<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended: June 30, 1999 Commission File Number 0-19672
-------------
American Superconductor Corporation
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2959321
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
organization or incorporation) Identification Number)
Two Technology Drive
Westborough, Massachusetts 01581
--------------------------------
(Address of principal executive offices, including zip code)
(508) 836-4200
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports 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 X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 15,446,216
- -------------------------------------- ---------------------------------
Class Outstanding as of August 13, 1999
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
-----
<TABLE>
<CAPTION>
Page No.
----------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1999 and March 31, 1999 3
Consolidated Statements of Operations
for the three months ended
June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows
for the three months ended
June 30, 1999 and 1998 5
Notes to Interim Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Part II - Other Information 15
Signatures 16
</TABLE>
2
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $20,290,780 $24,969,142
Accounts receivable 4,131,545 4,099,211
Inventory 5,893,428 5,024,552
Prepaid expenses and other current assets 382,225 538,485
----------- -----------
Total current assets 30,697,978 34,631,390
Property and equipment:
Equipment 15,900,623 15,159,313
Furniture and fixtures 1,315,206 1,243,894
Leasehold improvements 2,667,441 2,657,188
----------- -----------
19,883,270 19,060,395
Less: accumulated depreciation (13,411,404) (12,945,765)
----------- -----------
Property and equipment, net 6,471,866 6,114,630
Long-term marketable securities 6,754,235 6,602,829
Net investment in sales-type lease 279,110 287,110
Other assets 593,819 494,344
----------- -----------
Total assets $44,797,008 $48,130,303
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $4,118,773 $4,171,948
Deferred revenue 1,259,883 -
----------- -----------
Total current liabilities 5,378,656 4,171,948
Commitments
Stockholders' equity:
Common stock, $.01 par value
Authorized shares-50,000,000; issued and outstanding
- 15,418,797 and 15,378,656 at June 30, 1999 and
March 31, 1999, respectively 154,188 153,787
Additional paid-in capital 134,425,925 134,030,618
Deferred warrant costs (923,181) (1,018,391)
Accumulated other comprehensive income (loss) (26,535) 10,392
Accumulated deficit (94,212,045) (89,218,051)
----------- -----------
Total stockholders' equity 39,418,352 43,958,355
----------- -----------
Total liabilities and stockholders' equity $44,797,008 $48,130,303
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Contract revenue $ 2,136,462 $ 2,228,386
Product sales and prototype
development contracts 111,111 131,536
Rental/other revenue 22,563 22,569
----------- -----------
Total revenues 2,270,136 2,382,491
Costs and expenses:
Costs of revenue 2,272,944 2,700,610
Research and development 3,286,078 2,629,632
Selling, general and
administrative 2,044,464 1,503,861
----------- -----------
Total costs and expenses 7,603,486 6,834,103
Interest income 339,440 496,074
Interest expense 0 (9,827)
Other income (expense), net (84) 3,245
----------- -----------
Net loss $(4,993,994) $(3,962,120)
=========== ===========
Net loss per common share
Basic $ (0.32) $ (0.27)
=========== ===========
Diluted $ (0.32) $ (0.27)
=========== ===========
Weighted average number of common
shares outstanding
Basic 15,392,981 14,450,488
=========== ===========
Diluted 15,392,981 14,450,488
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (4,993,994) $ (3,962,120)
Adjustments to reconcile net loss to net cash used by operations:
Depreciation and amortization 465,639 480,398
Deferred warrant costs 108,644 80,455
Stock compensation expense 19,209 130,625
Changes in operating asset and liability accounts :
Accounts receivable (32,334) (1,696,441)
Inventory (868,876) (752,272)
Prepaid expenses and other current assets 156,260 (122,351)
Accounts payable and accrued expenses (53,175) (448,540)
Deferred revenue 1,259,883 (99,640)
-------------- ---------------
Total adjustments 1,055,250 (2,427,766)
Net cash used by operating activities (3,938,744) (6,389,886)
Cash flows from investing activities:
Purchase of property and equipment (net) (829,927) (500,688)
Purchase of long-term marketable securities (181,281) (31,214)
Net investment in sales-type lease 8,000 21,000
Increase in other assets (99,475) (102,620)
-------------- ---------------
Net cash used in investing activities (1,102,683) (613,522)
Cash flows from financing activities:
Payments on notes payable - (29,609)
Payments on long-term debt - (3,141,793)
Net proceeds from issuance of common stock 363,065 45,833,307
-------------- ---------------
Net cash provided by financing activities 363,065 42,661,905
Net increase (decrease) in cash and cash equivalents (4,678,362) 35,658,497
Cash and cash equivalents at beginning of period 24,969,142 1,842,142
-------------- ---------------
Cash and cash equivalents at end of period $ 20,290,780 $ 37,500,639
============== ===============
Supplemental schedule of cash flow information:
Cash paid for interest $ - $ 119,789
Noncash issuance of common stock $ 19,209 $ 130,625
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS:
-------------------
American Superconductor Corporation (the "Company"), which was formed on
April 9, 1987, develops and commercializes high temperature superconducting
("HTS") wire, wire products and systems, including current leads, multistrand
conductors, electromagnetic coils, and electromagnets and subsystems
comprising electromagnetics integrated with appropriate cooling systems. The
focus of the Company's development and commercialization efforts is on
electrical equipment for use by electric utilities and industrial users of
electrical power. For large-scale applications, the Company's development
efforts are focused on power transmission cables, motors, transformers,
generators and fault current limiters. In the area of industrial power
quality and transmission network power quality, the Company is focused on
marketing and selling commercial low temperature superconducting magnetic
energy storage ("SMES") devices, on development and commercialization of new
SMES products, and on development of power electronic subsystems and
engineering services. The Company operates in two business segments.
The Company derives a substantial portion of its revenue from research and
development contracts. A significant portion of this contract revenue relates
to development contracts with Pirelli Cavi E Sistemi S.p.A. and Electricite
de France who (through affiliated companies) are stockholders of the Company.
Included in costs of revenue are research and development expenses related to
externally funded development contracts of approximately $1,421,000 and
$1,624,000 for the three months ended June 30, 1999 and 1998, respectively.
Selling, general and administrative expenses in the amounts of approximately
$737,000 and $717,000 were included as costs of revenue for the three months
ended June 30, 1999 and 1998, respectively.
2. BASIS OF PRESENTATION:
----------------------
The accompanying consolidated financial statements are unaudited, except for
those dated as of March 31, 1999, and have been prepared in accordance with
generally accepted accounting principles. Certain information and footnote
disclosure normally included in the Company's annual consolidated financial
statements have been condensed or omitted. The interim consolidated financial
statements, in the opinion of management, reflect all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the
results for the interim periods ended June 30, 1999 and 1998 and the
financial position at June 30, 1999.
The results of operations for the interim period are not necessarily
indicative of the results of operations to be expected for the fiscal year.
It is suggested that these interim consolidated financial statements be read
in conjunction with the audited consolidated financial statements for the
year ended March 31, 1999 which are contained in the Company's Annual Report
on Form 10-K covering the year ended March 31, 1999.
Certain prior year amounts have been reclassified to be consistent with
current year presentation.
6
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. NET LOSS PER COMMON SHARE:
--------------------------
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share" effective December 28, 1997. SFAS No. 128
requires presentation of basic earnings per share ("EPS") and, for companies
with complex capital structures, diluted EPS. Basic EPS excludes dilution and
is computed by dividing net income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS includes dilution and is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Common equivalent shares include the effect of the exercise of stock options.
For the three months ended June 30, 1999 and 1998, common equivalent shares
of 615,515 and 449,129 were not included for the calculation of diluted EPS
as they were considered antidilutive.
4. COST-SHARING AGREEMENTS:
-----------------------
The Company received funding under a government cost-sharing agreement with
the Department of Energy of approximately $629,000 and $538,000, for the
three months ended June 30, 1999 and 1998, respectively. This funding was
used to directly offset research and development and selling, general and
administrative expenses.
5. COMPREHENSIVE LOSS:
------------------
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income", which requires that an entity include in
total comprehensive income certain amounts which were previously recorded
directly to stockholders' equity.
The Company's comprehensive loss was as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1999 1998
---- ----
<S> <C> <C>
Net loss $(4,993,994) $(3,962,120)
Other comprehensive income (loss) (36,927) 5,226
----------- -----------
Total comprehensive loss $(5,030,921) $(3,956,894)
=========== ===========
</TABLE>
Other comprehensive income represents changes in foreign currency translation
and unrealized gains and losses on investments.
7
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. BUSINESS SEGMENT INFORMATION:
-----------------------------
The Company adopted Statement of Financial Accounting Standard No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"), as of March 31, 1999. Prior year information was restated in
conformity with this accounting standard. The Company has two reportable
business segments as defined by FAS 131--High Temperature Superconducting
("HTS") business segment, and the Superconducting Magnetic Energy Storage
("SMES") segment.
The HTS business segment develops and commercializes HTS wire, wire products
and systems. The focus of this segment's development efforts is on HTS wire
for power transmission cables, motors, transformers, generators and fault
current limiters for large-scale applications.
The SMES business segment is focused on marketing and selling commercial low
temperature SMES devices, on development and commercialization of new SMES
products, and on development of power electronic subsystems and engineering
services for industrial power quality and transmission network reliability
applications.
The operating segment results for the HTS and SMES business segments were as
follows:
<TABLE>
<CAPTION>
NET SALES
- ---------
For the three months ended June 30 1999 1998
---- ----
<S> <C> <C>
HTS $ 1,981,242 $ 2,359,922
SMES 288,894 22,569
------------ -------------
Total $ 2,270,136 $ 2,382,491
============ =============
OPERATING INCOME (LOSS)
- -----------------------
For the three months ended June 30 1999 1998
---- ----
HTS $ (3,658,546) $ (3,230,302)
SMES (1,674,804) (1,221,310)
------------ -------------
Total $ (5,333,350) $ (4,451,612)
============= =============
<CAPTION>
The segment assets for the HTS and
SMES business segments were as
follows: June 30, 1999 March 31, 1999
------------- --------------
<S> <C> <C>
HTS $ 37,651,998 $ 42,288,549
SMES 7,145,010 5,841,754
------------ -------------
Total $ 44,797,008 $ 48,130,303
============ =============
</TABLE>
The accounting policies of the business segments are the same as
those described in Note 2.
8
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at
its fair value. The Statement requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item
in the income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.
Statement 133 is effective for fiscal years beginning after June 15, 2000.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance. Statement 133 cannot be applied retroactively.
Statement 133 must be applied to (a) derivative instruments and (b) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired or substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
The Company's management believes the impact of adopting Statement 133 on
its financial statements will be immaterial.
9
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1999
RESULTS OF OPERATIONS
- ---------------------
American Superconductor Corporation's revenues during the three months ended
June 30, 1999 were $2,270,000 compared to $2,382,000 for the same period a year
earlier. The HTS business segment revenues decreased $378,000. This decrease was
primarily a result of a planned reduction in funding under the Company's four-
year development contract with Pirelli. The decrease in HTS revenues was
partially offset by higher SMES development contract revenues of $266,000.
For the three months ended June 30, 1999, the Company also recorded funding of
$629,000 under government cost-sharing agreements with the Department of Energy
("DOE"). Funding under these cost-sharing agreements for the three months ended
June 30, 1998 was $538,000. The Company anticipates that a portion of its
funding in the future will continue to come from cost-sharing agreements as the
Company continues to develop joint programs with government agencies. Funding
from government cost-sharing agreements is recorded as an offset to research and
development and selling, general and administrative expenses, as required by
government contract accounting guidelines, rather than as revenues.
The Company's total costs and expenses for the three months ended June 30, 1999
were $7,603,000, compared to $6,834,000 for the same period last year. This
increase reflects a continued increase in research and development expenses and
higher marketing expenses.
Adjusted research and development ("R&D") expenses, which include amounts
classified as costs of revenue and amounts offset by cost sharing funding,
increased to $5,031,000 in the first quarter from $4,531,000 a year earlier.
This increase was due to the continued scale-up of the Company's internal
research and development activities including the hiring of additional personnel
and the purchases of materials and equipment. A portion of the R&D expenditures
related to externally funded development contracts has been classified as costs
of revenue (rather than as R&D expenses). These R&D expenditures that were
included as costs of revenue during the first quarter of fiscal years 2000 and
1999 were $1,421,000 and $1,624,000, respectively. Additionally, R&D expenses
that were offset by cost sharing funding were $324,000 and $277,000 in the first
quarter of fiscal years 2000 and 1999, respectively. Net R&D expenses
(exclusive of amounts classified as costs of revenue and amounts offset by cost
sharing funding) increased to $3,286,000 in the three months ending June 30,
1999 from $2,630,000 for the same period last year.
Adjusted selling, general and administrative ("SG&A") expenses, which include
amounts classified as costs of revenue and amounts offset by cost sharing
funding, were $3,086,000 for the quarter ended June 30, 1999 compared to
$2,482,000 for the same period the prior year. This increase was primarily due
to the hiring of additional personnel and related expenses incurred to
10
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1999
support future planned growth and increased marketing activities, primarily in
the SMES business unit. The SG&A amounts offset by cost-sharing funding were
$305,000 and $261,000 in the first quarter of fiscal years 2000 and 1999,
respectively. In addition, certain SG&A expenditures related to externally
funded development contracts have been classified as costs of revenue (rather
than as SG&A expenses). Such indirect costs included in costs of revenue during
the three-month period ended June 30, 1999 were $737,000 compared to $717,000
for the same period last year. Net SG&A expenditures (exclusive of amounts
classified as costs of revenue and amounts offset by cost share funding)
increased to $2,044,000 for the three months ended June 30, 1999 compared to
$1,504,000 for the same period the prior year.
Interest income was $339,000 in the quarter ended June 30, 1999 compared to
$496,000 for the same period in the previous year. This decrease primarily
reflects the reduced cash balances available for investment as a result of cash
being used to fund the Company's operations and purchase capital equipment.
Interest expense was $0 in the quarter ended June 30, 1999, compared to $10,000
for the same period in the previous year. This decrease reflects the Company's
retirement of all long-term debt in the quarter ended June 30, 1998.
The Company expects to continue to incur operating losses for at least the next
few years, as it continues to devote significant financial resources to its
research and development activities and commercialization efforts.
The Company expects to be party to agreements which, from time to time, may
result in costs incurred exceeding expected revenues under such contracts.
The Company may enter into such agreements for a variety of reasons including,
but not limited to, entering new product application areas, furthering the
development of key technologies, and advancing the demonstration of commercial
prototypes in critical market applications.
Please refer to the "Future Operating Results" section of the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999 for a discussion of certain factors that may affect the Company's
future results of operation and financial condition.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1999, the Company had cash, cash equivalents and long-term
marketable securities of $27,045,000 compared to $31,572,000 at March 31, 1999.
The principal uses of cash during the quarter ended June 30, 1999 were the
funding of the Company's operations and the acquisition of capital equipment,
primarily for research and development and manufacturing.
The Company believes that several years of further development will be necessary
before HTS wires
11
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1999
and related products are available in significant quantities for commercial
power applications. The Company believes, based on its current business plan,
that its current cash and marketable securities should be sufficient to fund the
Company's operations through the end of fiscal year 2001. However, the Company
may need additional funds sooner than anticipated if the Company's performance
deviates significantly from its current business plan or there are significant
changes in competitive or other market factors. There can be no assurance that
such funds, whether from equity or debt financing, development contracts or
other sources, will be available, or available under terms acceptable to the
Company.
To date, inflation has not had a material impact on the Company's financial
results.
YEAR 2000 ISSUES
- ----------------
The Company is currently addressing a universal problem commonly referred to as
"Year 2000 Compliance," which relates to the ability of computer programs and
systems to properly recognize and process date sensitive information before and
after January 1, 2000. Many computer programs and systems recognize dates using
two-digit year data (rather than four-digit data), and therefore may be unable
to determine the correct century for the year. Failure to properly recognize
and process date information may cause such programs and systems to fail to
operate or to operate with erroneous results.
The Company has analyzed and continues to analyze its internal information
technology ("IT") systems ("IT systems") to identify any computer programs that
are not Year 2000 compliant and implement any changes required to make such
systems Year 2000 compliant. The Company believes that its critical IT systems
currently are capable of functioning without substantial Year 2000 compliance
problems. The Company has identified only a few non-critical, but important, IT
systems that must be replaced due to Year 2000 concerns, and the Company already
has plans to replace these IT systems with Year 2000 compliant systems providing
increased functionality. The Company believes such IT systems will be Year
2000 capable in a time frame that will avoid any material adverse effect on the
Company. Also, the Company does not believe that the expenditures related to
replacing or upgrading any of its IT systems to make them Year 2000 compliant
will have a material adverse effect on the operating results or financial
condition of the Company. The Company has evaluated its critical equipment and
critical systems that contain embedded software and the Company believes that
all of its critical Non-IT systems are capable of functioning without
substantial Year 2000 compliance problems.
A substantial portion of the current products being developed, manufactured
and/or sold by the Company (e.g. HTS wire and related products) contain no
computer programs and as such pose no significant Year 2000 compliance concerns.
The SMES business unit has previously manufactured several SMES units that
contain computer systems that may be susceptible to Year 2000 compliance
problems. The Company is in the process of upgrading and testing these
12
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1999
systems to insure Year 2000 compliance, and believes that all changes will be in
place in the third calendar quarter of 1999 on all these previously sold units.
SMES units that are currently being manufactured have computer systems that are
Year 2000 compliant. However, the Company's products are often used by its
customers in systems that contain third party products. Therefore, even though
the Company's current products may be Year 2000 compliant, the failure of such
third party products to be Year 2000 compliant, or to properly interface with
the Company's current products, may result in a system failure.
The Company is investigating each of its significant vendors, suppliers,
financial service organizations, service providers and customers to confirm that
the Company's operations will not be materially adversely affected by the
failure of any such third party to have Year 2000 compliant computer programs.
This is being undertaken by a process that includes questionnaires, interviews,
on-site visits and other available means. The Company expects to complete this
process by the end of the third calendar quarter of 1999. Regardless of the
responses that the Company receives from such third parties, the Company is
establishing contingency plans to reduce the Company's exposure resulting from
the non-compliance of third parties. First, the Company plans to build
inventories of critical and/or important components prior to January 1, 2000,
and thereby decrease the Company's dependence on suppliers that are not Year
2000 compliant. Second, the Company plans to review delivery schedules with its
major customers, commencing in the third calendar quarter of 1999. Such review
should enable customers to accept ordered products after January 1, 2000, even
if their internal computer systems are not operating properly.
The Company estimates that, through June 30, 1999, it has spent less than
$75,000 to remediate Year 2000 issues in its IT systems, and the Company
estimates that it will spend less than an additional $75,000 to remediate Year
2000 issues in its IT systems. Additionally, the Company accelerated into fiscal
1999 the planned replacement of its E-mail software, and is currently
implementing the planned replacement of its financial systems software to avoid
potential Year 2000 problems. For the development and deployment of SMES system
computer upgrades to remedy Year 2000 problems, the Company has spent, through
June 30, 1999, approximately $25,000 and estimates it will spend an additional
$10,000 to complete deployment and testing of these upgrades. All of such
expenditures are included in the budgets of the various departments of the
Company tasked with various aspects of the Year 2000 project. No IT projects
have been deferred due to the Company's Year 2000 efforts.
Finally, the Company is in the process of developing contingency plans to be
implemented as part of its efforts to identify and correct any Year 2000
compliance problems. Such plans are expected to be completed by the end of the
third calendar quarter of 1999.
13
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1999
The Company does not currently believe that any of the foregoing will have a
material adverse effect on its financial condition or its results of operations.
However, the process of evaluating the Company's products and third party
products and systems is ongoing. Although not expected, failures of critical
suppliers, critical customers, critical IT systems, critical non-IT systems, or
products sold by the Company (including any delay in the deployment of SMES
computer program upgrades) could have a material adverse effect on the Company's
financial condition or results of operations. Year 2000 Compliance has many
issues and aspects, not all of which the Company is able to accurately forecast
or predict. There is no way to assure that Year 2000 Compliance will not have
adverse effects on the Company, some of which could be material. Many of the
Company's statements related to Year 2000 are forward-looking statements and
actual results could differ materially from those anticipated above.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
---------------------------------------------------------
There were no material changes in the Company's exposure to market risk from
March 31, 1999.
14
<PAGE>
AMERICAN SUPERCONDUCTOR CORPORATION
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibit 27.1 Financial Data Schedule
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
AMERICAN SUPERCONDUCTOR CORPORATION
August 13, 1999 /s/ Gregory J. Yurek
- ------------------------------------ ------------------------------------
Date Gregory J. Yurek
Chairman of the Board, President and
Chief Executive Officer
August 13, 1999 /s/ Thomas M. Rosa
- ------------------------------------ -------------------------------------
Date Thomas M. Rosa
Chief Accounting Officer, Corporate
Controller and Assistant Secretary
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
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0
0
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