilities located in Australia, Austria, India, Wisconsin, Washington and the United

Kingdom with a combined total of approximately 72,000 square feet of space. These leases have varying
expiration dates through November 2027 which can generally be terminated at our request after a six-month
advance notice. These locations focus primarily on research and development, sales and/or field service and do
not have significant leases or physical presence. We believe all of these facilities are well-maintained and
suitable for their intended uses.

The following table summarizes information regarding our significant properties, as of March 31, 2021:

Location

United States

Supporting

Square
footage

Owned/
Leased

Ayer, Massachusetts . . . . . . . . . . . .
Westminster, Massachusetts . . . . . .
Queensbury, New York . . . . . . . . . .

Corporate & Grid Segment
Grid Segment
Grid Segment

88,000
77,500
35,000

Leased
Leased
Owned

Item 3.

LEGAL PROCEEDINGS

We are not party to any material legal proceedings.

Item 4. MINE SAFETY DISCLOSURES

Not Applicable.

32

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the Nasdaq Global Select Market under the symbol “AMSC” since

1991.

Holders

The number of holders of record of our common stock on May 28, 2021 was 178.

Dividend Policy

We have never paid cash dividends on our common stock. We currently intend to retain earnings, if any, to
fund the development and growth of our business and do not anticipate paying cash dividends for the foreseeable
future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking
into account various factors, including our financial condition, operating results, current and anticipated cash
needs and plans for expansion.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on our common stock from
March 31, 2016 to March 31, 2021 with the cumulative total return of (i) the Nasdaq Composite Index and
(ii) the Nasdaq Electrical Components & Equipment Index.

This graph assumes the investment of $100.00 on March 31, 2016 in our common stock, the Nasdaq
Composite Index and the Nasdaq Electrical Components & Equipment Index, and assumes any dividends are
reinvested. Measurement points are March 31, 2016; March 31, 2017; March 31, 2018; March 31, 2019;
March 31, 2020; and March 31, 2021.

33

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among American Superconductor Corporation,
the Nasdaq Composite Index and the Nasdaq Electrical Components & Equipment Index

NASDAQ Composite - XCMP

Nasdaq Elect. Components & Equipment - NQUSB10102015T

AMSC - USQ

3/31/17

3/31/18

3/31/19

3/31/20

3/31/21

400

350

300

250

200

150

100

50

0

3/31/16

Company/Index

2016

2017

2018

2019

2020

2021

American Superconductor Corporation . . . . . . . . . . . . . .
Nasdaq Composite Index . . . . . . . . . . . . . . . . . . . . . . . . .
Nasdaq Electrical Components & Equipment Index . . . .

100.00
100.00
100.00

90.26
122.88
126.01

76.58
148.39
140.76

169.21
164.16
139.85

72.11
165.30
115.97

249.47
286.62
215.47

Fiscal year ended March 31,

Item 6.

SELECTED FINANCIAL DATA

This item is not required for smaller reporting companies.

34

Item 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

Executive Overview

We are 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 our Navy’s fleet. Our solutions
enhance the performance of the power grid, protect our Navy’s fleet, and lower the cost of wind power. In the
power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to
connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and
power electronics and superconductor-based systems. In the wind power market, we enable manufacturers to
field highly competitive wind turbines through our advanced power electronics and control system products,
engineering, and support services. Our power grid and wind products and services provide exceptional reliability,
security, efficiency and affordability to our customers.

Our power system solutions help to improve energy efficiency, alleviate power grid capacity constraints,

improve system resiliency, and increase the adoption of renewable energy generation. Demand for our solutions
is driven by the growing needs for modernized smart grids that improve power reliability, security and quality,
the U.S. Navy’s effort to upgrade in-board power systems to support fleet electrification, and the need for
increased renewable sources of electricity, such as wind and solar energy. Concerns about these factors have led
to increased spending by corporations and the military, as well as supportive government regulations and
initiatives on local, state, and national levels, including renewable portfolio standards, tax incentives and
international treaties.

We manufacture products using two proprietary core technologies: PowerModule™ programmable power
electronic converters and our Amperium® high temperature superconductor (“HTS”) wires. These technologies
and our system-level solutions are protected by a broad and deep intellectual property portfolio consisting of
hundreds of patents and licenses worldwide.

We operate our business under two market-facing business units: Grid and Wind. We believe this market-

centric structure enables us to more effectively anticipate and meet the needs of power generation project
developers, the Navy’s ship protection systems, electric utilities and wind turbine manufacturers.

• Grid. Through our Gridtec™ Solutions, our Grid business segment enables electric utilities and
renewable energy project developers to connect, transmit and distribute power with exceptional
efficiency, reliability, security and affordability. We provide transmission planning services that allow
us to identify power grid congestion, poor power quality, and other risks, which help us determine how
our solutions can improve network performance. These services often lead to sales of our grid
interconnection solutions for wind farms and solar power plants, power quality systems and
transmission and distribution cable systems. We also sell ship protection products to the U.S. Navy
through our Grid business segment.

• Wind. Through our Windtec™ Solutions, our Wind business segment enables manufacturers to field

wind turbines with exceptional power output, reliability and affordability. We supply advanced power
electronics and control systems, license our highly engineered wind turbine designs, and provide
extensive customer support services to wind turbine manufacturers. Our design portfolio includes a
broad range of drivetrains and power ratings of 2 MW and higher. We provide a broad range of power
electronics and software-based control systems that are highly integrated and designed for optimized
performance, efficiency, and grid compatibility.

Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are
referring to the fiscal year beginning on April 1 of that same year. For example, fiscal 2020 refers to the fiscal
year beginning on April 1, 2020. Other fiscal years follow similarly.

35

On October 31, 2018, we entered into a Subcontract Agreement with Commonwealth Edison Company
(“ComEd”) (the “Subcontract Agreement”) for the manufacture and installation of our resilient electric grid
(“REG”) system within ComEd’s electric grid in Chicago, Illinois (the “Project”). As provided in the Subcontract
Agreement, the Subcontract Agreement became effective upon the signing of an amendment by us and the U.S.
Department of Homeland Security (“DHS”) to the existing contract (the “Prime Contract”) between ourselves
and DHS on June 20, 2019. Unless terminated earlier by us, ComEd or DHS according to the terms of the
Subcontract Agreement, the term of the Subcontract Agreement will continue until we complete our warranty
obligations under the Subcontract Agreement. Under the terms of the Subcontract Agreement, we have agreed,
among other things, to provide the REG system and to supervise ComEd’s installation of the REG system in
Chicago. As part of our separate cost sharing arrangement with DHS under the Prime Contract, we expect
funding provided by DHS in connection with the Subcontract Agreement to be between $9.0 to $11.0 million,
which represents the total amount of revenues we are expected to recognize over the term of the Subcontract
Agreement and includes up to $1.0 million that we have agreed to reimburse ComEd for costs incurred by
ComEd while undertaking its tasks under the Subcontract Agreement (the “Reimbursement Amount”). In
addition, we have agreed to deliver an irrevocable letter of credit in the amount of $5.0 million to secure certain
obligations under the Subcontract Agreement, which we have done, and deposited $5.0 million in an escrow
account as collateral to secure such letter of credit. ComEd has agreed to provide the site and provide all civil
engineering work required to support the installation, operation and integration of the REG system into ComEd’s
electric grid. Other than the Reimbursement Amount, ComEd is responsible for its own costs and
expenses. Substation work on the project began in late 2019, and we have delivered the REG project
hardware. The REG system is expected to be operational in 2021.

On October 1, 2020, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with
the selling stockholders named therein. Pursuant to the terms of the Stock Purchase Agreement and concurrently
with entering into such agreement, we acquired all of the issued and outstanding (i) shares of capital stock of
Northeast Power Systems, Inc., a New York corporation (“NEPSI”), and (ii) membership interests of Northeast
Power Realty, LLC, a New York limited liability company, which holds the real property that serves as NEPSI’s
headquarters (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. As a result of this
transaction, NEPSI became a wholly-owned subsidiary and is operated by our Grid business segment.

The NEPSI purchase price was $26.0 million in cash on hand, including cash from the settlement of our

$25 million certificate of deposit during the three months ended September 30, 2020, and 873,657
restricted shares of our common stock. As part of the transaction, in the future, the selling stockholders may
receive up to an additional 1,000,000 restricted shares of our common stock upon the achievement of certain
specified future revenue objectives during varying periods of up to four years after the closing.

On October 26, 2020, we completed an offering of 3,670,000 shares of our common stock at a public
offering price of $15.00 per share under our then-existing Registration Statement on Form S-3. We received net
proceeds of approximately $51.5 million after deducting underwriting discounts and commissions and offering
expenses. See Note 1, “Nature of the Business and Operations and Liquidity,” for further information about this
offering.

On May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of (i) Neeltran, Inc., a

Connecticut corporation (“Neeltran”) that supplies rectifiers and transformers to industrial customers, and
(ii) Neeltran International, Inc., a Connecticut corporation (“International”), as well as the real property that
served as Neeltran’s headquarters. For additional information, see “Liquidity and Capital Resources” below.

In 2020, COVID-19 was declared a pandemic and spread throughout the globe, including in the

Commonwealth of Massachusetts where our headquarters are located, and in other areas where we have business
operations. In response to the outbreak, we have followed the guidelines of the U.S. Centers for Disease Control
and Prevention (“CDC”) and applicable state government authorities to protect the health and safety of our

36

employees, their families, our suppliers, our customers and our communities. While these measures and,
COVID-19 generally, have not materially disrupted our business to date, any future actions necessitated by the
COVID-19 pandemic may result in disruption to our business.

The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our
business, liquidity, results of operations and financial condition will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including the continued geographic spread of the
disease, the duration of the pandemic, the location, duration and magnitude of future waves of infection, new
mutations of the virus, availability and adoption of vaccines, effectiveness of vaccines against the virus and its
mutations, travel restrictions and social distancing in the United States, the European Union, India and other
countries, the duration and extent of business closures or business disruptions and the effectiveness of actions
taken to contain and treat the disease.

Results of Operations

Fiscal Years Ended March 31, 2021 and March 31, 2020

For a discussion of our results of operations for the year ended March 31, 2019, including a year-to-year
comparison between fiscal 2019 and fiscal 2018, refer to Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended
March 31, 2020.

Revenues

Total revenues increased by 36% to $87.1 million in fiscal 2020 from $63.8 million in fiscal 2019. Our

revenues are summarized as follows (in thousands):

Fiscal Years Ended
March 31,

2021

2020

Revenues:

Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$70,528
16,597

$49,585
14,253

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$87,125

$63,838

Revenues in our Grid business unit are derived from our D-VAR product sales, NEPSI product sales, HTS

wire sales, ship protection systems (“SPS”), government-sponsored electric utility projects, license contracts and
other prototype development contracts. We also engineer, install and commission our products on a turnkey-basis
for some customers. The Grid business unit accounted for 81% of total revenues in fiscal 2020 and 78% in fiscal
2019. Grid revenues increased 42% to $70.5 million in fiscal 2020 from $49.6 million in fiscal 2019. The
increase in revenues was driven by the contribution from the NEPSI Acquisition as well as growth in
the D-VAR, Volt Var Optimization (“VVO”) and SPS product lines.

Revenues in our Wind business unit are derived from wind turbine electrical control systems and core
components, wind turbine license and development contracts, service contracts and consulting arrangements. Our
Wind business unit accounted for 19% of total revenues in fiscal 2020 and 22% in fiscal 2019. Revenues in the
Wind business unit increased 16% to $16.6 million in fiscal 2020 from $14.3 million in fiscal 2019. The increase
over the prior year period was driven by increased shipments of Electrical Control Systems (“ECS”) to Inox and
an increase in spares revenue. As further described in Note 1 “Nature of the Business and Operations and
Liquidity,” Inox was delinquent on its obligations to post letters of credit for sets of ECS that Inox had agreed to
purchase under the terms of the supply contract, and on May 29, 2020, we sent written notice to Inox notifying

37

Inox of its default under the supply contract due to Inox’s failure to post letters of credit in the amount of
€6.0 million for the payment of ECS that Inox is obligated to purchase under the terms of the supply contract. On
October 1, 2020, Inox delivered approved letters of credit for payment of the remaining ECS that Inox had been
obligated to purchase as a result of its then existing forecast under the terms of the Supply Contract and cured the
default set forth in the May 29, 2020 default notice. Should Inox submit a forecast for purchases under the
Supply Contract in the future, its ability to perform its obligations with respect to such forecasted purchases may
be hampered by the prolonged impacts of the COVID-19 pandemic, or otherwise. Inox has been active in the
new central and state government auction regime in India and has a cumulative order book of over 1.4
GW. However, we cannot predict if and how successful Inox will be in executing on these orders or in obtaining
new orders under the new central and state auction regime. Any failure by Inox to succeed under this regime, or
any delay in Inox’s ability to deliver its wind turbines, could result in fewer ECS shipments to Inox.

Cost of Revenues and Gross Margin

Cost of revenues increased by 28% to $69.7 million in fiscal 2020, compared to $54.4 million in fiscal 2019.

Gross margin increased to 20% in fiscal 2020 from 15% in fiscal 2019. The increase in gross margin in
fiscal 2020 was driven by additional revenues and a more favorable product mix. Cost of revenues in fiscal 2020
includes $0.5 million for amortization on our backlog intangible asset as result of the NEPSI Acquisition. In
addition, a fair value purchase adjustment of approximately $1.0 million for the step-up basis assigned to
acquired inventory, to properly reflect the fair value in purchase accounting, was charged to cost of revenues in
the fiscal year ended March 31, 2021. The step up was assigned to acquired work-in-progress and finished goods
inventory that were completely delivered during fiscal 2020.

Operating Expenses

Research and development

Research and development (“R&D”) expenses increased by 15% to $11.0 million, or 13% of revenue in
fiscal 2020, compared to $9.6 million, or 15% of revenue, in fiscal 2019. The increase in R&D expenses is a
result of additional compensation expense, additional stock compensation expenses and higher outside services
expenses.

Selling, general, and administrative

Selling, general and administrative (“SG&A”) expenses increased by 12% to $25.3 million, or 29% of
revenue in fiscal 2020 from $22.7 million, or 36% of revenue, in fiscal 2019. The increase in SG&A expenses is
primarily the result of higher compensation, higher stock compensation expense and additional outside services
expenses.

Amortization of acquisition related intangibles

We recorded $1.2 million in fiscal 2020 and $0.3 million in fiscal 2019 in amortization expense related to

our core technology and know-how, customer relationships, and other intangible assets. The increase in
amortization expense is primarily a result of the NEPSI Acquisition.

Change in fair value of contingent consideration

The change in fair value of our contingent consideration for the earnout payment on the NEPSI Acquisition

resulted in a loss of $3.0 million in the year ended March 31, 2021. The change in the fair value was primarily
driven by the change in our stock price, which is a key valuation metric. There was no contingent consideration
for the fiscal year ended March 31, 2020.

38

Operating loss

Our operating loss is summarized as follows (in thousands):

Fiscal Years Ended
March 31,

2021

2020

Operating loss:

Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate expenses . . . . . . . . . . . . . . . . .

$(13,318)
(3,302)
(6,545)

$(13,508)
(7,699)
(1,922)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(23,165)

$(23,129)

The Grid segment generated an operating loss of $13.3 million in fiscal 2020 and $13.5 million in fiscal
2019. The operating loss held relatively steady despite an increase in revenue primarily due to the acquisition
related adjustments in cost of revenues discussed above.

The Wind segment generated an operating loss of $3.3 million in fiscal 2020 and $7.7 million in fiscal 2019.

The decrease in operating loss for fiscal 2020 was driven by improved gross margins due to additional revenues
as well as less operating expenses.

Unallocated corporate expenses in fiscal 2020 consisted of a loss on contingent consideration of

$3.0 million and stock-based compensation expense of $3.5 million. Unallocated corporate expenses in fiscal
2019 consisted of stock-based compensation expense of $1.9 million.

Change in fair value of warrants

There were no warrants outstanding as of March 31, 2021 and 2020. The change in the fair value of

warrants of $4.6 million in the year ended March 31, 2020 was primarily due to changes in our stock price, which
is a key valuation metric, as well as the exercise in June 2019 of warrants previously issued to Hercules
Technology Growth Capital, Inc. (the “Hercules Warrants”) in June 2019 and the exercise and expiration in
November 2019 of warrants previously issued to Hudson Bay Capital (the “Hudson Warrants”) in November
2019.

Interest income, net

Interest income, net was $0.4 million in fiscal 2020 compared to $1.3 million for fiscal 2019. The decrease

in interest income, net, was driven primarily by higher cash balances in the first half of fiscal 2019 as well as
lower interest rates applicable in fiscal 2020.

Other (expense) income, net

Other expense, net was $0.8 million in fiscal 2020, compared to other income, net of $0.3 million in fiscal

2019. The decrease in other income, net was due to foreign currency losses in fiscal 2020.

Income Taxes

We recorded an income tax benefit of $0.8 million in fiscal 2020 compared to income tax expense
of $0.2 million in fiscal 2019. The decrease in income tax expense is a result of purchase accounting for the
acquired intangible assets and the resulting deferred tax liability from the NEPSI Acquisition. The Company
recorded a deferred tax liability of $1.7 million, primarily for the difference in book and tax basis on the
intangible assets acquired in fiscal 2020. As a result, the Company was able to benefit additional deferred tax

39

assets and therefore released a corresponding valuation allowance of $1.7 million during the fiscal year
ended March 31, 2021. The tax benefit was offset during the fiscal year for income tax expense in foreign
jurisdictions.

Net loss

Net loss was $22.7 million in fiscal 2020, compared to net loss of $17.1 million in fiscal 2019. The increase

in net loss was driven primarily by the loss on contingent consideration of $3.0 million and additional
amortization expenses tied to the NEPSI Acquisition.

Please refer to the “Risk Factors” section in Part I, Item 1A, for a discussion of certain factors that may

affect our future results of operations and financial condition.

Non-GAAP Measures

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial
position or cash flow that either excludes or includes amounts that are not normally excluded or included in the
most directly comparable measure calculated and presented in accordance with generally accepted accounting
principles in the United States (“GAAP”). The non-GAAP measures included in this Form 10-K, however,
should be considered in addition to, and not as a substitute for or superior to the comparable measure prepared in
accordance with GAAP.

We define non-GAAP net loss as net loss before stock-based compensation, amortization of acquisition-
related intangibles, acquisition costs, changes in fair value of contingent consideration and warrants, and other
non-cash or unusual charges. We believe non-GAAP net loss assists management and investors in comparing our
performance across reporting periods on a consistent basis by excluding these non-cash charges and other items
that we do not believe are indicative of our core operating performance. In addition, we use non-GAAP net loss
as a factor to evaluate the effectiveness of our business strategies. A reconciliation of GAAP to non-GAAP net
loss is set forth in the table below (in thousands, except per share data):

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquisition-related intangibles . . . . . . . . .
Acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration and

Year ended March 31,

2021

2020

$(22,678)
3,485
1,697
313

$(17,096)
1,922
340
—

warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,060

(4,648)

Non-GAAP net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,123)

(19,482)

Non-GAAP net loss per share . . . . . . . . . . . . . . . . . . . . . .

$

(0.59)

$

(0.93)

Weighted average shares outstanding - basic and

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,879

20,985

We incurred non-GAAP net losses of $14.1 million or $0.59 per share for fiscal 2020, compared to

$19.5 million, or $0.93 per share, for fiscal 2019. The decrease in non-GAAP net loss in fiscal 2020 compared to
fiscal 2019 was driven by higher revenues, a more favorable product mix and the change in fair value of
contingent consideration and warrants.

For a description and reconciliation of our other non-GAAP financial measure, non-GAAP operating cash

flow, see below under “Non-GAAP Financial Measure – Non-GAAP Operating Cash Flow.”

40

Liquidity and Capital Resources

We have experienced recurring operating losses and as of March 31, 2021 had an accumulated deficit of

$1,001.3 million.

Our cash requirements depend on numerous factors, including the successful completion of our product

development activities, our ability to commercialize our REG and ship protection system solutions, the rate of
customer and market adoption of our products, collecting receivables according to established terms, the
continued availability of U.S. government funding during the product development phase of our superconductor-
based products and whether Inox is successful in executing on Solar Energy Corporation of India Limited orders
or in obtaining additional orders under the new central and state auction regime.

As described above, on October 1, 2020, we acquired NEPSI. The NEPSI purchase price was $26.0 million
in cash, which included cash from the settlement of our $25 million certificate of deposit during the three months
ended September 30, 2020, and 873,657 restricted shares of our common stock. As part of the transaction, the
selling stockholders may receive up to an additional 1,000,000 restricted shares of our common stock upon the
achievement of certain specified revenue objectives in the future.

As described above, on October 26, 2020, we completed an offering of 3,670,000 shares of our common
stock at a public offering price of $15.00 per share. We received net proceeds of approximately $51.5 million
after deducting underwriting discounts and commissions and offering expenses. In addition, we had granted the
underwriters a 30-day option to purchase up to an additional 550,500 shares of common stock at the public
offering price which they did not exercise.

In February 2021, we filed a shelf registration statement on Form S-3 that will expire in February 2024 (the

“Form S-3”). The Form S-3 allows us 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 us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund
our 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.

As described above, on May 6, 2021, we acquired all of the issued and outstanding shares of capital stock of

(i) Neeltran, that supplies rectifiers and transformers to industrial customers, and (ii) International, for: (a)
$1.0 million in cash, and (b) 301,556 shares of the Company’s common stock, which were paid and issued to the
selling stockholders of Neeltran. We also paid $1.1 million to the selling stockholders of Neeltran at closing to
pay off previous loans made by them to Neeltran. [Placeholder for registration of shares].

Also on May 6, 2021, our subsidiary, AMSC Husky LLC, purchased the real property that served as
Neeltran’s headquarters for $4.3 million, of which (a) $2.4 million was paid in immediately available funds by
AMSC Husky to the owners of such real property, and (b) $1.9 million was paid directly to TD Bank as full
payment for the outstanding indebtedness secured by the mortgage on such real property. Additionally, we paid
approximately $7.6 million, including $1.9 million of indebtedness secured by the mortgage on the real property,
directly to Neeltran lenders at closing to extinguish outstanding Neeltran indebtedness to third parties. All cash
payments associated with the Neeltran acquisition were funded with cash on hand.

41

At March 31, 2021, we had cash, cash equivalents, marketable securities and restricted cash of

$80.7 million, compared to $66.1 million at March 31, 2020 an increase of $14.6 million. As of March 31, 2021,
we had approximately $3.2 million of cash, cash equivalents, marketable securities and restricted cash in foreign
bank accounts. Our cash and cash equivalents, marketable securities and restricted cash are summarized as
follows (in thousands):

March 31,
2021

March 31,
2020

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$67,814
5,140
7,725

$24,699
35,195
6,165

Total cash, cash equivalents, marketable securities and

restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$80,678

$66,059

Net cash used in operating activities was $8.7 million and $16.5 million in fiscal 2020 and 2019,
respectively. The decrease in net cash used in operations in fiscal 2020 compared to fiscal 2019 was due
primarily to the overall impact of increased sales activities on the operating accounts in fiscal 2020.

Net cash provided by/(used in) investing activities was $2.5 million and ($36.6 million) in fiscal 2020 and
2019, respectively. The decrease in net cash used in investing activities in fiscal 2020 compared to fiscal 2019
was due primarily to the purchase of the $35.0 million certificate of deposit in the year ended March 31,
2020 with no such transaction in the fiscal 2020 period and the sale of the $30.0 million in certificates of deposit
in the year ended March 31, 2021, offset by cash that was used to pay for the NEPSI Acquisition.

Net cash provided by financing activities was $50.8 million and $5.8 million in fiscal 2020 and 2019,
respectively. The increase in net cash provided by financing activities in fiscal 2020 compared to fiscal 2019 was
primarily due to the proceeds from the October 2020 offering.

At March 31, 2021, we had $5.6 million of restricted cash included in long-term assets and $2.2 million of
restricted cash in short-term assets. At March 31, 2020, we had $5.7 million of restricted cash included in long-
term assets and $0.5 million of restricted cash in short-term assets. These amounts included in restricted cash
primarily represent collateral deposits to secure surety bonds and letters of credit for various customer contracts
including the Subcontract Agreement with ComEd. These deposits are held in interest bearing accounts.

We believe we have sufficient available liquidity to fund our operations and capital expenditures for the
next twelve months. In addition, we may seek to raise additional capital, which could be in the form of loans,
convertible debt or equity, to fund our operating requirements and capital expenditures. Our liquidity is highly
dependent on our ability to increase revenues, including our ability to collect revenues under our agreements with
Inox, control our operating costs, and our ability to raise additional capital, if necessary. There can be no
assurance that we will be able to raise additional capital on favorable terms or at all, or execute on any other
means of improving our liquidity as described above. Additionally, the impact of the COVID-19 pandemic on the
global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively
impact our liquidity. We also continue to closely monitor our expenses and, if required, we intend to reduce our
operating and capital spending to enhance liquidity.

Non-GAAP Financial Measure – Non-GAAP Operating Cash Flow

We define non-GAAP operating cash flow as operating cash flow before the Sinovel settlement (net of legal

fees and expenses); tax effect of adjustments; and other unusual cash flows or items. The tax effect of
adjustments relates primarily to the Sinovel settlement, net. We believe non-GAAP operating cash flow assists
management and investors in comparing our operating cash flow across reporting periods on a consistent basis by

42

excluding these non-recurring cash items that it does not believe are indicative of our core operating cash flow. A
reconciliation of GAAP to non-GAAP operating cash flow is set forth in the table below (in thousands).

Operating cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sinovel settlement (net of legal fees and expenses) . . . . . .
. . . . . . . . . . . . . . . . .
Tax effect of Sinovel settlement, net

$(8,681)
—
—

$(16,497)
1,000
3,323

Non-GAAP operating cash flow . . . . . . . . . . . . . . . . . . . . .

$(8,681)

$(12,174)

March 31,
2021

March 31,
2020

Legal Proceedings

From time to time, we are involved in legal and administrative proceedings and claims of various types. We

record a liability in our consolidated financial statements for these matters when a loss is known or considered
probable and the amount can be reasonably estimated. We review these estimates each accounting period as
additional information is known and adjust the loss provision when appropriate. If a matter is both probable to
result in liability and the amounts of loss can be reasonably estimated, we estimate and disclose the possible loss
or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is
not probable or cannot be reasonably estimated, a liability is not recorded in our consolidated financial
statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined under SEC rules, such as relationships with

unconsolidated entities or financial partnerships, which are often referred to as structured finance or special
purpose entities, established for the purpose of facilitating transactions that are not required to be reflected on our
balance sheet except as discussed below.

We occasionally enter into construction contracts that include a performance bond. As these contracts
progress, we continually assess the probability of a payout from the performance bond. Should we determine that
such a payout is probable, we would record a liability.

In addition, we have various contractual arrangements, under which we have committed to purchase certain

minimum quantities of goods or services on an annual basis.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 provide more
decision-useful information about the expected credit losses on financial instruments and other commitments to
extend credit held by a reporting entity at each reporting date. The ASU is effective for annual reporting periods
beginning after December 15, 2019, including interim periods within that year. Following the release of ASU
2019-10 in November 2019, the new effective date, as long as we remain a smaller reporting company, would be
annual reporting periods beginning after December 15, 2022. We are currently evaluating the impact, if any, the
adoption of ASU 2016-13 may have on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Changes to the
Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 provide for increased
effectiveness of the disclosures made around fair value measurements while including consideration for costs and
benefits. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim
periods within those periods. As of April 1, 2020, we have adopted ASU 2018-13 and noted no material impact
on our consolidated financial statements.

43

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting

for Income Taxes. The amendments in ASU 2019-12 provide for simplified accounting to several income tax
situations and removal of certain accounting exceptions. The ASU is effective for annual reporting periods
beginning after December 15, 2020, including interim periods within those periods. We do not expect the impact
of the adoption of ASU 2019-12 to be material to our consolidated financial statements.

We do not believe that other recently issued accounting pronouncements will have a material impact on our

financial statements.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements requires that we make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. We base our estimates on historical experience and various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
under different assumptions or conditions. Our accounting policies that involve the most significant judgments
and estimates are as follows:

• Revenue recognition;

• Business acquisitions;

• Marketable securities;

• Accounts receivable;

•

Inventory;

• Valuation of long-lived assets;

• Leases;

• Goodwill;

•

•

Income taxes;

Stock-based compensation;

• Contingencies;

•

•

Product warranty; and

Fair value of financial instruments.

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. We record revenue based on a five-step model
which includes verifying the existence of the contract, 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 do not meet the

requirements of an exchange transaction and therefore do not fall within the scope of Accounting Standards
Codification (“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.

44

For certain arrangements, such as contracts to perform research and development, prototype development

contracts and certain customized product sales, we record 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. We follow this method when any of the three 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 is no alternative use to us and there is an enforceable right to payment including a
reasonable profit 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, we follow the point in time method.

We enter into sales arrangements that may provide 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, we continually assess the probability of a payout from the
performance bond. Should we determine that such a payout is likely, we would record a liability. We would
reduce revenue to the extent a liability is recorded. In addition, we enter into licensing arrangements that include
training services.

Performance obligations are separated into more than one unit of accounting when (1) the delivered
element(s) have value to the customer on a stand-alone basis, and (2) our 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. Revenues for product shipments are 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. We identify all goods and/or services that are to be delivered separately under a sales arrangement
and allocate 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. We review SSP and the related margins at least annually.

Our 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 our
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 we can determine that we have no further obligations
other than the grant of the license and that we have fully transferred the technology know-how, we recognize the
revenue under a point in time model. In other license arrangements, we may also agree to provide training
services to transfer the technology know-how. In these arrangements, we have determined that the licenses have
no standalone value to the customer and are not separable from training services as we can only fully transfer the
technology know-how through the training component. Accordingly, we account for these arrangements as a
single unit of accounting, and recognize 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 is not 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, we recognize revenue for these amounts upon
reaching the constraining event successfully. We do not generally provide for extended payment terms or provide
our customers with a right of return.

Infrequently, we receive requests from customers to hold product being purchased from us for a valid
business purpose. We recognize revenues for such arrangements provided the transaction meets, at a minimum,

45

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; we have no continuing performance obligation in
regards to the purchased product and these products have been segregated from our inventories and cannot be
used to fill other orders received. There were no such transactions during the fiscal year ended March 31,
2021 or 2020.

We have elected to record taxes collected from customers on a net basis and do not include tax amounts in

revenue or costs of revenue.

Our 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. Our accounts receivable balance is made up entirely of customer contract
related balances.

See Note 4, “Revenue Recognition,” for further information regarding the Company’s adoption of

ASC 606, Revenue from Contracts with Customers.

Business Acquisitions

We account for acquisitions using the purchase method of accounting in accordance with ASC 805,
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. The excess purchase price over the
estimated fair value of the net assets acquired is recorded as goodwill. Intangible assets, if identified, are also
recorded.

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 our acquisitions may include future payments that are contingent upon the occurrence

of a particular event. We record a contingent consideration obligation for such contingent consideration
payments at fair value on the acquisition date. We estimate 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. Each period we revalue the contingent consideration
obligations associated with the acquisition to fair value and record changes in the fair value within the
operating expenses in our consolidated statements of income. 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. See Note 3, “NEPSI Acquisition,” for additional information.

Marketable Securities

Marketable securities consist of certificates of deposit with maturities of greater than 12 months that are
measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. We
determine the appropriate classification of marketable securities at the time of purchase and re-evaluate such
classification as of each balance sheet date. All marketable securities are considered available for sale and are
carried at fair value. Changes in fair value are recorded to other income (expense), net. We periodically
review the realizability of each short and long term marketable security when impairment indicators exist with
respect to the security. If other than temporary impairment of value of the security exists, the carrying value of
the security is written down to its estimated fair value.

46

Accounts Receivable

Accounts receivable consist of amounts owed by commercial companies and government agencies.

Accounts receivable are stated net of allowances for doubtful accounts. Our accounts receivable relate principally
to a limited number of customers. As of March 31, 2021, Naval Surface Warfare Center accounted for
approximately 28%, and RWE Renewables, LLC accounted for approximately 11% of our accounts receivable
balance, with no other customers accounting for greater than 10% of the balance. As of March 31, 2020, Fuji
Bridex Pte. Ltd. accounted for approximately 25%, Department of Homeland Security accounted for 18%, and
Doosan Heavy Industries & Construction Co., Ltd. accounted for approximately 17% of our accounts receivable
balance, with no other customers accounting for greater than 10% of the balance. Changes in the financial
condition or operations of our customers may result in delayed payments or non-payments which would
adversely impact our cash flows from operating activities and/or our results of operations. As such, we may
require collateral, advanced payment or other security based upon the customer history and/or creditworthiness.
In determining the allowance for doubtful accounts, we evaluate 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. If the financial condition of
our 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 doubtful accounts and ensure that
payments are received on a timely basis could have a material adverse effect on our 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 a first-in, first-out basis, or net realizable value determined on a first-in, first-out basis as the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. We record inventory when we take 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.

At each balance sheet date, we evaluate our 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 is not written back up if demand increases.

We recorded inventory reserves of $1.8 million and $1.3 million during fiscal 2020 and 2019, respectively,

based on evaluating our ending inventories for excess quantities and obsolescence.

Valuation of long-lived assets

We periodically evaluate our long-lived assets, consisting principally of fixed and amortizable intangible
assets for potential impairment. In accordance with the applicable accounting guidance for the treatment of long-
lived assets, we review the carrying value of our 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 may not 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 determination of our asset groups
involves a significant amount of judgment, assumptions and estimates. We evaluate our long-lived assets
whenever events or circumstances suggest that the carrying amount of an asset or group of assets may not be
recoverable from the estimated undiscounted future cash flows.

47

Our judgments regarding the existence of impairment indicators are based on market and operational

performance. Indicators of potential impairment include:

•

•

•

•

•

•

a significant change in the manner in which an asset group is used;

a significant decrease in the market value of an asset group;

identification of other impaired assets within a reporting unit;

a significant adverse change in its business or the industry in which it is sold;

a current period operating cash flow loss combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with the asset group; and

significant advances in our technologies that require changes in our manufacturing process.

There were no indicators requiring further impairment testing on our long-lived assets during the fiscal

years ended March 31, 2021 or 2020.

Leases

Leases include all agreements in which we obtain 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 our control of the asset, after being discounted by our incremental borrowing rate. Our lease
portfolio is made up primarily of real estate leases for our various offices, but also includes items such as
vehicles, IT equipment and other miscellaneous tools and equipment needed for manufacturing. Our incremental
borrowing rate was determined through an analysis to identify what rates we could obtain if we were to secure
external financing for similar transactions, and includes considerations of both the market and our current credit
ratings. An analysis will be 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 our leases are classified as operating leases, and therefore the expense is captured in income

from operations each period.

We have elected to exclude all leases of less than twelve months from the balance sheet presentation. We
have also elected a policy in which we will not segregate lease components from non-lease components, so in the
event we execute an agreement which includes a non-lease component our 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.

Goodwill

Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated. We
perform our annual assessment of goodwill on February 28th of each fiscal year and whenever events or changes
in circumstances or a triggering event indicate that the carrying amount may not be recoverable. Determining
whether a triggering event has occurred often involves significant judgment from management. An entity is
permitted to first 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 than not that a reporting
unit’s fair value is less than its carrying amount. We determine the fair value of a reporting unit based on an
income approach utilizing a discounted cash flow adjusted for entity specific factors. In evaluating whether it is
more likely than not 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 that reporting unit. See Note 5, “Goodwill” for further
information and discussion.

48

We performed our annual assessment of goodwill on February 28, 2021 and noted no triggering events from

the analysis date to March 31, 2021 and determined that there was no impairment to goodwill.

Income taxes

Our 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 carryforwards using expected tax rates in effect in the years during which the differences are
expected to reverse. All deferred tax assets and liabilities are presented as non-current in the Consolidated
Balance Sheet.

We regularly assess our ability to realize our deferred tax assets. Assessments of the realization of deferred

tax assets require that management consider all available evidence, both positive and negative, and make
significant judgments about many factors, including the amount and likelihood of future taxable income. Based
on all the available evidence, we have recorded valuation allowances to reduce our deferred tax assets to the
amount that is more likely than not to be realizable due to the taxable losses that have been incurred since our
inception and uncertainty around our future profitability.

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical
merits, it is more likely than not that the position will be sustained upon audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon ultimate settlement. We reevaluate these uncertain tax positions on
a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in
these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. We
include interest and penalties related to gross unrecognized tax benefits within the provision for income taxes.
See Note 13, “Income Taxes,” of our consolidated financial statements for further information regarding our
income tax assumptions and expenses.

Stock-based compensation

We measure compensation cost arising from the grant of share-based payments to employees and

non-employees at fair value and recognize such cost over the period during which the employee and
non-employee is required to provide service in exchange for the award, usually the vesting period. Total stock-
based compensation expense recognized during the fiscal years ended March 31, 2021 and 2020 was $3.5 million
and $1.9 million, respectively. For awards with service conditions only, we recognize compensation cost on a
straight-line basis over the requisite service/vesting period. For awards with performance conditions, accruals 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 calculating the fair value of share-based payment awards

requires the input of highly subjective assumptions, including the expected life of the share-based payment
awards and stock price volatility. Management determined that expected volatility rates should be estimated
based on historical and implied volatilities of our 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 our historical
exercise, cancellation and expiration patterns. The assumptions used in calculating the fair value of share-based
payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and
the application of management judgment. As a result, if circumstances change and we use different assumptions,
our stock-based compensation expense could be materially different in the future. In addition, we are required to
estimate an expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual

49

forfeiture rate is materially different from our estimate, the stock-based compensation expense could be
significantly different from what we have recorded in the current period. See Note 15, “Stockholders’ Equity,” of
our consolidated financial statements for further information regarding our stock-based compensation
assumptions and expenses.

We account for share-based payments made to non-employees in 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 our stock compensation currently reported.

Contingencies

From time to time, we are involved in legal and administrative proceedings and claims of various types. We

record a liability in our consolidated financial statements for these matters when a loss is known or considered
probable and the amount can be reasonably estimated. We review these estimates each accounting period as
additional information is known and adjust the loss provision when appropriate. If the loss is not probable or
cannot be reasonably estimated, a liability is not recorded in our consolidated financial statements. If, with
respect to a matter, it is not both probable to result in liability and the amount of loss cannot be reasonably
estimated, an estimate of possible loss or range of loss shall be disclosed unless such an estimate cannot be made.
We do not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss
contingencies are expensed as incurred. See Note 16, “Commitments and Contingencies”, of our consolidated
financial statements for further information.

Product Warranty

Warranty obligations are incurred in connection with the sale of our products. We generally provide a one to

three year warranty on our products, commencing upon installation. 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.

Fair Value of Financial Instruments

Our financial instruments consist principally of cash and cash equivalents, marketable securities, accounts

receivable, notes receivable, accounts payable, accrued expenses, and warrants. The carrying amounts of cash
and cash equivalents, accounts receivable, accounts payable, and accrued expenses due to their short term nature
approximate fair value at March 31, 2021 and 2020. The estimated fair values have been determined through
information obtained from market sources and management estimates. Marketable securities consist of
certificates of deposit with maturities of greater than 12 months that are measured using such inputs as quoted
prices and are classified within Level 1 of the valuation hierarchy. We determine the appropriate classification of
our marketable securities at the time of purchase and re-evaluate such classification as of each balance sheet
date. All marketable securities are considered available for sale and are carried at fair value. Changes in fair
value are recorded to other income (expense), net. The fair value for the debt and warrant arrangements were
historically estimated by management based on the terms that we believe we could obtain in the current market
for debt with the same terms and similar maturities. The warrants were subject to revaluation at each balance
sheet date, and any change in fair value was recorded as a change in fair value in other (expense) income until the
earlier of the warrants’ exercise or expiration. We relied on assumptions used in a lattice model to determine the
fair value of the warrants. We have appropriately valued the warrants within Level 3 of the valuation hierarchy.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This item is not required for smaller reporting companies.

50

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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, 2021 and 2020, 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,
2021 and 2020, 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.

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 Public Company Accounting Oversight Board (United States) (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. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain
an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.

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.

Revenue Recognition

As described in Notes 1 and 4 of the consolidated financial statements, a significant portion of the
Company’s revenue is generated pursuant to nonstandard written contractual arrangements to design, develop,

51

and/or manufacture products, and to provide related technical and other services according to the specifications
of the customers. Because of the uniqueness of the terms and conditions in the customer contracts, there is
significant analysis, and at times significant judgments, that are made by management when evaluating the
contracts for proper revenue recognition. The Company’s performance obligations under these contractual
agreements are satisfied over time or at a point in time. For performance obligations satisfied over time, revenue
is generally recognized by measuring progress through costs incurred to date relative to total estimated costs at
completion, which requires management to estimate both total expected project costs and expected gross margin,
including evaluating customer change orders, to determine the appropriate amount of revenue to recognize,
which can require significant management judgment. For contracts with multiple performance obligations when
the standalone selling price is not directly observable, the Company uses its best estimate of the standalone
selling price of each distinct good or service in the contract using the cost-plus reasonable margin approach and a
relief from royalty method for licenses, which include significant management estimates.

We identified revenue recognition pertaining to customer contracts 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 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:

• We obtained an understanding of the relevant controls related to revenue recognition and tested

controls specific to management’s analysis of customer contract terms and application of relevant
accounting guidance as well as determination of significant assumptions used in computing revenue for
design and operating effectiveness,

• We selected a sample of contracts with customers and related revenue transactions and performed the

following audit procedures:

• Obtained customer contract, related invoices, purchase orders, and management revenue

recognition analysis for each testing selection, to evaluate if relevant contractual terms and
transaction price were appropriately considered by management and conclusions on revenue
recognition method were in accordance with the relevant accounting guidance;

• Evaluated management’s estimations of total contract cost and contract profit by assessing actual

costs to date against projections made throughout the course of the contract term;

• Evaluated the reasonableness of management’s estimates of standalone selling prices through

review of historical data supporting estimate of gross margin and extended warranty costs used in
management’s calculations

Valuation of Intangible Asset and Contingent Consideration in Business Combination

As described in Note 3 of the consolidated financial statements, the Company completed the acquisition of
Northeast Power Systems, Inc. and Northeast Power Realty, LLC on October 1, 2020 for total consideration of
$42.4 million. The total consideration included contingent consideration in the form of seller earn out provisions
with a fair value of $4.0M at the acquisition date. The Company accounted for this transaction under the
acquisition method of accounting for business combinations. Accordingly, the total consideration paid was
allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified
intangible assets of $7.3 million and resulting goodwill of $32.9 million. Of the identified intangible assets
acquired, the most significant included a customer relationships intangible asset of $6.1 million. The Company
estimated the fair value of the customer relationship intangible asset using the multi-period excess earnings
method, which required management to make significant estimates and assumptions related to forecasted revenue

52

and earnings, expected economic life of the asset, contributory asset charges, attrition rates, and the selection of
discount rates. The Company estimated fair value of the contingent consideration using a Monte Carlo
simulation, which is a complex valuation model that required use of a management third-party specialist as well
as required management to make significant estimates and assumptions related to forecasted revenue targets,
discount rates and revenue volatility.

We identified the valuation of the customer relationship intangible asset and contingent consideration as a

critical audit matter because of the significant estimates and assumptions management used in the fair value
determination as well as the complexity of the Monte Carlo simulation model used to value the contingent
consideration. Auditing management’s forecasts of future revenues and cash flows, the selection of the discount
rates as well as testing the Monte Carlo simulation model required a high degree of auditor judgment and an
increased extent of effort when performing audit procedures, including the use of our valuation specialists.

Our audit procedures related to the customer relationship intangible asset and contingent consideration

included the following, among others:

• With the assistance of our valuation specialists, we prepared an independent calculation of the fair
value of the contingent consideration to test the accuracy of the Company’s valuation model.

• We evaluated the reasonableness of management’s forecasts of revenue, probabilities of achieving

revenue metrics, future cash flows and attrition rates by comparing the projections to historical results
as well as industry benchmarks

• With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s

valuation methodologies and significant assumptions by:

• Testing the source information underlying the determination of the discount rates and verifying

the accuracy of the calculations, including the contributory asset charges.

• Developing an analysis for the discount rates and compared that analysis to the discount rates

selected by management.

/s/ RSM US LLP

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

Boston, Massachusetts
June 2, 2021

53

AMERICAN SUPERCONDUCTOR CORPORATION
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands)

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities, long term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue, long term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability, long term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitments and contingencies (Note 16)
Stockholders’ equity:

March 31,
2021

March 31,
2020

$

$

$

67,814
5,140
13,267
13,306
3,546
2,157

105,230
—
8,997
9,153
3,747
34,634
5,568
1,223
314
168,866

19,810
612
7,050
13,266

40,738
7,991
3,246
274
25

52,274

$

24,699
30,149
16,987
18,975
2,959
508

94,277
5,046
8,565
3,550
3,359
1,719
5,657
1,551
385
$ 124,109

$

22,091
439
—
18,430

40,960
7,712
3,000
180
38

51,890

Common stock, $0.01 par value, 75,000,000 shares authorized; 27,988,536 and
22,902,288 shares issued and 27,593,400 and 22,604,410 shares outstanding
at March 31, 2021 and 2020, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional paid-in capital
Treasury stock, at cost, 395,136 and 297,878 shares at March 31, 2021 and

2020, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

280
1,121,495

229
1,053,507

(3,593)
(277)
(1,001,313)

(2,666)
(216)
(978,635)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116,592

72,219

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

168,866

$ 124,109

The accompanying notes are an integral part of the consolidated financial statements.

54

AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Fiscal Year Ended
March 31,

2021

2020

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 87,125
69,671

$ 63,838
54,393

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

17,454

9,445

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquisition related intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,015
25,322
1,222
3,060

40,619
(23,165)
—
426
(771)

(23,510)
(832)

9,565
22,669
340
—

32,574
(23,129)
4,648
1,327
253

(16,901)
195

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(22,678) $(17,096)

Net loss per common share

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

(0.95) $

(0.81)

(0.95) $

(1.03)

Weighted average number of common shares outstanding

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,879

20,985

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,879

21,069

The accompanying notes are an integral part of the consolidated financial statements.

55

AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax:

Foreign currency translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended
March 31,

2021

2020

$(22,678) $(17,096)

(61)

(61)

(211)

(211)

Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(22,739) $ 17,307

The accompanying notes are an integral part of the consolidated financial statements.

56

AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

Common Stock

Number
of
Shares

Par
Value

Additional
Paid-in
Capital

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Deficit

Total
Stockholders’
Equity

Balance at March 31, 2019 . . . . . . 21,652 $216 $1,044,622 $(2,101)

$

(5)

$ (961,539) $ 81,193

Issuance of common stock -

ESPP . . . . . . . . . . . . . . . . . . . . .

37 —

201

—

Issuance of common stock -

restricted shares . . . . . . . . . . . . .

360

Stock-based compensation

expense . . . . . . . . . . . . . . . . . . . — —

Issuance of stock for 401(k)

match . . . . . . . . . . . . . . . . . . . . .

44

Issuance of common stock-

warrant exercise . . . . . . . . . . . .

809

4

1

8

Repurchase of treasury stock . . . . — —
Cumulative translation

adjustment . . . . . . . . . . . . . . . . . — —
Net loss . . . . . . . . . . . . . . . . . — —

(4) —

1,922

341

6,425
—

—
—

—

—

—
(565)

—
—

—

—

—

—

—
—

—

—

—

—

—
—

201

—

1,922

342

6,433
(565)

(211)
—

—
(17,096)

(211)
(17,096)

Balance at March 31, 2020 . . . . . . 22,902 $229 $1,053,507 $(2,666)

$(216)

$ (978,635) $ 72,219

Exercise of stock options . . . . . . .
Issuance of common stock -

3 — $

ESPP . . . . . . . . . . . . . . . . . . . . .

15 —

63

215

—

—

Issuance of common stock -

restricted shares . . . . . . . . . . . . .

494

5

(5) —

Stock-based compensation

expense . . . . . . . . . . . . . . . . . . . — —

3,485

Issuance of stock for 401(k)

match . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock - equity
offering . . . . . . . . . . . . . . . . . . .

Issuance of common stock -

30 —

366

3,670

37

51,440

—

—

—

NEPSI acquisition . . . . . . . . . . .

874

9

Repurchase of treasury stock . . . . — —
Cumulative translation

adjustment . . . . . . . . . . . . . . . . . — —
Net loss . . . . . . . . . . . . . . . . . — —

12,424
—

—
(927)

—

—

—

—

—

—

—
—

— $

63

—

—

—

—

—

—
—

215

—

3,485

366

51,477

12,433
(927)

—
—

—
—

(61)
—

—
(22,678)

(61)
(22,678)

Balance at March 31, 2021 . . . . . . 27,988 $280 $1,121,495 $(3,593)

$(277)

$(1,001,313) $116,592

The accompanying notes are an integral part of the consolidated financial statements.

57

AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Fiscal Year Ended
March 31,

2021

2020

Cash flows from operating activities:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash used in operations:

$(22,678) $(17,096)

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for excess and obsolete inventory . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized foreign exchange loss/(gain) on cash and cash equivalents . . . . .

Changes in operating asset and liability accounts:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,352
3,485
1,762
(1,221)
3,060
—
(94)
272
363

5,193
8,106
823
(5,047)
(8,057)
(8,681)

Cash flows from investing activities:

. . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of property, plant and equipment
Proceeds from the sale of property, plant and equipment
. . . . . . . . . . . . . . .
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisition, net of cash received . . . . . . . . . . . . . . . . . . . . . . .
Purchase of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,764)
—
—
30,152
(26,000)
—

81
2,469

4,308
1,922
1,276
(1,714)
—
(4,648)
(308)
329
(319)

(9,159)
(8,143)
373
5,894
10,788
(16,497)

(3,630)
3,001
(35,000)
—
—
(1,000)
8
(36,621)

Cash flows from financing activities:

Employee taxes paid related to net settlement of equity awards . . . . . . . . . .
Proceeds from exercise of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from public equity offering, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of employee stock options and ESPP . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . . . .
Net increase (decrease) in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of year . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . .

(927)
—
51,477
278
50,828
59
44,675
30,864
$ 75,539

(565)
6,139
—
202
5,776
8
(47,334)
78,198
$ 30,864

Supplemental schedule of cash flow information:

Cash paid for income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . .

$

594

$ 3,653

Non-cash investing and financing activities

Issuance of common stock in connection with the purchase of Northeast

Power Systems, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock to Hercules to settle warrant liability . . . . . . . . .
Issuance of common stock to settle liabilities . . . . . . . . . . . . . . . . . . . . . . . .

12,433
—
395

—
294
407

The accompanying notes are an integral part of the consolidated financial statements.

58

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 products leverage its proprietary “smart materials” and “smart software and
controls” to provide enhanced resiliency and improved performance of megawatt-scale power flow.

The Company’s consolidated financial statements have been prepared on a going concern basis in
accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and
Exchange Commission’s (“SEC”) instructions to Form 10-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, 2021, the

Company had an accumulated deficit of $1,001.3 million. In addition, the Company has historically experienced
recurring negative operating cash flows. At March 31, 2021, the Company had cash, cash equivalents, and
marketable securities of $73.0 million. Marketable securities includes a certificate of deposit with maturity in six
months. Cash used in operations for the year ended March 31, 2021 was $8.7 million.

In December 2015, the Company entered into a set of strategic agreements valued at approximately

$210.0 million with Inox Wind Ltd. (“Inox” or “Inox Wind”), which includes a multi-year supply contract
pursuant to which the Company will supply electrical control systems to Inox and a license agreement allowing
Inox to manufacture a limited number of electrical control systems. After Inox purchases the specified number of
electrical control systems required under the terms of the supply contract, Inox agreed that the Company will
continue as Inox’s preferred supplier and Inox will be required to purchase from the Company a majority of its
electrical control systems requirements for an additional three-year period. Pursuant to these strategic
agreements, Inox must forecast future purchase orders of sets of Electrical Control Systems (“ECS”) which
become firm orders three months prior to shipment, and Inox must post letters of credit before the Company will
ship such orders. During the year ended March 31, 2020, Inox was delinquent on its obligation to post letters of
credit for sets of ECS that Inox had agreed to purchase under the terms of the supply contract. On May 29, 2020,
the Company sent written notice to Inox notifying Inox of its default under the supply contract due to Inox’s
failure to post letters of credit in the amount of €6.0 million for the payment of ECS that Inox is obligated to
purchase under the terms of the supply contract. If Inox failed to post letters of credit in the amount of
€6.0 million in accordance with the terms of the supply contract within the ninety day cure period after receipt of
the default notice, then the Company could have terminated the supply contract by providing written notice of
such termination to Inox. On September 2, 2020, Inox delivered approved letters of credit in the amount of
€1.3 million for the payment of a portion of the ECS that Inox was obligated to purchase under the terms of the
supply contract. On September 11, 2020, the Company notified Inox that due to (i) the Company’s business
relationship with Inox, and (ii) Inox’s delivery of approved letters of credit in the amount of €1.3 million as
described above, the Company gave Inox until October 5, 2020 to regain compliance with the terms of the supply
contract by providing approved letters of credit in the amount of €4.7 million for payment of the remaining ECS
that Inox currently was obligated to purchase under the terms of the supply contract. On October 1, 2020, Inox
delivered approved letters of credit for payment of the remaining ECS that Inox was obligated to purchase as a
result of its then existing forecast under the terms of the supply contract and cured the default set forth in the
May 29, 2020 default notice.

On October 1, 2020 (the “Acquisition Date”), the Company entered into a Stock Purchase Agreement (the

“Stock Purchase Agreement”) with the selling stockholders named therein. Pursuant to the terms of the Stock

59

Purchase Agreement and concurrently with entering into such agreement, the Company acquired all of the issued
and outstanding (i) shares of capital stock of Northeast Power Systems, Inc., a New York corporation (“NEPSI”),
and (ii) membership interests of Northeast Power Realty, LLC, a New York limited liability company, which
holds the real property that serves as NEPSI’s headquarters (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 now 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 in the
future.

On October 22, 2020, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc.,

as representative of the several underwriters named therein, relating to the issuance and sale (the “2020
Offering”) of 3,670,000 shares of the Company’s common stock at a public offering price of $15.00 per share.
The net proceeds to the Company from the 2020 Offering were approximately $51.5 million, after deducting
underwriting discounts and commissions and offering expenses payable by the Company. The 2020 Offering
closed on October 26, 2020. In addition, the Company had granted the underwriters a 30-day option to purchase
up to an additional 550,500 shares of common stock at the public offering price which was not exercised.

In March 2020, the World Health Organization declared the disease caused by the novel coronavirus
(“COVID-19“) to be a pandemic. COVID-19 has spread throughout the globe, including in the Commonwealth
of Massachusetts where the Company’s headquarters are located, and in other areas where the Company has
business operations. In response to the outbreak, the Company has followed the guidelines of the U.S. Centers for
Disease Control and Prevention (“CDC”) and applicable state government authorities to protect the health and
safety of the Company’s employees, families, suppliers, customers and communities. While these existing
measures and, COVID-19 generally, have not materially disrupted the Company’s business to date, any future
actions necessitated by the COVID-19 pandemic may result in disruption to the Company’s business.

While the COVID-19 pandemic continues to rapidly evolve, the Company continues to assess the impact of
the COVID-19 pandemic to best mitigate risk and continue the operations of the Company’s business. The extent
to which the outbreak impacts the Company’s business, liquidity, results of operations and financial condition
will depend on future developments, which are highly uncertain and cannot be predicted with confidence,
including new information that may emerge concerning the severity of the COVID-19 pandemic and the actions
to contain it or treat its impact, among others. If the Company, its customers or suppliers experience prolonged
shutdowns or other business disruptions, the Company’s business, liquidity, results of operations and financial
condition are likely to be materially adversely affected, and the Company’s ability to access the capital markets
may be limited.

The Company believes that based on the information presented above and its annual management

assessment, it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months
following the issuance of the financial statements for the year ended March 31, 2021. The Company’s liquidity is
highly dependent on its ability to increase revenues, including its ability to collect revenues under its agreements
with Inox, its ability to control its operating costs, and its ability to raise additional capital, if necessary. The
impact of the COVID-19 pandemic on the global financing markets may reduce the Company’s ability to raise
additional capital, if necessary, which could negatively impact the Company’s liquidity. There can be no
assurance that the Company will be able to continue to raise additional capital, on favorable terms or at all, from
other sources or execute on any other means of improving liquidity described above.

2. 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. Certain reclassifications of

60

prior year amounts have been made to conform to the current year presentation. These reclassifications had no
effect on net income, cash flows from operating activities or stockholders’ equity.

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 are not 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 may differ 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 of three months or less that are

regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are
classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificates of
deposits and money market accounts.

Marketable Securities

Marketable securities consist of certificates of deposit with maturities of less than 12 months that are
measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. The
Company determines the appropriate classification of its marketable securities at the time of purchase and
re-evaluates such classification as of each balance sheet date. All marketable securities are considered available
for sale and are carried at fair value. Changes in fair value are recorded to other income (expense), net. The
Company periodically reviews the realizability of each short and long term marketable security when impairment
indicators exist with respect to the security. If other than temporary impairment of value of the security exists, the
carrying value of the security is written down to its estimated fair value.

Accounts Receivable

Accounts receivable consist of amounts owed by commercial companies and government agencies.
Accounts receivable are stated net of allowances for doubtful accounts. The Company’s accounts receivable
relate principally to a limited number of customers. As of March 31, 2021, Naval Surface Warfare Center
accounted for approximately 28%, and RWE Renewables, LLC accounted for approximately 11% of the
Company’s accounts receivable balance, with no other customers accounting for greater than 10% of the balance.
As of March 31, 2020, Fuji Bridex Pte. Ltd. accounted for approximately 25%, Department of Homeland
Security accounted for 18%, and Doosan Heavy Industries & Construction Co., Ltd. accounted for approximately
17% of the Company’s accounts receivable balance, with no other customers accounting for greater than 10% of
the balance. Changes in the financial condition or operations of the Company’s customers may result 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 may require collateral, advanced payment or other security based

61

upon the customer history and/or creditworthiness. In determining the allowance for doubtful accounts, 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. 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 doubtful accounts 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 a first-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.

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 is not written back up if demand increases.

For the fiscal years ended March 31, 2021 and 2020, the Company recorded inventory reserves of

approximately $1.8 million and $1.3 million, respectively, based on evaluating its ending inventory on hand for
excess quantities and obsolescence.

Leases

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 income from operations each period.

We have elected to exclude all leases of less than twelve months from the balance sheet presentation. We
have also elected a policy in which we will not segregate lease components from non-lease components, so in the
event we execute an agreement which includes a non-lease component our 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.

62

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:

Asset Classification

Machinery and equipment . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . .

Estimated Useful Life in Years

3-10
3-5
Shorter of the estimated useful life
or the remaining lease term

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
amortizable 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 may not 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 may not be recoverable from the estimated undiscounted future cash flows.

There were no indicators requiring impairment testing on the Company’s long-lived assets during the fiscal

years ended March 31, 2021 and 2020.

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 February 28th of each fiscal year and whenever events
or changes in circumstances or a triggering event indicate that the carrying amount may not be recoverable.
Determining whether a triggering event has occurred often involves significant judgment from management. An
entity is permitted to first 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 than not that a reporting
unit’s fair value is less than its carrying amount. The Company determines the fair value of a reporting unit based
on an income approach utilizing a discounted cash flow adjusted for entity specific factors. In evaluating whether
it is more likely than not 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 Note 5, “Goodwill” for further
information and discussion.

The Company performed its annual assessment of goodwill on February 28, 2021 and noted no triggering

events from the analysis date to March 31, 2021 and determined that there was no impairment to goodwill.
Additionally, there was no impairment identified for the fiscal year ended March 31, 2020 based on the
assessment performed in the prior fiscal year.

63

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 a five-
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 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.

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
the three 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 is no 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.

The Company enters into sales arrangements that may provide 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 than one 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 and allocates 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’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
has no 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

64

arrangements, the Company may also agree to provide training services to transfer the technology know-how. In
these arrangements, the Company has determined that the licenses have no standalone value to the customer and
are not 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 is not 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 does not generally provide for extended
payment terms or provide its customers with a right of return.

The Company has elected to record taxes collected from customers on a net basis and does not 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.

See Note 4, “Revenue Recognition,” for further information regarding the Company’s adoption of

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

Business Acquisitions

The Company accounts for acquisitions using the purchase method of accounting in accordance with ASC

805, 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 may include 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. 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. See Note 3, “NEPSI
Acquisition,” for additional information.

65

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 typically one to three 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 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.

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., Romania and
China deferred income tax assets since the Company believes that it is more likely than not that these deferred
tax assets are not currently realizable due to uncertainty around profitability in the future.

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical
merits, it is more likely than not that the position will be sustained upon audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon ultimate settlement. The Company reevaluates these uncertain tax
positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in
these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The
Company includes interest and penalties related to gross unrecognized tax benefits within the provision for
income taxes. See Note 13, “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

66

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 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 may result 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 accounts for share-based payments made to non-employees in 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.

67

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 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,
2021 and 2020, common equivalent shares of 436,139, and 354,748, respectively, were not included in the
calculation of diluted EPS as they were considered antidilutive. The following table reconciles the numerators
and denominators of the EPS calculation for the fiscal years ended March 31, 2021 and 2020 (in thousands
except per share amounts):

Numerator:

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: decrease in fair value of warrants, net of

income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Plus: change in fair value due to exercise of

warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss — diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator:

Weighted-average shares of common stock

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average shares subject to repurchase . . . . .

Shares used in per-share calculation — basic . . . . . .

Fiscal year ended
March 31,

2021

2020

$(22,678)

$(17,096)

—

—

(4,648)

83

$(22,678)

$(21,662)

24,991
(1,112)

23,879

21,937
(953)

20,985

84

Common stock warrants . . . . . . . . . . . . . . . . . . . . . . .

—

Shares used in per-share calculation — diluted . . . . .

23,879

21,069

Net loss per share — basic . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss per share — diluted . . . . . . . . . . . . . . . . . . . . . . .

$

$

(0.95)

(0.95)

$

$

(0.81)

(1.03)

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, and AMSC China, for which the local
currency (Renminbi) is the functional currency. The assets and liabilities of AMSC Austria and AMSC China 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 income (expense), net on the consolidated statements of operations and were $0.7 million and $0.1 million,
for the fiscal years ended March 31, 2021 and 2020, respectively. The Company has no 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.

68

The Company invests its available cash in high credit, quality financial instruments and invests primarily in

investment-grade marketable securities, including, but not 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, 2022 and beyond as
incremental funding is authorized and appropriated by the government.

Contingencies

From time to time, the Company may be 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 is not probable or cannot be reasonably estimated, a liability is not recorded in the
consolidated financial statements. If, with respect to a matter, it is not 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 does not recognize gain contingencies until they are realized.
Legal costs incurred in connection with loss contingencies are expensed as incurred. See Note 16, “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, accounts receivable,

marketable securities, accounts payable, accrued expenses, warrants to purchase shares of common stock, and
derivatives. The carrying amounts of cash and cash equivalents, accounts receivable, short-term debt, accounts
payable, and accrued expenses due to their short nature approximate fair value at March 31, 2021 and 2020. The
estimated fair values have been determined through information obtained from market sources and management
estimates. Marketable securities consist of certificates of deposit with maturities of less than 12 months that are
measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. The
Company determines the appropriate classification of its marketable securities at the time of purchase and
re-evaluates such classification as of each balance sheet date. All marketable securities are considered available
for sale and are carried at fair value. Changes in fair value are recorded to other income (expense), net. The 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 Level 3 inputs. See Note 6, “Fair Value
Measurements” for a full discussion on fair value measurements.

3. NEPSI Acquisition

Acquisition of NEPSI

As described in Note 1, Nature of the Business and Operations and Liquidity, on the Acquisition Date, the
Company acquired all of the issued and outstanding shares of capital stock of NEPSI and membership interests of
Northeast Power Realty, LLC, a New York limited liability company, which holds the real property that serves as
NEPSI’s headquarters. NEPSI is a U.S.-based global provider of medium-voltage metal-enclosed power
capacitor banks and harmonic filter banks for use on electric power systems. Prior to the NEPSI Acquisition, the
Company had purchased $0.4 million of products from NEPSI in fiscal year 2019 for which NEPSI was paid and
had recorded revenue.

69

Pursuant to the Stock Purchase Agreement, the Company acquired all of the issued and outstanding shares
of NEPSI, and membership interest in the realty entity, for which the Company paid $26.0 million in cash and
issued 873,657 restricted shares of the Company’s common stock. Additionally, the Company may issue to the
selling stockholders up to an additional 1,000,000 shares of common stock upon NEPSI’s achievement of
specified revenue objectives during varying periods of up to four years following closing of the NEPSI
Acquisition. This contingent consideration is recorded as a derivative liability based on a Monte Carlo
simulation to determine fair value at the time of issuance. NEPSI is now a wholly-owned subsidiary of the
Company and is operated and reported as a component of its Grid business unit.

The NEPSI Acquisition completed by the Company during the twelve months ended March 31, 2021 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 date of 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. As NEPSI was previously a private
company, the adoption of ASC 606 was completed as part of the NEPSI Acquisition. See Note 4 “Revenue
Recognition” for further details. There were no leases acquired and the NEPSI Acquisition had no impact to the
Company’s reporting under ASC 842.

The total purchase price of approximately $42.4 million includes the fair value of shares of the Company’s

common stock issued at closing, cash paid, and contingent consideration as follows (in millions):

Cash payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of 873,657 shares of Company’s common stock . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$26.0
12.4
4.0

42.4

At the Acquisition Date, in addition to the $26.0 million cash, the Company valued the Company’s common

stock, using $14.23 per share, which was the closing price on the day that the Company acquired NEPSI and
$4.0 million of contingent consideration for the earnout liability valued as of the Acquisition Date. Acquisition
costs of $0.3 million were recorded in selling, general and administrative (“SG&A”) costs for the year ended
March 31, 2021.

The fair value of the contingent consideration was determined using a Monte Carlo model and is accounted

for as a derivative liability which is revalued at the fair value determined 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. See Note 12, “Warrants and Derivative Liabilities” for further
details and a summary of key assumptions used to determine fair value in each period.

70

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 NEPSI
Acquisition (in millions):

Net working capital (excluding inventory and deferred

revenue) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net tangible assets/(liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names and trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net identifiable intangible assets/(liabilities) . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.1
4.2
2.3
(2.7)
(1.7)

2.2

0.6
0.6
6.1

7.3
32.9

Total purchase consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42.4

Inventory includes a $1.0 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 $1.0 million step up adjustment increased cost of revenue in the fiscal year ended
March 31, 2021, as the inventory was sold. This increase is not reflected in the pro forma condensed combined
statements of operations because it does not have a continuing impact beyond the first year.

Backlog of $0.6 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 a two year period
with the expense being allocated to cost of revenues.

Customer relationships of $6.1 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 the economic consumption over 7 years with the expense being allocated to SG&A.

Trade names and trademarks of $0.6 million were reviewed, using the assumption that the Company would
continue to utilize the NEPSI trade name indefinitely. The relief from royalty method was utilized using an 8%
royalty rate on revenues with a 13% discount rate over 8 years.

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 NEPSI Acquisition was assigned to the
Company’s Grid segment. Goodwill recognized in the NEPSI Acquisition is not deductible for tax purposes. This
purchase price allocation is preliminary and has not been finalized as the analysis on the assets and liabilities
acquired, primarily the tax related liability may require further adjustments to our purchase accounting that could
result in a measurement period adjustment that would impact our reported net assets and goodwill as of
October 1, 2020. Material changes, if any, to the preliminary allocation summarized above will be reported once
the related uncertainties are resolved, but no later than October 1, 2021. The $1.7 million of deferred tax liability
is primarily related to inventory step up and intangibles.

71

Unaudited Pro Forma Operating Results

The unaudited pro forma condensed consolidated statement of operations for the year ended March 31,

2021 and 2020 is presented as if the NEPSI Acquisition had occurred on April 1, 2019.

Twelve Months Ended
March 31,

2021

2020

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 99,462
(22,158)

$ 88,578
(20,781)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss per common share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares - basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares - diluted . . . . . . . . . . . . . . . . . . . . . . . . . .

$(23,050)

$(12,922)

$
$

(0.97)
(0.97)
23,879
23,879

$
$

(0.59)
(0.59)
21,859
21,943

The pro forma amounts include the historical operating results of the Company and NEPSI with appropriate
adjustments that give effect to acquisition related costs, income taxes, intangible amortization resulting from the
NEPSI Acquisition and certain conforming accounting policies of the Company. The fiscal year ended March 31,
2021 includes a $3.0 million increase in operating loss and net loss for the change in fair value on the contingent
consideration. The pro forma amounts are not necessarily indicative of the operating results that would have
occurred if the NEPSI Acquisition 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 year ended March 31, 2021, NEPSI’s operations are included in the

Company’s consolidated results from the date of Acquisition of October 1, 2020. NEPSI contributed
$13.2 million of revenue and $0.3 million in net income for the Company for the fiscal year ended March 31,
2021. Amortization expense of $1.2 million is included in the year ended March 31, 2021 as a result of the
NEPSI acquired intangible assets. In addition, $1.0 million for the step-up basis assigned to acquired inventory
was charged to cost of revenues in the year ended March 31, 2021.

4. Revenue Recognition

The Company’s revenues in its Grid segment are derived primarily through enabling the transmission and

distribution of power, providing planning services that allow it to identify power grid needs and risks, and
developing ship protection systems for the U.S. Navy. The Company’s revenues in its Wind segment are derived
primarily through supplying advanced power electronics and control systems, licensing its highly engineered
wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The
Company records revenue based on a five-step model in accordance with 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 March 31, 2021, 78% of revenue was recognized at the point in time
when control transferred to the customer, with the remainder being recognized over time. In the fiscal year
ended March 31, 2020, 72% of revenue was recognized at the point in time when control transferred to the
customer, with the remainder being recognized over time.

Following the NEPSI Acquisition, the Company evaluated all open NEPSI contracts at the Acquisition Date

against a five-step model in accordance with ASC 606 as NEPSI, as a private company, had deferred
adopting ASC 606 prior to the Acquisition, as permitted. The Company identified two NEPSI revenue streams
which are (1) the sale of its major components, which falls under the equipment and systems product line and

72

(2) the sale of spare parts, which falls under the service product line. Further details on each of these product
lines can be found below. The Company does not expect a material impact to its consolidated statements of
operations on an ongoing basis resulting from the adoption of the ASC 606 standard for the NEPSI business, and
NEPSI revenue streams will follow the existing policies noted below.

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

The Company’s equipment and system product line includes certain contracts which do not meet the
requirements of an exchange transaction and therefore do not fall within the scope of ASC 606. As these
non-exchange transaction contracts are considered grant revenue and do not fall within any specific accounting
literature, the Company follows guidance within ASC 606 by analogy to recognize grant revenue over time. In
the year ended March 31, 2021, the Company recorded $3.9 million in grant revenue, which is included in the
Company’s Grid revenue. There was $6.4 million in grant revenue recorded in the year ended March 31, 2020,
which is included in the Company’s Grid revenue.

In the Company’s service and technology development product line, there are several different types of

transactions and each begins with a contract with a customer that summarizes each product sold to a customer,
which typically represents distinct performance obligations. The technology development transactions are
primarily for activities that have no alternative use and for which a profit can be expected throughout the life of
the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be
assured throughout the entire contract 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 no further
remaining performance obligations.

The Company’s service contracts can include a purchase order from a customer for specific goods in which

each item is a distinct performance obligation satisfied at a point in time at which control of the goods is
transferred to the customer 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.

73

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 to three

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 30 to 60 days from delivery.

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

Year Ended March 31,
2021

Grid

Wind

Product Line:
Equipment and systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Services and technology development

$65,930
4,598

$14,362
2,235

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$70,528

$16,597

Region:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$54,168
11,326
5,034

$

87
16,207
303

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$70,528

$16,597

74

Year Ended
March 31, 2020

Grid

Wind

Product Line:
Equipment and systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Services and technology development

$44,065
5,520

$12,282
1,971

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$49,585

$14,253

Region:
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$33,207
10,407
5,971

$

87
13,996
170

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$49,585

$14,253

In the fiscal years ended March 31, 2021 and 2020, 41% and 51% 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, 2021 and March 31, 2020, 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
7, “Accounts Receivable” and Note 8, “Inventory” for a reconciliation to the condensed consolidated balance
sheet) 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:

Beginning balance as of March 31, 2020 . . . . . . . . . . . . .
Increases for balances acquired . . . . . . . . . . . . . . . . . . . .
Increases for costs incurred to fulfill performance

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) due to customer billings . . . . . . . . . .
Decrease due to cost recognition on completed

Unbilled
AR

$ 5,711
101

Deferred
Program
Costs

$ 1,631
—

Contract
Liabilities

$ 26,142
2,700

—
(8,687)

7,674
—

—
52,988

performance obligations . . . . . . . . . . . . . . . . . . . . . . . .

—

(8,346)

—

Increase (decrease) due to recognition of revenue based

on transfer of control of performance obligations . . . .
. . . . . . . . . . . . . . . . . . . . .

Other changes and FX impact

8,640
—

Ending balance as of March 31, 2021 . . . . . . . . . . . . . . .

$ 5,765

$

—
18

977

(61,183)
610

$ 21,257

75

Beginning balance as of March 31, 2019 . . . . . . . . . . . . .
Increases for costs incurred to fulfill performance

obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) due to customer billings . . . . . . . . . .
Decrease due to cost recognition on completed

Unbilled
AR

Deferred
Program
Costs

Contract
Liabilities

$ 2,213

$

318

$ 15,521

—
(11,516)

4,844
—

—
47,877

performance obligations . . . . . . . . . . . . . . . . . . . . . . . .

—

(3,525)

—

Increase (decrease) due to recognition of revenue based

on transfer of control of performance obligations . . . .
. . . . . . . . . . . . . . . . . . . . .

Other changes and FX impact

15,017
(3)

—

(6)

(37,009)
(247)

Ending balance as of March 31, 2020 . . . . . . . . . . . . . . .

$ 5,711

$ 1,631

$ 26,142

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 March 31, 2021, the
Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the
next twelve months of approximately $54.9 million. There are also approximately $16.9 million of outstanding
performance obligations to be recognized over a period of thirteen to sixty months. The remaining performance
obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably
estimated. The twelve month performance obligations include anticipated shipments to Inox based on the twelve
month rolling forecast provided by Inox on the multi-year supply contract. The quantities specified in any
forecast provided by Inox related to the multi-year supply contract are firm and irrevocable for the first three
months of a twelve-month rolling forecast. The timing of the performance obligations beyond the twelve-month
forecast provided by Inox are not determinable and therefore are not included in the total remaining performance
obligations.

The following table sets forth customers who represented 10% or more of the Company’s total revenues for

the year ended March 31, 2021 and 2020:

EPC Services Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Department of Homeland Security . . . . . . . . . . . . . . . . . . . . . . . .

Grid
Grid

Reportable
Segment

Year Ended
March 31,

2021

2020

13% 0%
<10% 10%

5. Goodwill

The guidance under ASC 805-30 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 NEPSI Acquisition in fiscal
2020 and Infinia Technology Corporation in fiscal 2017 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 is not
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 might not be recoverable.

76

The following table provides a roll forward of the changes in our Grid business segment goodwill balance:

March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NEPSI Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill

$ 1,719
32,915

March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$34,634

There was no change in goodwill during the year ended March 31, 2020.

The Company performed its annual assessment of goodwill on February 28, 2021 and noted no triggering

events from the analysis date to March 31, 2021 and determined that there was no impairment to
goodwill. Additionally, no impairment resulted from the assessment performed in the fiscal year ended
March 31, 2020.

6. Fair Value Measurements

A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been

established. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the

Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for

identical or similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable for the asset or liability, and inputs that are derived principally from or
corroborated by observable market data by correlation or other means (market corroborated
inputs).

Level 3 - Unobservable inputs that reflect the Company’s assumptions that market participants would use

in pricing the asset or liability. The Company develops these inputs based on the best information
available, including its own data.

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details

of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its
current level is reflected in the period during which the pricing methodology of such investment
changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the
related security is significant to total cash and investments. The Company did not have any transfers of assets and
liabilities from Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the year ended
March 31, 2021.

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 of three months or less that are

regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are
classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificates of
deposits and money market accounts.

77

Marketable Securities

Marketable securities consist of certificates of deposit with maturities of less than 12 months that are
measured using such inputs as quoted prices and are classified within Level 1 of the valuation hierarchy. The
Company determines the appropriate classification of its marketable securities at the time of purchase and
re-evaluates such classification as of each balance sheet date. All marketable securities are considered available
for sale and are carried at fair value. Changes in fair value would be recorded to other income (expense), net. The
Company recognized less than a $0.1 million in unrealized gains on marketable securities, which is recorded in
other income, in the fiscal year ended March 31, 2021. The Company recognized $0.1 million in unrealized gains
on marketable securities, which is recorded in other income, for the fiscal year ending March 31, 2020.

The Company periodically reviews the realizability of each short and long term marketable security when

impairment indicators exist with respect to the security. If other than temporary impairment of value of the
security exists, the carrying value of the security is written down to its estimated fair value.

Contingent Consideration

Contingent consideration relates to the earnout payment for the NEPSI Acquisition. See Note 3 “NEPSI
Acquisition” and Note 12, “Warrants and Derivative Liabilities” for further discussion. The Company relied on a
Monte Carlo simulation pricing method to determine the fair value of the contingent consideration on the
Acquisition Date and will continue to revalue the fair value of the contingent consideration at each subsequent
balance sheet date until the final settlement date, with the resulting gain or loss recorded in operating expenses.

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as

of March 31, 2021 and 2020 (in thousands):

Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Carrying
Value

March 31, 2021:
Assets:

Cash equivalents . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . .

$54,104
$ 5,141

$54,104
$ 5,141

Derivative liabilities:

Contingent Consideration . . . . . . . . .

$ 7,050

$ —

$—
$—

$—

$ —
$ —

$7,050

Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Carrying
Value

March 31, 2020:
Assets:

Cash equivalents . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . .

$19,394
$35,195

$19,394
$35,195

$—
$—

$—
$—

78

The table below reflects the activity for the Company’s major classes of liabilities measured at fair value on

a recurring basis (in thousands):

April 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of contingent consideration . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Mark to market adjustment

March 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

April 1, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mark to market adjustment
. . . . . . . . . . . . . . . . . . . . . . . .
Exercise of in-the-money warrants . . . . . . . . . . . . . . . . . .

Acquisition
Contingent
Consideration

$ —
3,990
3,060

$7,050

Warrants

$ 4,942
(4,648)
(294)

March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

7. Accounts Receivable

Accounts receivable at March 31, 2021 and March 31, 2020 consisted of the following (in thousands):

Accounts receivable (billed) . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (unbilled) . . . . . . . . . . . . . . . . . . . . . .

$ 7,502
5,765

$11,276
5,711

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,267

$16,987

March 31,
2021

March 31,
2020

8. Inventory

Inventory, net of reserves, at March 31, 2021 and March 31, 2020 consisted of the following (in thousands):

March 31,
2021

March 31,
2020

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred program costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,255
3,297
777
977

$10,739
1,345
5,260
1,631

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,306

$18,975

The Company recorded inventory reserves of $1.8 million and $1.3 million for the fiscal years ended March

31, 2021 and 2020, respectively. These write downs were based on evaluating its inventory on hand for excess
quantities and obsolescence.

Deferred program costs as of March 31, 2021 and March 31, 2020 primarily represent costs incurred on

programs accounted for upon completion of the project when control has transferred to the customer before
revenue and costs will be recognized.

79

9. Property, Plant and Equipment

The cost and accumulated depreciation of property and equipment at March 31, 2021 and 2020 are as

follows (in thousands):

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress - equipment . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2021

$

270
220
1,630
41,652
1,333
6,308

March 31,
2020

$ —
3,130
—
41,737
1,302
2,477

Property, plant and equipment, gross . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . .

51,413
(42,416)

48,646
(40,081)

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . .

$ 8,997

$ 8,565

Depreciation expense was $3.7 million and $4.0 million, for the fiscal years ended March 31, 2021 and

2020, respectively. Construction in progress — equipment primarily includes capital investments in the
Company’s HTS equipment and leasehold improvements in the Company’s leased facility in Ayer,
Massachusetts. The increase in land and building relates to the property added as part of the NEPSI Acquisition.

10. Intangible Assets

Intangible assets at March 31, 2021 and 2020 consisted of the following (in thousands):

2021

2020

Backlog . . . . . . . . . . . . . . . . . . . . .
Trade names and trademarks . . . .
Customer relationships . . . . . . . . .
Core technology and

Gross
Amount

Accumulated
Amortization

600
600
6,100

(475)
—
(739)

Net
Book
Value

125
600
5,361

Gross
Amount

Accumulated
Amortization

Net
Book
Value

Estimated
Useful Life

—
—
—

—
—
—

2

—
— Indefinite
—

7

know-how . . . . . . . . . . . . . . . . .

5,970

(2,903)

3,067

5,970

(2,420)

3,550

5-10

Intangible assets . . . . . . . . . . . . . .

$13,270

$(4,117)

$9,153

$5,970

$(2,420)

$3,550

The Company recorded intangible amortization expense of $1.2 million and $0.3 million, for the fiscal years

ended March 31, 2021, and 2020, respectively. Additionally, in the fiscal year ended March 31, 2021, the
Company recorded $0.5 million related to intangible amortization related to backlog that is reported in cost of
revenues.

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

Fiscal years ending March 31,

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

$2,115
1,808
1,393
1,077
860
1,300

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,553

80

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

11. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at March 31, 2021 and March 31, 2020 consisted of the following

(in thousands):

March 31,
2021

March 31,
2020

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .
Accrued inventories in-transit . . . . . . . . . . . . . . .
Accrued other miscellaneous expenses . . . . . . . .
Advanced deposits . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . .
Accrued product warranty . . . . . . . . . . . . . . . . . .

$ 5,353
1,460
2,369
1,035
7,018
522
2,053

$10,045
763
1,986
666
5,683
933
2,015

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$19,810

$22,091

The Company generally provides a one to three year warranty on its products, commencing upon

installation. 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):

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired Warranty Obligation . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accruals for warranties during the period . . . .
Settlements during the period . . . . . . . . . . . . . . . . . . . . . .

Fiscal Years Ended
March 31,

2021

2020

$2,015
147
643
(752)

$1,545
—
542
(72)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,053

$2,015

12. Warrants and Derivative Liabilities

Contingent Consideration

The Company evaluated the NEPSI Acquisition earnout payment set forth in the Stock Purchase
Agreement (see Note 3, “NEPSI Acquisition” for further details), which may 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.

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:

March 31,
2021

December 31,
2020

October, 1,
2020

Fiscal Year 2020
Revenue risk premium . . . . . . . . . . . . . . . . . .
Revenue volatility . . . . . . . . . . . . . . . . . . . . . .
Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment delay (days) . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.70%
30%

6.90%
30%

7.10%
30%

$

18.96
80
$7.1 million

$

23.42
80
$6.7 million

$

14.23
—
$4.0 million

81

Warrants

The Company accounted for its warrants as liabilities due to certain adjustment provisions within the
instruments, which required that they be recorded at fair value. The warrants were subject to revaluation at each
balance sheet date and any change in fair value was recorded as a change in fair value of warrants until the earlier
of its expiration or its exercise at which time the warrant liability was reclassified to equity. The Company
calculated the fair value of the warrants utilizing an integrated lattice model. See Note 6, “Fair Value
Measurements,” for further discussion. As of March 31, 2021 and 2020, the Company had no remaining
outstanding warrants.

Hercules Warrant

On December 19, 2014, the Company entered into a second amendment to the Loan and Security
Agreement with Hercules (the “Hercules Second Amendment”). In conjunction with the Hercules Second
Amendment, the Company issued Hercules a warrant to purchase 58,823 shares of the Company’s common stock
(the “Hercules Warrant”). The Hercules Warrant was exercisable at any time after its issuance at an exercise
price of $7.85 per share, subject to certain price-based and other anti-dilution adjustments, including the equity
offering in May 2017, the acquisition of Infinia Technology Corporation (“ITC”) with common stock in
September 2017 and sales of common stock under the ATM entered into in January 2017. This warrant had a fair
value of $0.4 million as of March 31, 2019. On April 8, 2019, Hercules notified the Company of its intent to
exercise this warrant on a cashless basis. Hercules received 22,821 shares of the Company’s common stock on
April 17, 2019. As a result of this exercise the Company recorded a net gain of $0.1 million to change in fair
value of warrants, resulting from the decrease in the fair value of the Hercules Warrant during the year ended
March 31, 2020.

Hudson Warrant

On November 13, 2014, the Company completed an offering of 909,090 units of the Company’s common
stock with Hudson Bay Capital. Each unit consisted of one share of the Company’s common stock and 0.9 of a
warrant to purchase one share of common stock, or warrants to purchase in the aggregate 818,181 shares (the
“Hudson Warrants”). The Hudson Warrants were exercisable at any time, at an exercise price equal to $7.81 per
share, subject to certain price-based and other anti-dilution adjustments including those noted above. On
November 13, 2019, Hudson partially exercised the Hudson Warrants for 786,000 restricted shares of Company
common stock at $7.81 per share. The remaining 32,181 warrants expired on November 13, 2019. The Company
recorded a net gain of $4.6 million to change in fair value of warrants, resulting from the decrease in the fair
value of the Hudson Warrants during the year ended March 31, 2020.

13. Income Taxes

(Loss) income before income taxes for the fiscal years ended March 31, 2021, and 2020 are provided in the

table as follows (in thousands):

Fiscal years ended
March 31,

2021

2020

Income/(Loss) before income tax expense:
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(26,721)
3,211

$(18,260)
1,359

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(23,510)

$(16,901)

82

The components of income tax expense (benefit) attributable to continuing operations consist of the

following (in thousands):

Current
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal years ended
March 31,

2021

2020

$

191
198

389

$ 1,814
95

1,909

(1,602)
381

(1,524)
(190)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,221)

(1,714)

Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . .

$ (832)

$

195

The reconciliation between the statutory federal income tax rate and the Company’s effective income tax

rate is shown below.

Statutory federal income tax rate . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign income tax rate differential . . . . . . . . . . . . . . . . . . . . . . .
True-up of NOLs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GILTI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal years ended
March 31,

2021

2020

(21)% (21)%
(20)
36
3
(1)
(1)

2
1
1
(6)
24

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)%

1%

The following is a summary of the principal components of the Company’s deferred tax assets and liabilities

(in thousands):

Deferred tax assets:
Net operating loss carryforwards . . . . . . . . . . . . . . . . . .
Research and development and other tax credit

carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accruals and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets and intangible assets . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

March 31,
2021

March 31,
2020

$ 184,455

$ 195,504

13,280
5,416
1,414
1,149

13,244
5,352
1,697
1,565

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

205,714
(200,081)

217,362
(199,989)

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Intercompany Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . .

5,633

17,373

(4,205)
(479)

(4,684)

(14,365)
(1,637)

(16,002)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$

949

$

1,371

83

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act

(“CARES Act”). The CARES Act is an emergency economic stimulus package that includes spending and tax
breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19.
While the CARES Act provides sweeping tax changes in response to the COVID-19 pandemic, some of the more
significant provisions include removal of certain limitations on utilization of net operating losses, increasing the
loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well
as amending certain provisions of the previously enacted Tax Cuts and Jobs Act of 2017. The CARES Act is not
expected to have a material impact on the Company’s financial position, results of operations or cash flows.

The Company has provided a full valuation allowance against its net deferred income tax assets in the U.S.,

Romania and China since it is more likely than not that its deferred tax assets will not be realizable. After
consideration of all the available evidence, both positive and negative, the Company has determined that a
$200.1 million valuation allowance at March 31, 2021 is necessary to reduce the deferred tax assets to the
amount that will more likely than not be realized which is a $0.1 million increase from the $200.0 valuation
allowance as of March 31, 2020.

At March 31, 2021, the Company had aggregate net operating loss carryforwards in the U.S. for federal and
state income tax purposes of approximately $780.5 million and $211.1 million, respectively, which expire in the
years ending March 31, 2021 through 2040. For U.S. federal tax purpose, approximately $68.2 million of federal
net operating losses have an indefinite carryforward period. Included in the U.S. net operating loss are
$3.7 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 $3.0 million are available to offset federal and state income taxes, respectively,
and will expire in the years ending through 2040.

At March 31, 2021, the Company had aggregate net operating loss carryforwards for its Chinese operation
of approximately $30.1 million, which can be carried forward for five years and begin to expire December 31,
2021.

At March 31, 2021, AMSC Romania had aggregate net operating loss carryforwards of approximately

$0.9 million, which can be carried forward for seven years and begin to expire at March 31, 2028.

Section 382 of the U.S. Internal Revenue Code of 1986, 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 may have. The Company updated its study in 2020
to determine whether Section 382 could limit the use of its carryforwards in this manner. After completing this
study, the Company has concluded that the limitation will not 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, 2021 was

$1.7 million resulting in the recording of a $0.3 million deferred tax liability for foreign withholding taxes.

The Company has not recorded a deferred tax asset for the temporary difference associated with the excess

of the tax greater than the book basis in its Chinese and Romanian subsidiaries as the future tax benefit is not
expected to reverse in the foreseeable future.

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax
positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical
merits, it is more likely than not that the position will be sustained upon audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being realized upon ultimate settlement. The Company reevaluates these uncertain tax

84

positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or
circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in
these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The
Company did not identify any uncertain tax positions at March 31, 2021. The Company did not have any gross
unrecognized tax benefits at March 31, 2021 or 2020.

There were no reversals of uncertain tax positions in the fiscal years ended March 31, 2021 and 2020.

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 does not expect that the amounts of unrecognized benefits will
change significantly within the next twelve 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., China,
Romania and Austria. All U.S. income tax filings for fiscal years ended March 31, 1996 through 2021 remain
open and subject to examination.

All fiscal years from the fiscal year ended March 31, 2019 through 2021 remain open and subject to
examination in Austria. As of March 31, 2021, the Company remains open to audit for the calendar years 2016
and forward in China. Tax filings in Romania for the fiscal years ended March 31, 2016 through 2021 remain
open and subject to examination.

14. Leases

On April 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“ASC 842”), using the
modified retrospective approach. The Company elected the package of practical expedients available in the
standard and as a result, did not reassess the lease classification of existing contracts or leases or the initial direct
costs associated with existing leases. The Company did not elect the hindsight practical expedient and evaluated
lease terms for existing leases. The Company has also elected the practical expedient to not separate lease
components and non-lease components and will account for the leases as a single lease component for all classes
of leases.

All significant lease arrangements are recognized at lease commencement. Operating lease right–of-use
assets and lease liabilities are recognized at commencement. The operating lease right-of-use asset includes any
lease payments related to initial direct cost and prepayments and excludes any lease incentives. Lease expense is
recognized on a straight-line basis over the 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 agreements generally provide for fixed minimum rental payments and the payment of real estate taxes and
insurance. Many of these leases have one or more renewal options that allow the Company, at its discretion, to
renew the lease for varying periods up to five years or to terminate the lease. Only renewal options or termination
rights that the Company believed were likely to be exercised were included in the lease calculations.

The Company also enters into leases for vehicles, IT equipment and service agreements, and other leases
related to its manufacturing operations that are also included in the right-of-use asset and lease liability accounts
if they are for a term of longer than twelve months. However, many of these leases are either short-term in nature
or immaterial. The Company has made the policy election to exclude short-term leases from the balance sheet.

The discount rate was calculated using an incremental borrowing rate based on an assessment prepared by
the Company through the use of Company credit ratings, consideration of its lease populations potential risk to
its total capital structure, and a market rate for a collateralized loan for its risk profile, calculated by a third party.
The Company elected to apply the discount rate using the remaining lease term at the date of adoption.

85

The Company did not identify any leases that are classified as financing leases.

Supplemental balance sheet information related to leases at March 31, 2021 and 2020 are as follows:

Operating Leases:
Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities - ST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities - LT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . .

March 31,
2021

March 31,
2020

$3,747

3,747
$ 612
3,246

$3,858

$3,359

3,359
$ 439
3,000

$3,439

Weighted-average remaining lease term . . . . . . . . . . . . . . .
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . .

5.82
6.72%

6.91
7.08%

The costs related to the Company’s leases for the fiscal years ended March 31, 2021 and 2020 are included

in selling, general and administrative costs and are as follows:

Year ended
March 31, 2021

Year ended
March 31, 2020

Operating Lease:
Operating lease costs - fixed . . . . . . . . . . . . . . . . .
Operating lease costs - variable . . . . . . . . . . . . . .
Short-term lease costs . . . . . . . . . . . . . . . . . . . . . .

Total lease costs . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 830
118
1,083

$2,031

$ 713
100
544

$1,357

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

Year ended March 31,
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

Operating
Leases

$ 849
822
768
659
664
933

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . .
Less: interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,695
(837)

Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . .

$3,858

15. Stockholders’ Equity

Stock-Based Compensation Plans

As of March 31, 2021, the Company had two active stock plans: the 2007 Stock Incentive Plan, as amended

(the “2007 Plan”) and the Amended and Restated 2007 Director Stock Plan (the “2007 Director Plan”). On
August 1, 2019, the Company’s stockholders approved amendments to the 2007 Plan and the 2007 Director Plan.
The amendment to the 2007 Plan increased the total number of shares of common stock authorized for issuance
under the 2007 Plan from 3,400,000 shares to 4,600,000 shares. The amendment to the 2007 Director Plan
increased the total number of shares of common stock authorized for issuance under the 2007 Director Plan from
230,000 shares to 280,000 shares.

86

The 2007 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the
IRC of 1986, 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 is no 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.

The 2007 Director Plan provides for the grant of nonstatutory stock options and stock awards to members of
the Board of Directors who are not also employees of the Company (“outside directors”). Under the terms of the
2007 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 a two-year period. In addition, each outside director is granted an award of shares
of common stock on the third business day following the last day of each fiscal year with an aggregate value
equal to $40,000 using the closing price of the Company’s common stock two business days following the last
day of each fiscal year, subject to proration for any partial fiscal year of service.

As of March 31, 2021, the 2007 Plan had 793,499 shares available for future issuance and the 2007 Director

Plan had 81,133 shares available for future issuance.

Stock-Based Compensation

The components of stock-based compensation for the years ended March 31, 2021 and 2020 were as follows

(in thousands):

Fiscal years ended
March 31,

2021

2020

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock and stock awards . . . . . . . . . . . . . . . . . . . . . . .
Employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . .

$

19
3,428
38

$

16
1,870
36

Total stock-based compensation expense . . . . . . . . . . . . . . . . .

$3,485

$1,922

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 for the fiscal year ended March 31, 2021. This expense will be
recognized over a weighted-average expense period of approximately 0.2 years. The total unrecognized
compensation cost for unvested outstanding restricted stock was $4.4 million for the fiscal year ended March 31,
2021. This expense will be recognized over a weighted-average expense period of approximately 1.7 years.

The following table summarizes stock-based compensation expense by financial statement line item for the

fiscal years ended March 31, 2021 and 2020 (in thousands):

Fiscal years ended
March 31,

2021

2020

Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . .

$

40
642
2,803

$

66
333
1,522

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,485

$1,922

87

The following table summarizes the information concerning currently outstanding and exercisable employee

and non-employee options:

Outstanding at March 31, 2020 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled/forfeited . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
(thousands)

Options /
Shares

140,281
—
(2,588)
(10,528)

Weighted-
Average
Exercise
Price

$ 49.95
—
24.30
129.53

Outstanding at March 31, 2021 . . . . . . . . . . . . . . . .

127,165

$ 44.37

Exercisable at March 31, 2021 . . . . . . . . . . . . . . . .

127,140

$ 44.38

Fully vested and expected to vest at March 31,

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

124,196

$ 45.18

2.0

2.0

1.9

$167

$167

$143

The Company did not grant any options to purchase shares of common stock during the year ended

March 31, 2021. The Company granted options to purchase 5,939 shares of common stock during the year ended
March 31, 2020. The stock options granted during the year ended March 31, 2020 will vest over 2 years. The
weighted average assumptions used in the Black Scholes valuation model for stock options granted during
the year ended March 31, 2020 are as follows:

Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal years ended
March 31,

2020

66.5%
1.8%
5.91
None

The following table summarizes the employee and non-employee restricted stock activity for the year ended

March 31, 2021:

Outstanding at March 31, 2020 . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares

982,247
712,824
(414,449)
(232,708)

Outstanding at March 31, 2021 . . . . . . . . . . . . . .

1,047,914

Weighted
Average
Grant Date Fair
Value

Intrinsic
Aggregate
Value
(thousands)

$6.26
6.97
5.84
4.30

$7.17

$19,868

The total fair value of restricted stock that was granted during the fiscal years ended March 31, 2021

and 2020 was $5.1 million and $3.4 million, respectively. The total fair value of restricted stock that vested
during the fiscal years ended March 31, 2021 and 2020 was $4.3 million and $2.9 million, respectively.

There were 255,000 performance-based restricted shares awarded during the fiscal year ended March 31,
2021 for which the performance conditions are deemed probable to be met and the expense is being recorded
over the expected vesting period. There were 94,500 performance-based restricted shares awarded during the
fiscal year ended March 31, 2020 for which the performance conditions are deemed probable to be met
and the expense is being recorded over the expected vesting period.

88

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 the 2000 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, 2021, the ESPP
had 187,868 shares available for future issuance. The Company recognized less than $0.1 million of
compensation expense for both the fiscal years ended March 31, 2021 and 2020, related to the ESPP.

16. 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 year ended March 31, 2021 and 2020 all leases were recorded in selling, general and

administrative expense. See Note 14, “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 statements not misleading. If the loss is not probable or cannot be reasonably
estimated, a liability is not recorded in its consolidated financial statements.

Other

The Company enters into long-term construction contracts with customers that require the Company to
obtain performance bonds. The Company is required to deposit an amount equivalent to some or all the face
amount of the performance bonds into an escrow account until the termination of the bond. When the
performance conditions are met, amounts deposited as collateral for the performance bonds are returned to the
Company. In addition, the Company has various contractual arrangements in which minimum quantities of goods
or services have been committed to be purchased on an annual basis.

As of March 31, 2021, the Company had $5.6 million of restricted cash included in long-term assets and
$2.2 million of restricted cash in current assets. These amounts included in restricted cash primarily represent
deposits to secure letters of credit for various supply contracts or collateral deposits including the irrevocable
letter of credit in the amount of $5.0 million to secure certain of the Company’s obligations under the
Subcontract Agreement with Commonwealth Edison Company. These deposits are held in interest bearing
accounts.

89

17. Employee Benefit Plans

The Company has implemented a defined contribution plan (the “Plan”) under Section 401(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 the first 6% of eligible
contributions. The Company recorded expense of $0.4 million for the fiscal year ended March 31, 2021, and
$0.3 million for the fiscal year ended March 31, 2020, and recorded corresponding charges to additional paid-in
capital related to this program.

18. Business Segments

The Company reports its financial results in two reportable business segments: Grid and Wind. In

accordance with ASC 280, Segment Reporting, we aggregate two operating segments into one reporting segment
for financial reporting purposes due to their similar operating and financial characteristics. Our 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 of 2 megawatts (“MWs”) and higher. The Company provides a broad range of power electronics and
software-based control systems that are highly integrated and designed for optimized performance, efficiency,
and grid compatibility.

The operating results for the two business segments are as follows (in thousands):

Fiscal Years Ended
March 31,

2021

2020

Revenues:

Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$70,528
16,597

$49,585
14,253

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$87,125

$63,838

Fiscal Years Ended
March 31,

2021

2020

Operating loss:

Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate expenses . . . . . . . . . . . . . . . . .

$(13,318)
(3,302)
(6,545)

$(13,508)
(7,699)
(1,922)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(23,165)

$(23,129)

90

Total assets for the two business segments as of March 31, 2021 and March 31, 2020 are as follows (in

thousands):

Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 81,253
6,098
81,515

$ 44,044
14,250
65,815

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$168,866

$124,109

March 31,
2021

March 31,
2020

The accounting policies of the business segments are the same as those for the consolidated Company. The

Company’s business segments have been determined in accordance with the Company’s internal management
structure, which is organized based on operating activities. The Company evaluates performance based upon
several factors, of which the primary financial measures are segment revenues and segment operating loss. The
disaggregated financial results of the segments reflect allocation of certain functional expense categories
consistent with the basis and manner in which Company management internally disaggregates financial
information for the purpose of assisting in making internal operating decisions. In addition, certain corporate
expenses which the Company does not believe are specifically attributable or allocable to either of the two
business segments have been excluded from the segment operating loss.

Unallocated corporate expenses primarily consist of loss on contingent consideration of $3.0 million and

stock-based compensation expense of $3.5 million, in the fiscal year ended March 31, 2021. Unallocated
corporate expenses primarily consist of stock-based compensation of $1.9 million in the year ended March 31,
2020.

Geographic information about property, plant and equipment associated with particular regions is as follows

(in thousands):

North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,777
174
46

$8,113
397
55

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,997

$8,565

March 31,

2021

2020

19. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more
decision-useful information about the expected credit losses on financial instruments and other commitments to
extend credit held by a reporting entity at each reporting date. The ASU is effective for annual reporting periods
beginning after December 15, 2019, including interim periods within that year. Following the release of ASU
2019-10 in November 2019, the new effective date, as long as the Company remains a smaller reporting
company, would be annual reporting periods beginning after December 15, 2022. The Company is currently
evaluating the impact, if any, the adoption of ASU 2016-13 may have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Changes to the
Disclosure Requirements for Fair Value Measurement. The amendments in ASU 2018-13 provide for increased
effectiveness of the disclosures made around fair value measurements while including consideration for costs and
benefits. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim
periods within those periods. As of April 1, 2020, the Company has adopted ASU 2018-13 and noted no material
impact on its consolidated financial statements.

91

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting

for Income Taxes. The amendments in ASU 2019-12 provide for simplified accounting to several income tax
situations and removal of certain accounting exceptions. The ASU is effective for annual reporting periods
beginning after December 15, 2020, including interim periods within those periods. The Company does not
expect the impact of the adoption of ASU 2019-12 to be material to its consolidated financial statements.

20. Subsequent Events

The Company has performed an evaluation of subsequent events through the time of filing this Annual
Report on Form 10-K with the SEC, and has determined that other than the details below, there are no such
events to report.

On May 6, 2021, the Company acquired all of the issued and outstanding shares of capital stock of

(i) Neeltran Inc. (“Neeltran”), that supplies rectifiers and transformers to industrial customers, and (ii) Neeltran
International, Inc. (“International”), for: (a) $1.0 million in cash, and (b) 301,556 shares of the Company’s
common stock, which were paid and issued to the selling stockholders of Neeltran. The Company also paid
$1.1 million to the selling stockholders of Neeltran at closing to pay off previous loans made by them to
Neeltran.

Also on May 6, 2021, the Company’s wholly-owned Connecticut subsidiary, AMSC Husky LLC, purchased

the real property that served as Neeltran’s headquarters for $4.3 million, of which (a) $2.4 million was paid in
immediately available funds by AMSC Husky to the owners of such real property, and (b) $1.9 million was paid
directly to TD Bank as full payment for the outstanding indebtedness secured by the mortgage on such real
property. Additionally, the Company paid approximately $7.6 million, including the $1.9 million of indebtedness
secured by the mortgage on the real property, directly to Neeltran lenders at closing to extinguish outstanding
Neeltran indebtedness to third parties. All cash payments associated with the Neeltran acquisition were funded
with cash on hand.

Item 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,

evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2021. The term “disclosure
controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls
and other procedures of a company that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed
by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the company’s management, including its principal executive and principal financial officers, as appropriate, to
allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls
and procedures.

Based on the evaluation of our disclosure controls and procedures as of March 31, 2021, our Chief

Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance level.

92

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial

reporting. Internal control over financial reporting is defined in Rules 13a–15(f) and 15d–15(f) under the
Exchange Act as a process designed by, or under the supervision of, a company’s chief executive officer and
chief financial officer, and effected by the board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles, and includes those policies
and procedures that:

(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of assets;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation

of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures are being made only in accordance with authorizations of management and directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use or disposition of assets that could have a material effect on the financial statements.

As disclosed in Item 4, Controls and Procedures in our Quarterly Report on Form 10-Q for the quarter ended
December 31, 2020, during the third quarter of fiscal 2020 we identified a material weakness in internal controls
related to the initial purchase accounting and the continuing fair value accounting associated with the acquisition
of Northeast Power Systems, Inc. (“NEPSI”) and related assets (the “NEPSI Acquisition”).

During the fourth quarter of fiscal 2020, management implemented new procedures, policies and processes,
including revising the precision level of management review controls and gaining additional assurance regarding
timely completion of our outside service providers’ quality control procedures, in order to remediate the material
weakness. During this same quarter, we completed our testing of the operating effectiveness of the implemented
controls and found them to be effective. As a result, we have concluded that the material weakness has been
remediated as of March 31, 2021.

Under the supervision and with the participation of our management, including our chief executive officer

and chief financial officer, an evaluation was conducted of the effectiveness of our internal control over financial
reporting based on the Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control
– Integrated Framework (2013 Edition). Our evaluation excluded the NEPSI Acquisition, which was acquired on
October 1, 2020. Our Consolidated Statement of Operations for the year ended March 31, 2021 included revenue
of approximately $13.1 million and our Consolidated Balance Sheet as of March 31, 2021 included total assets of
approximately $48.8 million attributable to the NEPSI Acquisition. In accordance with guidance issued by the
Securities and Exchange Commission, companies are allowed to exclude acquisitions from their assessment of
internal control over financial reporting during the first year subsequent to the acquisition while integrating the
acquired operations. Based on this evaluation, management concluded that our internal control over financial
reporting is effective as of March 31, 2021.

This Annual Report on Form 10-K does not include an attestation report of our independent registered

public accounting firm on our internal control over financial reporting because we do not qualify as an
accelerated or a large accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended).

Changes in Internal Control over Financial Reporting

Other than changes related to our material weakness remediation efforts and new procedures associated with
business combinations in general, initial purchase accounting and continuing fair value accounting specifically as
described above, there were no changes in our internal control over financial reporting (as defined in Rules

93

13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended March 31, 2021 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

94

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The response to this item is contained in part under the caption “Executive Officers” in Part I of this Annual

Report on Form 10-K, and in part in our Proxy Statement for the Annual Meeting of Stockholders to be held
in 2021 (the “2021 Proxy Statement”) in the sections “Corporate Governance — Members of the Board,”
“Corporate Governance — Code of Business Conduct and Ethics,” “Corporate Governance —Board
Committees” and “Corporate Governance — Board Committees — Audit Committee,” “Corporate
Governance — Director Nomination Process”, “Corporate Governance — Board Determination of
Independence”, which sections are incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The sections of the 2021 Proxy Statement titled “Information About Executive and Director Compensation,”

“Information About Executive and Director Compensation — Compensation Committee Interlocks and Insider
Participation” and “Information About Executive and Director Compensation —Compensation Committee
Report” are incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS

The sections of the 2021 Proxy Statement titled “Stock Ownership of Certain Beneficial Owners and
Management” and “Information about Executive Officer and Director Compensation — Securities Authorized
for Issuance Under our Equity Compensation Plans” are incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The sections of the 2021 Proxy Statement titled “Certain Relationships and Related Transactions” and

“Corporate Governance — Board Determination of Independence” and “Corporate Governance — Board
Committees” are incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The section of the 2021 Proxy Statement titled “Ratification of Selection of Independent Registered Public

Accounting Firm (Proposal 2)” is incorporated herein by reference.

95

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Document filed as part of this Annual Report on Form 10-K:

1. Financial Statements

The following financial statements of American Superconductor Corporation, supplemental information and

report of independent registered public accounting firm required by this item are included in Item 8, “Financial
Statements and Supplementary Data,” in this Form 10-K:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets at March 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the fiscal years ended March 31, 2021 and 2020 . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Loss for the fiscal years ended March 31, 2021 and 2020 . . . . . .
Consolidated Statements of Stockholders’ Equity for the fiscal years ended March 31, 2021 and 2020 . . . . .
Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2021 and 2020 . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51
54
55
56
57
58
59

2. Financial Statement Schedules

All schedules are omitted because they are not applicable, not required or the required information is shown

in the consolidated financial statements or notes thereto.

3. Exhibits Required by Item 601 of Regulation S-K under the Exchange Act.

See (b) Exhibits.

(b) Exhibits

The list of Exhibits filed as a part of this Annual Report on Form 10-K is set forth on the Exhibit Index

immediately following Item 16, “Form 10-K Summary”, and is incorporated herein by reference.

Item 16. FORM 10-K SUMMARY

None.

96

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

EXHIBIT INDEX

Incorporated by Reference

3.1

3.2

3.3

4.1

4.2

4.3

10.1+

10.2+

10.3+

10.4+

10.5+

10.6+

10.7+

10.8+

10.9+

Restated Certificate of Incorporation of the
Registrant, as amended.

Certificate of Amendment of Restated
Certificate of Incorporation of the
Registrant, dated March 24, 2015.

Amended and Restated By-Laws of the
Registrant.

Form of Indenture, between the Registrant
and Wilmington Trust, National
Association.

Form of Warrant Agreement, by and
between the Registrant and the American
Stock Transfer and Trust Company, dated
November 13, 2014, and Form of Warrant.

Description of Capital Stock

S-3

333-191153

3.1

9/13/2013

8-K

000-19672

3.1

3/24/2015

8-K 333-191153

3.1

2/1/2021

S-3

333-222874

4.1

2/5/2018

8-K

000-19672

10-K

000-19672

4.1

4.3

11/13/2014

6/5/2019

2007 Stock Incentive Plan, as amended.

8-K

000-19672

10.1

8/6/2019

Form of Incentive Stock Option
Agreement under 2007 Stock Incentive
Plan, as amended.

Form of Non-statutory Stock Option
Agreement under 2007 Stock Option Plan,
as amended.

Form of Restricted Stock Agreement
Regarding Awards to Executive Officers
under 2007 Stock Option Plan, as amended.

Form of Restricted Stock Agreement
Regarding Awards to Employees, under
2007 Stock Option Plan, as amended.

Form of Restricted Stock Agreement
(regarding performance-based awards to
executive officers and employees) under
2007 Stock Incentive Plan, as amended.

Form of Option Surrender Agreement
under 2007 Stock Incentive Plan, as
amended.

Form of Performance-Based Restricted
Stock Agreement for Executive Officers
under 2007 Stock Incentive Plan, as
amended.

Form of Time-Based Restricted Stock
Agreement for Executive Officers under
2007 Stock Incentive Plan, as amended.

97

8-K

000-19672

10.2

8/7/2007

8-K

000-19672

10.3

8/7/2007

8-K

000-19672

10.4

8/7/2007

8-K

000-19672

10.5

8/7/2007

8-K

000-19672

10.1

5/20/2008

10-Q

000-19672

10.4

11/6/2018

10-Q

000-19672

10.1

2/5/2020

10-Q

000-19672

10.2

2/5/2020

Exhibit
Number

10.10+

10.11+

10.12+

10.13+

10.14+

10.15+

10.16+

10.17+

10.18†

10.19†

10.20†

10.21^

10.22†

10.22

Exhibit Description

Form

File No.

Exhibit

Incorporated by Reference

Filing
Date

Filed/
Furnished
Herewith

*

Amended and Restated 2007 Director
Stock Plan.

Form of Non-statutory Stock Option
Agreement Under Amended and Restated
2007 Director Stock Plan.

Form of Employee Nondisclosure and
Developments Agreement.

Amended and Restated Executive
Severance Agreement, dated as of May 24,
2011, between the Registrant and Daniel P.
McGahn.

Executive Severance Agreement, dated as
of January 13, 2012, between the
Registrant and John W. Kosiba.

First Amendment to Executive Severance
Agreement, effective as of July 31, 2017,
between the Registrant and John W. Kosiba.

Fiscal 2020 Executive Incentive Plan.

Fiscal 2021 Executive Incentive Plan.

Supply Contract, dated December 16,
2015, by and between the Registrant and
Inox Wind Limited.

Amendment No. 1 to Supply Contract,
entered into as of March 14, 2018 and
effective as of November 8, 2017, by and
between the Registrant and Inox Wind
Limited.

Amendment No. 2 to Supply Contract,
entered into on May 21, 2018, by and
between the Registrant and Inox Wind
Limited.

Amendment No. 3 to Supply Contract,
entered into on May 11, 2021, by and
between the Registrant and Inox Wind
Limited.

Technology License Agreement, dated
December 16, 2015, by and among AMSC
Austria GMBH, the Registrant and Inox
Wind Limited.

Purchase and Sale Agreement, dated as of
February 1, 2018, by and between ASC
Devens LLC and 64 Jackson, LLC.

98

8-K

000-19672

10.7

8/7/2007

10-K/A

333-43647

10.11

6/7/2018

8-K

000-19672

10.2

5/24/2011

8-K

000-19672

10.1

4/4/2017

10-Q

000-19672

8-K

8-K

000-19672

000-19672

10.1

10.1

10.1

11/7/2017

5/27/2020

5/25/2021

10-Q

000-19672

10.1

2/9/2016

10-K

000-19672

10.29

6/6/2018

10-K

000-19672

10.30

6/6/2018

*

10-Q

000-19672

10.2

2/9/2016

8-K

000-19672

10.1

2/1/2018

Exhibit
Number

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

Incorporated by Reference

Subordinated Secured Commercial
Promissory Note of Jackson 64 MGI, LLC
in favor of ASC Devens LLC dated
March 28, 2018.

Assignment of Purchase and Sale
Agreement, dated as of March 26, 2018,
by and among ASC Devens LLC, 64
Jackson, LLC and Jackson 64 MGI, LLC.

Subordinated Second Mortgage of Jackson
64 MGI, LLC in favor of ASC Devens
LLC effective March 28, 2018.

Subordinated Second Assignment of
Leases and Rents by Jackson 64 MGI,
LLC to ASC Devens LLC dated March 28,
2018.

Intercreditor, Subordination and Standstill
Agreement by and among East Boston
Savings Bank, ASC Devens LLC and
Jackson 64 MGI, LLC dated March 28,
2018.

First Amendment to Intercreditor,
Subordination and Standstill Agreement by
and between East Boston Savings Bank
and ASC Devens LLC dated March 28,
2019.

Subordination of Subordinated Second
Mortgage Rents by ASC Devens LLC to
East Boston Savings Bank dated
March 28, 2019.

Subcontract Agreement, dated October 31,
2018, by and between the Registrant and
Commonwealth Edison Company.

Amendment to Subcontract Agreement,
effective February 6, 2020, by and
between the Registrant and
Commonwealth Edison Company.

Stock Purchase Agreement, dated
October 1, 2020, by and among American
Superconductor Corporation, Frank J.
Steciuk, Paul B. Steciuk and Peter A.
Steciuk.

Stock Purchase Agreement, dated May
6th, 2021, by and among American
Superconductor Corporation.

8-K

000-19672

10.1

4/3/2018

8-K

000-19672

10.2

4/3/2018

8-K

000-19672

10.3

4/3/2018

8-K

000-19672

10.4

4/3/2018

8-K

000-19672

10.5

4/3/2018

10-K

000-19672

10.38

6/5/2019

10-K

000-19672

10.38

6/5/2019

10-Q

000-19672

10.1

2/5/2019

10-K

000-19672

10.30

6/2/2020

8-K

000-19672

10.1

10/5/2020

8-K

000-19672

10.1

5/10/2021

21.1

Subsidiaries.

*

99

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed/
Furnished
Herewith

Incorporated by Reference

Exhibit
Number

23.1

31.1

31.2

32.1

32.2

Consent of RSM US LLP

Chief Executive Officer — Certification
pursuant to Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Chief Financial Officer — Certification
pursuant to Rule 13a-14(a) or Rule 15d-14(a)
of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

Chief Executive Officer — Certification
pursuant to Rule13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act
of 1934 and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Chief Financial Officer — Certification
pursuant to Rule 13a-14(b) or Rule
15d-14(b) of the Securities Exchange Act
of 1934 and 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

XBRL Taxonomy Extension Schema
Document.

XBRL Taxonomy Calculation Linkbase
Document.

XBRL Taxonomy Definition Linkbase
Document.

XBRL Taxonomy Label Linkbase
Document.

XBRL Taxonomy Presentation Linkbase
Document.

*

*

*

**

**

*

*

*

*

*

*

†

Confidential treatment previously requested and granted with respect to certain portions, which portions
were omitted and filed separately with the Commission.

+ Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this

Form 10-K.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
^
*
Filed herewith.
** Furnished herewith.

100

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

AMERICAN SUPERCONDUCTOR CORPORATION

BY:

/S/ DANIEL P. MCGAHN
Daniel P. McGahn
Chairman of the Board, President, and
Chief Executive Officer

Date: June 2, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name

Title

Date

/S/ DANIEL P. MCGAHN
Daniel P. McGahn

/S/ JOHN W. KOSIBA, JR.
John W. Kosiba, Jr.

/S/ ARTHUR H. HOUSE
Arthur H. House

/S/ VIKRAM S. BUDHRAJA
Vikram S. Budhraja

/S/ BARBARA G. LITTLEFIELD
Barbara G. Littlefield

/S/ DAVID R. OLIVER, JR.
David R. Oliver, Jr.

Chairman of the Board, President,

June 2, 2021

Chief Executive Officer, and
Director (Principal Executive
Officer)

Senior Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)

June 2, 2021

Lead Independent Director of the
Board

June 2, 2021

Director

June 2, 2021

Director

June 2, 2021

Director

June 2, 2021

101

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

Corporate Management and Directors

Management Team

Board of Directors 

Daniel P. McGahn 
Chairman, President and Chief Executive Officer

Vikram Budhraja 
President, Electric Power Group, LLC 

John W. Kosiba, Jr.
Senior Vice President, Chief Financial Officer and Treasurer

Arthur H. House 
Partner, Cybersecurity Risk Associates, LLC

Barbara G. Littlefield 
Chairwoman(cid:1)and(cid:1) Lead(cid:1)Operatin  g  Director, 
Resilient Infrastructure Group

Daniel P. McGahn
Chairman, President and Chief Executive Officer

David Oliver, Jr.
Rear Admiral, U.S. Navy (Retired)
Chief Operating Officer, European Aeronautic Defense  
and Space Company North America (EADS NA) (Retired)

AMSC 
114 E. Main Street 
Ayer, MA 01432-1832 
Phone: 978-842-3000 

Transfer Agent and Registrar 
American Stock Transfer & Trust Company 
59 Maiden Lane  Plaza Level  
New York, NY 10038  
800-937-5449

The transfer agent is responsible for handling shareholder 
questions about changes of ownership or the name in which  
shares are held. As of June 4, 2021  there were 178  holders 
of record of AMSC common stock. 

Common Stock Listing 
Nasdaq Global Select Market 
Symbol: AMSC

Legal Counsel 
Latham & Watkins LLP 
John Hancock Tower, 20th Floor 
200 Clarendon St 
Boston, MA 02116

Independent Auditors 
RSM U.S. LLP 
80 City Square 
Boston, MA 02129

Form 10-K 
The text of the company’s annual report on form 10-K for the  
fiscal year ended March 31, 2021 (excluding exhibits), as filed  
with the Securities and Exchange Commission, is included herein. 

®

(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:79)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:16)(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:21)(cid:20)(cid:40)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:28)(cid:22)(cid:23)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:29)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:15)(cid:3)
(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:86)(cid:30)(cid:3)(cid:83)(cid:85)(cid:72)(cid:71)(cid:76)(cid:70)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:86)(cid:87)(cid:85)(cid:72)(cid:68)(cid:80)(cid:86)(cid:30)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:40)(cid:51)(cid:54)(cid:44)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:49)(cid:72)(cid:72)(cid:79)(cid:87)(cid:85)(cid:68)(cid:81)(cid:30)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:30)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:42)(cid:85)(cid:76)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)
(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:30)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:39)(cid:82)(cid:82)(cid:86)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:81)(cid:82)(cid:91)(cid:30)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:44)(cid:81)(cid:71)(cid:76)(cid:68)(cid:81)(cid:3)(cid:90)(cid:76)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:30)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:42)(cid:85)(cid:76)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:30)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:73)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:72)(cid:85)(cid:74)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:53)(cid:40)(cid:42)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:75)(cid:76)(cid:70)(cid:68)(cid:74)(cid:82)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:30)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:76)(cid:81)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:86)(cid:87)(cid:68)(cid:76)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)(cid:3)(cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)
(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:16)(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:69)(cid:88)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:80)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:81)(cid:87)(cid:3)(cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:166)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)
(cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:167)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:20)(cid:17)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:20)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)(cid:16)(cid:46)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:21)(cid:20)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:16)(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:79)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)
(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:10)(cid:86)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:79)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:90)(cid:72)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:88)(cid:83)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:16)(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:86)(cid:82)(cid:80)(cid:72)(cid:3)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:82)(cid:3)
(cid:86)(cid:82)(cid:15)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:3)(cid:76)(cid:73)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:72)(cid:84)(cid:88)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:16)(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:76)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:89)(cid:76)(cid:72)(cid:90)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:72)(cid:84)(cid:88)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)
(cid:79)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:17)(cid:3)