1
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
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For The Quarter Ended: June 30, 1996 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 organization (I.R.S. Employer Identification Number)
or incorporation)
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 9,561,307
- -------------------------------------- --------------------------------
Class Outstanding as of August 7, 1996
2
AMERICAN SUPERCONDUCTOR CORPORATION
INDEX
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Page No.
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Part I - Financial Information
Consolidated Balance Sheets
June 30, 1996 and March 31, 1996 3
Consolidated Statements of Operations
for the three months ended
June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the three months ended
June 30, 1996 and 1995 5
Notes to Interim Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II - Other Information 11
Signatures 12
2
3
AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
-------
June 30, March 31,
1996 1996
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,665,048 $ 4,104,703
Accounts receivable 2,166,059 1,485,628
Notes receivable 509,414 607,536
Inventory 824,882 779,428
Prepaid expenses and other current assets 461,879 226,179
------------ ------------
Total current assets 5,627,282 7,203,474
Property and equipment:
Equipment 7,226,739 6,779,649
Furniture and fixtures 738,287 710,473
Leasehold improvements 1,691,991 1,663,806
------------ ------------
9,657,017 9,153,928
Less: accumulated depreciation (5,980,580) (5,606,374)
------------ ------------
Property and equipment, net 3,676,437 3,547,554
Long-term marketable securities 20,711,377 22,257,898
Licenses, net of amortization 0 14,574
Other assets 6,910 4,898
------------ ------------
Total assets $ 30,022,006 $ 33,028,398
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,521,038 $ 1,283,558
Obligation under capital lease, current portion 4,591 4,478
------------ ------------
Total current liabilities 1,525,629 1,288,036
Obligation under capital lease, long term portion 7,804 8,995
Commitments -- --
Stockholders' equity:
Common stock ($.01 par); 95,585 94,873
20,000,000 shares
authorized and 9,558,457 and
9,487,277 issued and outstanding at
June 30, 1996 and March 31,
1996, respectively
Additional paid-in capital 64,170,227 63,460,452
Deferred compensation (50,960) (50,960)
Deferred Contract Costs - Warrants (616,878) -
Unrealized gain (loss) on investments (120,814) (61,970)
Cumulative translation adjustment 1,096 4,602
Accumulated Deficit (34,989,683) (31,715,630)
------------ ------------
Total stockholders' equity 28,488,573 31,731,367
------------ ------------
Total liabilities and stockholders' equity $ 30,022,006 $ 33,028,398
============ ============
The accompanying notes are an integral part of the consolidated financial
statements
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AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------
Three Months Ended
June 30,
1996 1995
----------- -----------
Revenues:
Contract revenue $ 978,394 $ 609,067
Prototypes and prototype
development contracts 294,914 395,641
----------- -----------
Total revenues 1,273,308 1,004,708
Costs and expenses:
Costs of revenue 1,315,679 998,538
Research and development 2,443,822 1,526,280
Selling, general and
administrative 1,095,767 955,809
----------- -----------
Total costs and expenses 4,855,268 3,480,627
Interest income 347,261 422,922
Other income (expense), net (39,354) (2,640)
----------- -----------
Net loss $(3,274,053) $(2,055,637)
=========== ===========
Net loss per common share $ (0.34) $ (0.22)
=========== ===========
Weighted average number of
common shares outstanding 9,557,467 9,468,632
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
4
5
AMERICAN SUPERCONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June 30,
1996 1995
----------- -----------
Operating activities:
Net loss $(3,274,053) $(2,055,637)
Adjustments to reconcile net loss to net cash from operations:
Depreciation and amortization 374,206 370,934
Stock compensation expense -- 1,120
Changes in operating asset and liability accounts:
Accounts receivable (680,431) (92,106)
Notes receivable 98,122 95,882
Inventory (45,454) (45,508)
Prepaid expenses and other current assets (235,700) (3,157)
Accounts payable and accrued expenses 237,480 (347,139)
Advance payments -- 10,000
Advance payments - related parties -- (250,000)
----------- -----------
Total adjustments (251,777) (259,974)
----------- -----------
Net cash used by operating activities (3,525,830) (2,315,611)
----------- -----------
Investing activities:
Purchase of property and equipment, net (506,595) (251,600)
(Purchase) sale of long-term marketable securities, net 1,487,677 3,091,608
Increase in license fees and other assets 12,562 --
Payments under capital lease (1,078) (976)
----------- -----------
Net cash provided (used) by investing activities 992,566 2,839,032
----------- -----------
Financing activities:
Net proceeds from issuance of stock and warrants 93,609 12,410
----------- -----------
Net cash provided by financing activities 93,609 12,410
----------- -----------
Net increase (decrease) in cash and cash equivalents (2,439,655) 535,831
Cash and cash equivalents at beginning of period 4,104,703 1,467,284
----------- -----------
Cash and cash equivalents at end of period $ 1,665,048 $ 2,003,115
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements
5
6
AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
---
1. NATURE OF BUSINESS:
------------------
American Superconductor Corporation (the "Company") was formed on April 9,
1987 to develop and commercialize high temperature superconductor ("HTS")
wire, wire products and systems, which include multistrand conductors,
electromagnetic coils, cryogenic integration, power semiconductors and power
engineering. The Company operates in one business segment.
The Company is engaged in conducting research, developing prototypes for
commercial applications and conducting sales and marketing activities. 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 two stockholders, Inco Alloys
International, Inc. ("Inco") and Pirelli Cavi S.p.A. The Company has made
significant progress in developing prototypes. As the Company is moving
towards commercialization of the technology, the Company has elected not to
report the financials as a development stage enterprise.
2. BASIS OF PRESENTATION:
---------------------
The accompanying consolidated financial statements are unaudited, except for
those dated as of March 31, 1996, 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, 1996 and 1995 and the
financial position at June 30, 1996.
The results of operations for the interim periods 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, 1996 which are contained in the Company's Annual Report
on Form 10-K for the year ended March 31, 1996.
Included in "Costs of Revenue" are research and development expenses of
approximately $905,000 and $716,000 for the three months ended June 30, 1996
and 1995, respectively.
Continued
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AMERICAN SUPERCONDUCTOR CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
---
3. DEFERRED CONTRACT COSTS-WARRANTS:
--------------------------------
In March of 1996, the Company entered into a new strategic alliance with the
Electric Power Research Institute (EPRI). Under this new agreement
approximately 100,000 warrants will be granted and become exercisable over
the next five years. The Company recorded an increase to additional paid-in
capital and a corresponding charge to Deferred Contract Costs of
approximately $637,000 in the first quarter ended June 30, 1996. This amount
will be expensed over five years. Warrant expense related to this
transaction was approximately $20,000 for the quarter ended June 30, 1996.
4. NET LOSS PER COMMON SHARE:
-------------------------
Net loss per common share is computed based upon the weighted average number
of common shares outstanding.
5. COST-SHARING AGREEMENTS:
-----------------------
For the three months ended June 30, 1996 the Company received funding of
$70,562 under a Government cost-sharing agreement with Oak Ridge National
Laboratory. This funding was used to directly offset research and
development and selling, general and administrative expenses and to purchase
capital equipment.
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8
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1996
Results of Operations
- ---------------------
Revenues during the three months ended June 30, 1996 were $1,273,000 compared to
$1,005,000 for the same period in 1995. Revenues in the first quarter were
positively affected by an increase in work performed under certain corporate
contracts. This increase was partially offset by a decrease in prototype
sales. For the quarter ended June 30, 1995, prototype sales included revenues
from a cable wire prototype which was completed during the fiscal year ended
March 31, 1996. The Company expects that the prototype revenues in future
quarters will fluctuate on a quarter by quarter basis.
For the three months ended June 30, 1996, the Company also recorded funding of
$71,000 under a government cost-sharing agreement. Funding under various
cost-sharing agreements for the three months ended June 30, 1995 was $549,000.
The Company expects that funding from the existing cost-sharing agreement as
well as expected future cost-sharing agreements will increase in subsequent
quarters of this fiscal year as compared to the first quarter. 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 cost-sharing agreements was used to
offset research and development and selling, general and administrative expenses
and to purchase capital equipment. In accordance with government contract
accounting guidelines, funding received under cost-sharing agreements is not
included in the Company's reported revenues.
The Company's total operating expenses for the three months ended June 30, 1996
were $4,855,000, compared to $3,481,000 for the same period last year.
Costs of revenue increased to $1,316,000 for the three months ended June 30,
1996 from $999,000 for the same period a year earlier. This increase primarily
reflects an increase in costs associated with the increase in corporate contract
revenues, partially offset by a decrease in costs associated with prototype
revenues.
Research and development expenses increased to $2,444,000 during the first
quarter from $1,526,000 a year earlier. This increase was primarily due to the
continued scale-up of the Company's internal research and development activities
including the hiring of additional personnel, the purchase of materials and
equipment and increases in patent processing costs. In addition to these
expenses, a portion of research and development expenditures related to
externally funded development contracts has been classified as costs of revenue
(rather than as research and development expenses). Research and development
expenditures included as costs of revenue for the three month period ended June
30, 1996 were $905,000 compared to $716,000 for the same period last year.
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9
AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1996
Selling, general and administrative expenses for the quarter ended June 30, 1996
were $1,096,000 compared to $956,000 for the same period the prior year. This
increase reflects increased staffing, recruiting costs and other expenses
necessary to support the overall increase in the Company's development contracts
and internal research and development activities. Certain selling, general and
administrative expenditures related to externally funded development contracts
have been classified as costs of revenue (rather than as selling, general and
administrative expenses). Such indirect costs included in costs of revenue
during the three month period ended June 30, 1996 were $411,000 compared to
$283,000 for the same period last year.
Interest income was $347,000 in the quarter ended June 30, 1996 compared to
$423,000 for the same period in the previous year. This change primarily
reflects lower cash balances available for investment as a result of cash being
used to fund the Company's operations and to purchase property and equipment.
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.
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, 1996 for a discussion of certain factors that may affect the Company's
future results of operations and financial condition.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1996 the Company had cash, cash equivalents and long-term marketable
securities of $22,376,000 compared to $26,363,000 at March 31, 1996. This
decrease was primarily due to the use of $3,526,000 to fund the Company's
operations in the quarter ended June 30, 1996 which was mostly attributable to
the Company's net loss of $3,274,000. An additional $507,000 was used to acquire
capital equipment, primarily for research and development and manufacturing.
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AMERICAN SUPERCONDUCTOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1996
The Company believes that several years of further development will be necessary
before HTS wires are available for any significant commercial applications.
Management believes that revenues from funded development contracts and the sale
of prototypes and the Company's cash, cash equivalents and long-term marketable
securities and interest thereon should provide adequate funding to meet the
Company's cash requirements for its planned operations for the next two to three
years.
To date, inflation has not had a material impact on the Company's financial
results.
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AMERICAN SUPERCONDUCTOR CORPORATION
PART II
OTHER INFORMATION
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Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
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
11
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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, 1996 /s/ Ramesh L. Ratan
- ----------------------------- ---------------------------------------------
Date Ramesh L. Ratan
Executive Vice President of
Corporate Development and
Chief Financial Officer
(Principal Financial and Accounting Officer)
12
5
1,000
U.S. DOLLARS
3-MOS
MAR-31-1997
APR-01-1996
JUN-30-1996
1
1,665
20,711
2,675
0
825
5,627
9,657
5,981
30,022
1,526
0
96
0
0
28,393
30,022
295
1,273
354
1,316
3,540
0
0
(3,274)
0
(3,274)
0
0
0
(3,274)
(.34)
0
