SEC Filing | AMSC

View:

Download DOC

Download PDF

Download XLS

AMERICAN SUPERCONDUCTOR CORP. FORM 10-Q

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, 2003

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 or incorporation)

(I.R.S. Employer

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 by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of August 12, 2003
Common Stock, par value $.01 per share		21,343,720

AMERICAN SUPERCONDUCTOR CORPORATION

INDEX

		Page No.

Part I—Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets June 30, 2003 (unaudited) and March 31, 2003	3

	Consolidated Statements of Operations for the three months ended June 30, 2003 and 2002 (unaudited)	4

	Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2003 and 2002 (unaudited)	5

	Consolidated Statements of Cash Flows for the three months ended June 30, 2003 and 2002 (unaudited)	6

	Notes to Interim Consolidated Financial Statements	7-14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15-27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

Part II—Other Information

Item 1.	Legal Proceedings	29

Item 2.	Changes in Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 5.	Other Information	29

Item 6.	Exhibits and Reports on Form 8-K	29

Signatures		30

Exhibit Index		31

AMERICAN SUPERCONDUCTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

	June 30, 2003			March 31, 2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	11,089,265		$	18,487,752
Accounts receivable, net		6,758,683			5,446,007
Inventory		3,517,696			5,117,786
Prepaid expenses and other current assets		1,297,124			1,264,839

Total current assets		22,662,768			30,316,384
Property and equipment:
Land		4,021,611			4,021,611
Construction in progress—building and equipment		9,523,702			8,773,458
Building		34,102,138			34,102,138
Equipment		32,040,541			31,966,730
Furniture and fixtures		4,158,119			4,167,345
Leasehold improvements		6,246,497			6,246,497

		90,092,608			89,277,779
Less: accumulated depreciation		(29,587,993	)		(28,241,982	)

Property and equipment, net		60,504,615			61,035,797
Long-term marketable securities		1,012,620			1,561,120
Long-term inventory		3,250,000			3,250,000
Goodwill		1,107,735			1,107,735
Other assets		4,724,384			4,707,603

Total assets	$	93,262,122		$	101,978,639

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	10,066,835		$	9,773,874
Deferred revenue		297,383			1,136,002

Total current liabilities		10,364,218			10,909,876
Long-term deferred revenue		3,250,000			3,250,000
Commitments (Note 9)
Stockholders’ equity:
Common stock, $.01 par value
Authorized shares—50,000,000; shares issued and outstanding 21,343,720 and 21,293,772 at June 30, 2003 and March 31, 2003, respectively		213,437			212,938
Additional paid-in capital		361,488,915			361,024,689
Deferred compensation		(596,457	)		(311,563	)
Accumulated other comprehensive income		8,193			2,407
Accumulated deficit		(281,466,184	)		(273,109,708	)

Total stockholders’ equity		79,647,904			87,818,763

Total liabilities and stockholders’ equity	$	93,262,122		$	101,978,639

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

AMERICAN SUPERCONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended June 30,
	2003			2002
	(Unaudited)
Revenues:
Contract revenue	$	355,777		$	131,125
Product sales and prototype development contracts		7,400,530			2,728,848

Total revenues		7,756,307			2,859,973
Costs and expenses:
Costs of revenue—contract revenue		335,640			128,118
Costs of revenue—product sales and prototype development contracts		8,272,789			4,230,822
Research and development		4,863,057			6,217,335
Selling, general and administrative		2,704,848			3,463,923

Total costs and expenses		16,176,334			14,040,198

Operating loss		(8,420,027	)		(11,180,225	)

Interest income		34,519			370,806
Other income (expense), net		29,032			(19,820	)

Net loss	$	(8,356,476	)	$	(10,829,239	)

Net loss per common share
Basic and diluted	$	(0.39	)	$	(0.53	)

Weighted average number of common shares outstanding
Basic and diluted		21,343,720			20,535,175

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

AMERICAN SUPERCONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three months ended June 30,
	2003			2002
	(Unaudited)
Net loss	$	(8,356,476	)	$	(10,829,239	)
Other comprehensive income (loss)
Foreign currency translation		9,161			19,827
Unrealized loss on investments		(3,375	)		(1,688	)

Other comprehensive income		5,786			18,139
Comprehensive loss	$	(8,350,690	)	$	(10,811,100	)

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

AMERICAN SUPERCONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended June 30,
	2003			2002
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(8,356,476	)	$	(10,829,239	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		1,615,976			1,520,406
Gain on disposal of PP&E		(2,813	)		—
Amortization of deferred compensation expense		54,002			34,578
Amortization of deferred warrant costs		13,322			49,421
Changes in operating asset and liability accounts:
Accounts receivable		(1,312,676	)		(93,390	)
Inventory—current and long-term		1,600,090			67,117
Prepaid expenses and other current assets		(29,874	)		(16,047	)
Accounts payable and accrued expenses		292,961			(7,582,340	)
Deferred revenue—current and long-term		(838,619	)		(808,928	)

Net cash used in operating activities		(6,964,107	)		(17,658,422	)
Cash flows from investing activities:
Purchase of property and equipment		(889,799	)		(4,787,488	)
Proceeds from the sale of property and equipment		27,938
Sale of long-term marketable securities		551,875			7,089,215
Increase in other assets		(236,901	)		(390,375	)

Net cash (used in) provided by investing activities		(546,887	)		1,911,352
Cash flows from financing activities:
Net proceeds from issuance of common stock		112,507			249,930

Net cash provided by financing activities		112,507			249,930


Net cash decrease in cash and cash equivalents		(7,398,487	)		(15,497,140	)

Cash and cash equivalents at beginning of period		18,487,752			37,170,927

Cash and cash equivalents at end of period	$	11,089,265		$	21,673,787

Supplemental schedule of cash flow information:
Noncash issuance of common stock	$	54,002		$	34,578

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

AMERICAN SUPERCONDUCTOR CORPORATION

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business:

American Superconductor Corporation (the “Company” or “AMSC”), which was formed on April 9, 1987, is a world leader in developing and manufacturing products using superconducting materials and power electronic converters for electric power applications. The focus of the Company’s development and commercialization efforts is on electrical equipment for electric utilities, transmission grid operators, industrial and commercial users of electrical power, and commercial and military ships. For large-scale applications, the Company’s development efforts are focused on high temperature superconductor (“HTS”) wire for use in power transmission cables, motors, and generators. The Company is also developing and commercializing electric motors and generators based on its HTS wire. For power quality and reliability applications, the Company is focused on proprietary power electronic converters that rapidly switch, control and modulate power. The Company also designs, manufactures, and sells systems based on those power electronic converters for power quality and reliability solutions. The Company operates in three business segments—AMSC Wires, SuperMachines and Power Electronic Systems.

The Company has generated operating losses since its inception in 1987 and expects to continue incurring losses until at least the end of fiscal 2005. Operating losses for the fiscal years ended March 31, 2003, 2002 and 2001 have contributed to net cash used by operating activities of $39,604,957, $26,456,387 and $26,424,059, respectively, for these periods. For the three months ended June 30, 2003, net cash used by operating activities was $6,964,107. The Company’s average annual use of cash over this period is greater than our balance of cash, cash equivalents and long-term marketable securities at June 30, 2003 of $12,101,885.

In July 2003, the Company implemented approximately $5 million of reductions in its operating and capital budgets for fiscal 2004, primarily through the elimination of 34 positions, including a reduction in force of 23 employees, or 8% of its workforce. Cuts were also made in controllable expenses and capital equipment purchase plans.

The cash savings from the aforementioned cost reduction actions combined with an increasing level of revenues for the remainder of the fiscal year are expected to lower the Company’s quarterly cash usage beginning in the second quarter of fiscal 2004. The revenue increase is supported by the Company’s receipt in March 2003 of the three-year 36.5 MW motor contract from the Office of Naval Research as well as its selection in April 2003 by the Department of Energy (DOE) as the prime contractor for an HTS cable project with the Long Island Power Authority (LIPA).

To supplement the Company’s anticipated cash needs for operations as well as its investment in the second generation wire development program, the Company has been examining a number of options for raising additional capital. Based on these efforts over the last year, the Company signed in June 2003 non-binding letters of intent with three groups of investors to provide up to $50 million in financing. These letters of intent are subject to satisfactory due diligence by these investors, the completion of formal legal documentation and

approval of the financings by the Company’s shareholders. The $50 million financing is expected to be comprised of a five-year term loan of up to $30 million to be provided by a corporate finance company and several institutional investors with these amounts secured by the Company’s existing assets and additional assets projected to be acquired, excluding accounts receivable and inventory. In addition, three institutional investors have also signed a non-binding letter of intent to provide $10 million in the form of subordinated notes that are convertible into the Company’s common stock. The Company has also signed a non-binding letter of intent with a commercial bank to provide up to $10 million in the form of a working capital credit facility that is to be secured by its accounts receivable and inventory.

Each of the investor groups will also be issued warrants to acquire shares of the Company’s common stock. The conversion feature of the subordinated convertible notes combined with the warrants will trigger the NASDAQ requirement that the Company’s shareholders approve this $50 million financing transaction prior to its closing. Consequently, should the Company be able to close this transaction, the earliest this would occur would be the end of September 2003. The Company expects that all of the contemplated financings will be required to close simultaneously. While the Company believes it will be able to complete the $50 million financing transaction, it can make no assurance that such funds will be available, or available under terms acceptable to them, or that its shareholders will approve this financing transaction. In the event that this transaction cannot be completed, the Company is confident that they could obtain conventional mortgage financing on its Devens, MA manufacturing facility that, combined with its available cash, cash equivalents and long-term marketable securities, would be sufficient to satisfy its anticipated cash requirements for at least the next 12 months.

The Company currently derives a portion of its revenue from research and development contracts. The Company recorded contract revenue related to research and development contracts of $355,777 and $131,125 for the three months ended June 30, 2003 and 2002, respectively. In addition, the Company recorded prototype development contract revenues on U.S. Navy and other contracts of $5,549,894 and $2,271,611, which are included under “Revenues – Product sales and prototype development contracts,” in the three months ended June 30, 2003 and 2002, respectively.

Costs of revenue include research and development and selling, general and administrative expenses that are incurred in the performance of these development contracts.

Research and development (“R&D”) and selling, general and administrative (“SG&A”) expenses included as costs of revenue for these development contracts were as follows:

	Three Months Ended June 30,
	2003		2002
Research and development expenses	$	4,754,088	$	2,087,747
Selling, general and administrative expenses	$	1,524,654	$	308,745

2. Basis of Presentation:

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles. The unaudited consolidated financial statements of the Company presented herein have been prepared in accordance with the SEC’s instructions to Form 10-Q and as such do not include all of the information and note disclosures included in annual financial statements 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, 2003 and 2002 and the financial position at June 30, 2003.

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 fiscal year ended March 31, 2003 which are contained in the Company’s Annual Report on Form 10-K covering the fiscal year ended March 31, 2003.

There has been no material change to the Company’s significant accounting policies from those filed in the Form 10-K. Certain prior year amounts have been reclassified to be consistent with the current year presentation.

3. Stock-Based Compensation Plans and Pro Forma Stock-Based Compensation Expense

The Company applies Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock-based compensation plans. Accordingly, no accounting recognition is given to stock options granted at fair market value until they are exercised. Upon exercise, net proceeds, including tax benefits realized, are credited to stockholders’ equity.

In October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based Compensation,” which sets forth a fair-value-based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account for its stock-based compensation plans.

Had compensation cost for awards granted after 1994 under the Company’s stock-based compensation plan been determined based on the fair value at the grant dates consistent with the method set forth under SFAS No. 123, the effect on certain financial information of the Company would have been as follows:

	For the three months ended June 30,
	2003			2002
Net loss	$	(8,356,476	)	$	(10,829,239	)
Add: Stock compensation expense under APB 25	$	52,927		$	34,578
Less: Stock compensation, net of tax, had all options been recorded at fair value per SFAS 123	$	(949,757	)	$	(1,681,451	)

Pro forma net loss	$	(9,253,306	)	$	(12,476,112	)

Weighted average shares, basic and diluted		21,343,720			20,535,175
Net loss per share, as reported	$	(0.39	)	$	(0.53	)
Net loss per share, pro forma	$	(0.43	)	$	(0.61	)

The pro forma amounts include the effects of all activity under the Company’s stock-based compensation plans since April 1, 1998. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants:

	For the three months ended June 30,
	2003		2002
Dividend yield	None		None
Expected volatility	100	%	101	%
Risk-free interest rate	4.0	%	4.0	%
Expected life (years)	6.5		6.5

Weighted average fair value of options granted at fair market value during the three months ended June 30,

2003		$	3.03
2002		$	7.24

The above amounts may not be indicative of future expense because amounts are recognized over the vesting period and the Company expects it will have additional grants and related activity under these plans in the future.

4. Net Loss Per Common Share:

Basic Earnings Per Share (“EPS”) excludes dilution and is computed by dividing net income 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 shares and dilutive common equivalent shares outstanding during the period. Common equivalent shares include the dilutive effect of stock options and warrants. For the three months ended June 30, 2003 and 2002, common equivalent shares of 4,324,255 and 4,817,851 were not included in the calculation of diluted EPS as their effect was antidilutive.

5. Accounts Receivable:

Accounts receivable at June 30, 2003 and March 31, 2003 consisted of the following:

	June 30, 2003			March 31, 2003
Accounts Receivable (billed)	$	4,133,828		$	4,828,214
Accounts Receivable (unbilled)		5,282,340			3,275,278
Less: Allowance for Doubtful Accounts		(2,657,485	)		(2,657,485	)

Accounts Receivable, net	$	6,758,683		$	5,446,007

6. Inventories:

Inventories at June 30, 2003 and March 31, 2003 consisted of the following:

	June 30, 2003		March 31, 2003
Raw materials	$	763,084	$	1,217,033
Work-in-progress		2,121,972		2,250,321
Finished goods		632,640		1,650,432

Inventory	$	3,517,696	$	5,117,786

7. Long-term Inventory and Deferred Revenue:

Long-term inventory of $3,250,000 represents SMES units that were delivered in fiscal 2001 to one of our customers, Wisconsin Public Service Corporation (“WPS”), for a total purchase price of $3,787,000, less $537,000 recorded as revenue in the quarter ended December 31, 2002. As the sale of these units is subject to certain return and buyback provisions which expire from 2002 to 2009, the Company is deferring recognition of the revenue related to the remaining $3,250,000 in sales until the applicable buyback provisions lapse. Long-term deferred revenue of $3,250,000 represents the $3,787,000 cash payment received from WPS related to this transaction, less $537,000 recorded as revenue in the third quarter of fiscal 2003.

The buyback provisions, which are subject to a minimum 6-month written notice requirement, began to lapse in the quarter ended December 31, 2002, until which time WPS had the right to return all the units for the full purchase price of $3,787,000. On December 31 of each year after 2002, WPS has the right, subject to a minimum 6-month notice requirement, to sell the units back to the Company at a reduced price. Between January 1, 2003 and the next annual buyback date of December 31, 2003, the repurchase price for the units will be $3,250,000 and that price is further reduced by approximately 12% per year through December 31, 2009.

The Company recorded $537,000 of revenue and an equal amount of cost of revenue in the quarter ended December 31, 2002, as the buyback price transitioned from $3,787,000 to $3,250,000. The Company also recorded a $537,000 reduction in long-term inventory and long-term deferred revenue.

8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at June 30, 2003 and March 31, 2003 consisted of the following:

	June 30, 2003		March 31, 2003
Accounts payable	$	4,726,486	$	3,721,307
Accrued employee stock purchase plan		109,416		199,567
Accrued expenses		4,486,368		5,184,644
Accrued vacation		744,565		668,356

Accounts payable and accrued expenses	$	10,066,835	$	9,773,874

9. Commitments

As permitted under Delaware law, the Company has agreements whereby the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving at its request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a Director and Officer insurance policy that limits its exposure and enables it to recover a portion of future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. All of these indemnification agreements were grandfathered under the provisions of FIN No. 45 as they were in effect prior to March 31, 2003. Accordingly, the Company has no liabilities recorded for these agreements as of June 30, 2003.

10. Cost-Sharing Arrangements:

The Company has entered into several cost-sharing arrangements with various agencies of the United States government. Funds paid to the Company under these agreements are not reported as revenues but are used to directly offset the Company’s research and development and selling, general and administrative expenses, and to purchase capital equipment. The Company recorded costs and funding under these agreements of $312,719 and $103,321 for the three months ended June 30, 2003 and 2002, respectively. At June 30, 2003, total funding received to date under these agreements was $14,491,000. Future funding expected to be received under existing agreements is approximately $1,753,000, subject to continued future funding allocations.

11. Business Segment Information:

The Company has three reportable business segments—AMSC Wires, SuperMachines, and Power Electronic Systems.

The AMSC Wires business segment develops, manufactures and sells HTS wire. The focus of this segment’s current development, manufacturing and sales efforts is on HTS wire for power transmission cables, motors, generators, synchronous condensers and specialty magnets.

The SuperMachines business segment is developing and commercializing electric motors, generators, and synchronous condensers based on HTS wire. Its primary focus for motors and generators is on ship propulsion.

The Power Electronic Systems business segment develops and sells power electronic converters and designs, manufactures and sells integrated systems based on those converters for power quality and reliability solutions and for wind farm applications.

The operating results for the three business segments are as follows:

	Three Months Ended June 30,
	2003			2002
Revenues
AMSC Wires	$	1,097,124		$	217,633
SuperMachines		5,549,894			1,535,849
Power Electronic Systems		1,109,289			1,106,491

Total	$	7,756,307		$	2,859,973



	Three Months Ended June 30,
	2003			2002
Operating income (loss)
AMSC Wires	$	(6,333,675	)	$	(6,979,978	)
SuperMachines		11,858			(1,762,721	)
Power Electronic Systems		(1,824,065	)		(2,108,006	)
Unallocated corporate expense		(274,145	)		(329,520	)

Total	$	(8,420,027	)	$	(11,180,225	)

The assets for the three business segments (plus Corporate Cash) are as follows:

	For the period ended
	June 30, 2003		March 31, 2003
Assets
AMSC Wires	$	64,428,601	$	66,393,042
SuperMachines		7,037,906		4,992,328
Power Electronic Systems		9,693,730		10,544,397
Corporate cash and marketable securities		12,101,885		20,048,872

Total	$	93,262,122	$	101,978,639

The accounting policies of the business segments are the same as those for the consolidated Company, except that certain corporate expenses which the Company does not believe are specifically attributable or allocable to any of the three business segments have been excluded from the segment operating income (loss).

12. New Accounting Pronouncements:

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities.” In general, a variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. A variable interest entity often holds financial assets, including loans or receivables, real estate or other property. Variable interest entities have been commonly referred to as special-purpose entities or off-balance sheet structures. This Interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The Company does not expect that this Interpretation will have a material impact on its financial position or results of operations.

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). This accounting standard establishes standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity. It requires that certain financial instruments that were previously classified as equity now be classified as a liability. This accounting standard is effective for financial instruments entered into or modified after May 31, 2003, and otherwise at the beginning of the first interim period beginning after June 15, 2003. The Company does not expect the adoption of SFAS No. 150 will have an impact on its financial position or results of operations.

AMERICAN SUPERCONDUCTOR CORPORATION

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

American Superconductor Corporation was founded in 1987. We are focused on developing, manufacturing and selling products using two core technologies: high temperature superconductor (“HTS”) wires and power electronic converters for electric power applications. We also assemble superconductor wires and power electronic converters into fully-integrated products, such as HTS ship propulsion motors and dynamic reactive compensation systems, which we sell or plan to sell to end users.

Critical Accounting Policies

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 experiences 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;

•

Long-term inventory and deferred revenue;

•

Allowance for doubtful accounts;

•

Long-lived assets;

•

Inventory accounting;

•

Deferred tax assets

•

Goodwill; and

•

Acquisition accounting.

Revenue recognition. For certain arrangements, such as contracts to perform research and development and prototype development contracts, we record revenues using the percentage of completion method, measured by the relationship of costs incurred to total estimated contract costs. We follow this method since reasonably dependable estimates of the revenue and costs

applicable to various stages of a contract can be made. Since many contracts extend over a long period of time, revisions in cost and funding estimates during the progress of work have the effect of adjusting earnings applicable to performance in prior periods in the current period. Recognized revenues and profit or loss are subject to revisions as the contract progresses to completion. Revisions in profit or loss estimates are charged to income in the period in which the facts that give rise to the revision become known.

We recognize revenue from product sales upon shipment, installation or acceptance, where applicable, provided persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and the collectibility is reasonably assured, or for some programs, on the percentage of completion method of accounting. When other significant obligations remain after products are delivered, revenue is recognized only after such obligations (including buyback provisions) are fulfilled.

Long-term inventory and deferred revenue. Long-term inventory of $3,250,000 represents SMES units that were delivered in fiscal 2001 to one of our customers, Wisconsin Public Service Corporation (“WPS”), for a total purchase price of $3,787,000, less $537,000 recorded as revenue in the quarter ended December 31, 2002. As the sale of these units is subject to certain return and buyback provisions which expire from 2002 to 2009, we are deferring recognition of the revenue related to the remaining $3,250,000 in sales until the applicable buyback provisions lapse. Long-term deferred revenue of $3,250,000 represents the $3,787,000 cash payment received from WPS related to this transaction, less $537,000 recorded as revenue in the third quarter of fiscal 2003. The buyback provisions, which are subject to a minimum 6-month written notice requirement, began to lapse in the quarter ended December 31, 2002, until which time WPS had the right to return all the units for the full purchase price of $3,787,000. On December 31 of each year after 2002, WPS has the right, subject to a minimum 6-month notice requirement, to sell the units back to us at a reduced price. Between January 1, 2003 and the next annual buyback date of December 31, 2003, the repurchase price for the units will be $3,250,000 and that price is further reduced by approximately 12% per year through December 31, 2009. We recorded $537,000 of revenue and an equal amount of cost of revenue in the quarter ended December 31, 2002, as the buyback price transitioned from $3,787,000 to $3,250,000. We also recorded a $537,000 reduction in long-term inventory and long-term deferred revenue.

Allowance for doubtful accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional provisions for bad debt allowances may be required.

Long-Lived Assets. We periodically evaluate our long-lived assets for potential impairment under Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” We perform these evaluations whenever events or circumstances suggest that the carrying amount of an asset or group of assets is not recoverable. 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 is used;

•

a significant decrease in the market value of an asset;

•

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; and

•

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

If we believe an indicator of potential impairment exists, we test to determine whether impairment recognition criteria in SFAS No. 144 have been met. To analyze a potential impairment, we project undiscounted future cash flows over the remaining life of the asset or the primary asset in the asset group. If these projected cash flows are less than the carrying amount, an impairment loss is recognized based on the fair value of the asset or asset group less any costs of disposition. Evaluating the impairment requires judgment by our management to estimate future operating results and cash flows. If different estimates were used, the amount and timing of asset impairments could be affected. We charge impairments of the long-lived assets to operations if our evaluations indicate that the carrying values of these assets are not recoverable.

In the fourth quarter of fiscal 2003 ended March 31, 2003, we recorded a $39,231,000 impairment charge to write down our first-generation (1G) asset group, primarily comprised of the Devens manufacturing facility and capital equipment, to an estimated fair value.

Inventory accounting. We write down inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of the inventory and the estimated realizable value based upon assumptions of future demand and market conditions. If actual market conditions are less favorable than those projected, additional inventory write-downs may be required.

Deferred tax assets. We have recorded a full valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and tax planning strategies in assessing the need for the valuation allowance, if management were to determine that we would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax asset would decrease income in the period such determination was made.

Goodwill. Goodwill represents the excess of cost over net assets of acquired businesses that are consolidated. Pursuant to SFAS No. 142 “Goodwill and Other Intangible Assets,” goodwill is not amortized. In lieu of amortization, we perform an impairment review of our goodwill at least annually or when events and changes in

circumstances indicate the need for such a detailed impairment loss analysis, as prescribed by SFAS 142. To date, we have determined that goodwill is not impaired, but we could in the future determine that goodwill is impaired, which would result in a charge to earnings.

Acquisition accounting. We account for our acquisitions under the purchase method of accounting pursuant to SFAS No. 141 “Business Combinations.” In June 2000, we acquired in a business combination substantially all of the assets of Integrated Electronics, LLC (“IE”), as well as IE’s employees and facility lease. The IE acquisition was accounted for under the purchase method of accounting. Goodwill of $1,329,282 represented the excess of the purchase price of $1,833,125 over the fair value of the acquired assets of $503,843 at June 1, 2000. Goodwill was $1,107,735 at June 30, 2003 and March 31, 2003.

Results of Operations

The Company has three reportable business segments—AMSC Wires, SuperMachines, and Power Electronic Systems.

Total revenues during the three months ended June 30, 2003 were $7,756,000, a 171% increase compared to the $2,860,000 of revenue recorded for the same period a year earlier.

The increase in consolidated revenues of $4,896,000 was mainly the result of an increase in prototype development contract revenues, primarily relating to work performed on the Navy 36.5 Megawatt (MW) motor program. Revenues in our SuperMachines business unit increased by $4,014,000 to $5,550,000 for the quarter ended June 30, 2003 from $1,536,000 for the quarter ended June 30, 2002. Approximately 88%, or $4,878,000, of this business unit’s first-quarter revenues related to the performance of design work on the 36.5 MW motor program, which began in March 2003. The remainder of SuperMachines’ revenue related to the completion of work on the 5 MW motor, which was delivered to the U.S. Navy in July 2003, and to work performed on the SuperVAR^™ synchronous condenser prototype being developed for the Tennessee Valley Authority. SuperMachines’ revenues in the prior-year quarter were exclusively related to the 5 MW motor program.

Revenues in our AMSC Wires business unit increased by $879,000 to $1,097,000 for the quarter ended June 30, 2003 from $218,000 for the same period of the prior year. The growth in revenues in AMSC Wires in the first quarter of fiscal 2004, compared to the prior-year first quarter, was attributable to two factors. Product sales increased by $654,000 to $741,000 in the quarter ended June 30, 2003 from $87,000 in the prior-year quarter, due to a higher level of 1G wire sales, our first delivery of second generation (2G) wire to a customer, and the beginning of work on a project to install an HTS power cable in the transmission grid of the Long Island Power Authority (LIPA). Contract revenues also grew by $225,000 to $356,000 from $131,000 due to a higher level of work performed on two Phase II Small Business Innovation Research (SBIR) grants with the Department of Energy and the National Institutes of Health, both focused on 2G wire development.

Revenues in the Power Electronic Systems business unit were $1,109,000 for the quarter ended June 30, 2003 compared to $1,106,000 for the same period of the prior year. An increase in product sales due to the delivery of one D-VAR^™ system was offset by a lower level of prototype

development contract revenues on our ongoing Power Electronic Building Blocks (PEBB) program with the Navy.

For the three months ended June 30, 2003, we recorded approximately $313,000 in funding under two government cost-sharing agreements with the U.S. Air Force and the Department of Commerce. For the three months ended June 30, 2002, we recorded approximately $103,000 of funding under the U.S. Air Force agreement. We anticipate that a portion of our funding in the future will continue to come from cost-sharing agreements as we continue 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.

Total costs and expenses for the quarter ended June 30, 2003 were $16,176,000 compared to $14,040,000 for the same period last year.

Costs of revenue—product sales and prototype development contracts increased by $4,042,000 to $8,273,000 for the three months ended June 30, 2003, compared to $4,231,000 for the same period of the prior year. This increase was directly related to the higher level of prototype development contract revenues with the U.S. Navy in the SuperMachines business unit. Also contributing to this increase was a $272,000 increase in costs (including building and equipment depreciation) related to the AMSC Wires business unit’s growing utilization of the Devens, Massachusetts manufacturing plant. Costs of revenue—contract revenue increased by $208,000 to $336,000 for the three months ended June 30, 2003, compared to $128,000 for the same period of the prior year. Costs of revenue—contract revenue increased proportionally with the higher level of contract revenue, particularly with regard to two Phase II SBIR grants with the Department of Energy and National Institute of Health.

Our research and development (“R&D”) expenditures are summarized as follows:

	Three Months Ended June 30,
	2003		2002
R&D expenses per Consolidated Statements of Operations	$	4,863,000	$	6,217,000
R&D expenditures classified as Costs of revenue		4,754,000		2,088,000
R&D expenditures offset by cost sharing funding		286,000		53,000

Pro forma R&D expenses	$	9,903,000	$	8,358,000

R&D expenses (exclusive of amounts classified as costs of revenue and amounts offset by cost sharing funding) decreased to $4,863,000 in the three months ended June 30, 2003 from $6,217,000 for the same period last year. This amount decreased in the first three months of fiscal year 2004 when compared to the same period of 2003 as a result of a higher percentage of the R&D costs being classified as costs of revenue due to the higher level of funded prototype development contract work in SuperMachines. Pro forma R&D expenses, which include amounts classified as costs of revenue and amounts offset by cost sharing funding, increased to $9,903,000 in the three months ended June 30, 2003 from $8,358,000 for the same period last year. The increase in pro forma R&D spending in the first quarter of fiscal 2004, compared to the prior-year quarter, was the result of a $1,920,000 increase in material, subcontractor, and temporary labor costs in the SuperMachines business unit. This increase was partially offset by reduced R&D spending in the AMSC Wires and Power Electronic Systems business units, primarily due to headcount reductions in those two business units over the last year. 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). Additionally, a portion of R&D expenses was offset by cost sharing funding.

Our selling, general and administrative (“SG&A”) expenditures are summarized as follows::

	Three Months Ended June 30,
	2003		2002
SG&A expenses per Consolidated Statements of Operations	$	2,705,000	$	3,464,000
SG&A expenditures classified as Costs of revenue		1,524,000		309,000
SG&A expenditures offset by cost sharing funding		27,000		50,000

Pro forma SG&A expenses	$	4,256,000	$	3,823,000

SG&A expenses (exclusive of amounts classified as costs of revenue and amounts offset by cost sharing funding) decreased to $2,705,000 in the three months ended June 30, 2003 from $3,464,000 for the same period last year. This amount decreased in the first three months of fiscal year 2004 when compared to the same period of 2003 as a result of a higher percentage of the SG&A costs being classified as costs of revenue due to the higher level of funded prototype development contract work in SuperMachines. Pro forma SG&A expenses, which include amounts classified as costs of revenue and amounts offset by cost sharing funding, increased to $4,256,000 for the three months ended June 30, 2003, compared to $3,823,000 for the same period last year. This increase was primarily the result of a higher percentage of the rent and occupancy costs associated with our Westborough, MA headquarters now being classified as general and administrative expense rather than in costs of revenue — product sales and prototype development contracts and research and development expense. We have completed the relocation of our manufacturing workforce to Devens from Westborough, which is now partially unoccupied. A portion of the SG&A expenditures related to externally funded development contracts has been classified as costs of revenue (rather than as SG&A expenses). Additionally, a portion of SG&A expenses was offset by cost sharing funding.

We present pro forma R&D and pro forma SG&A expenses, which are non-GAAP financial measures, because we believe this presentation provides useful information on our aggregate R&D and SG&A spending.

Non-operating expenses/Interest income

Interest income decreased to $35,000 in the three months ended June 30, 2003 from $371,000 in the same period of the prior year. This decrease in interest income reflects the lower cash balances available for investment as a result of cash being used to fund our operations and to purchase property, plant and equipment, as well as lower interest rates available on our investments. Other income (expense), net of $29,000 in the three months ended June 30, 2003 consisted primarily of gains from the sale of certain pieces of surplus equipment. Other income (expense), net of ($20,000) in the three months ended June 30, 2002 reflected taxes on investment income.

We expect to continue to incur operating losses until at least the end of the fiscal year ending March 31, 2005 as we continue to devote significant financial resources to our research and development activities and commercialization efforts.

Please refer to the “Future Operating Results” section below for a discussion of certain factors that may affect our future results of operations and financial condition.

Liquidity and Capital Resources

At June 30, 2003, we had cash, cash equivalents and long-term marketable securities of $12,101,000 compared to $20,049,000 at March 31, 2003. The principal uses of cash during the three months ended June 30, 2003 were $6,964,000 for the funding of our operations and $890,000 for the acquisition of equipment, primarily for our 2G wire process equipment.

We have potential funding commitments (excluding amounts included in accounts receivable) of approximately $87,440,000 to be received after June 30, 2003 from government and commercial customers, compared to $78,336,000 at March 31, 2003 and $10,891,000 at June 30, 2002. However, these current funding commitments, including $78,816,000 on U.S. government contracts, are subject to certain standard cancellation provisions. Additionally, several of our government contracts are being funded incrementally, and as such, are subject to the future authorization and appropriation of government funding on an annual basis. We have a history of successful performance under incrementally-funded contracts with the U. S. government.

Included in our current potential funding commitment amount is $60,548,000 relating to the Navy 36.5 MW motor contract, which represents the total base program value (excluding certain potential performance-based incentive fees) of $66,611,000, less the $6,063,000 of revenue recognized for the program through June 30, 2003.

Of the current commitment amount of $87,440,000 as of June 30, 2003, approximately 43% is billable to and potentially collectable from our customers within the next 12 months.

The possibility exists that we may pursue acquisition and joint venture opportunities in the future that may affect liquidity and capital resource requirements.

To date, inflation and foreign exchange have not had a material impact on our financial results.

We have generated operating losses since our inception in 1987 and expect to continue incurring losses until at least the end of fiscal 2005. Operating losses for the fiscal years ended March 31, 2003, 2002 and 2001 have contributed to net cash used by operating activities of $39,604,957, $26,456,387 and $26,424,059, respectively, for these periods. For the three months ended June 30, 2003, net cash used by operating activities was $6,964,107. Our average annual use of cash over this period is greater than our balance of cash, cash equivalents and long-term marketable securities at June 30, 2003 of $12,101,885.

In July 2003, we implemented approximately $5,000,000 of reductions in our operating and capital budgets for fiscal 2004, primarily through the elimination of 34 positions, including a reduction in force of 23 employees, or 8% of our workforce. Cuts were also made in controllable expenses and capital equipment purchase plans.

The cash savings from the aforementioned cost reduction actions combined with an increasing level of revenues for the remainder of the fiscal year are expected to lower our quarterly cash usage beginning in the second quarter of fiscal 2004. The revenue increase is supported by our receipt in March 2003 of the three-year 36.5 MW motor contract from the Office of Naval Research as well as our selection in April 2003 by the Department of Energy (DOE) as the prime contractor for an HTS cable project with LIPA.

To supplement our anticipated cash needs for operations as well as our investment in the second generation wire development program, we have been examining a number of options for raising additional capital. Based on these efforts over the last year, we signed in June 2003 non-binding letters of intent with three groups of investors to provide up to $50,000,000 in financing. These letters of intent are subject to satisfactory due diligence by these investors, the completion of formal legal documentation and approval of the financings by our shareholders. The $50,000,000 financing is expected to be comprised of a five-year term loan of up to $30,000,000 to be provided by a corporate finance company and several institutional investors with these amounts secured by our existing assets and additional assets projected to be acquired, excluding accounts receivable and inventory. In addition, three institutional investors have also signed a non-binding letter of intent to provide $10,000,000 in the form of subordinated notes that are convertible into our common stock. We have also signed a non-binding letter of intent with a

commercial bank to provide up to $10,000,000 in the form of a working capital credit facility that is to be secured by our accounts receivable and inventory.

Each of the investor groups will also be issued warrants to acquire shares of our common stock. The conversion feature of the subordinated convertible notes combined with the warrants will trigger the NASDAQ requirement that our shareholders approve this $50,000,000 financing transaction prior to its closing. Consequently, should we be able to close this transaction, the earliest this would occur would be the end of September 2003. We expect that all of the contemplated financings will be required to close simultaneously. While we believe we will be able to complete the $50,000,000 financing transaction, we can make no assurance that such funds will be available, or available under terms acceptable to us, or that our shareholders will approve this financing transaction. In the event that this transaction cannot be completed, we are confident that we could obtain conventional mortgage financing on our Devens, MA manufacturing facility that, combined with our available cash, cash equivalents and long-term marketable securities, would be sufficient to satisfy our anticipated cash requirements for at least the next 12 months.

New Accounting Pronouncements

FUTURE OPERATING RESULTS

Various statements included herein, as well as other statements made from time to time by our representatives, which relate to future matters (including but not limited to statements concerning our future commercial success) constitute forward looking statements and are made under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. There are a number of important factors which could cause our actual results of operations and financial condition in the future to vary from that indicated in such forward looking statements. Factors that may cause such differences include, without limitation, the risks, uncertainties and other information set forth below.

We have a history of operating losses, and we expect to continue to incur losses in the future.

We have been principally engaged in research and development activities. We have incurred net losses in each year since our inception. Our net loss for the first three months of fiscal 2004 was $8,356,000 and for fiscal 2003, fiscal 2002, and fiscal 2001 was $87,633,000, $56,985,000, and $21,676,000, respectively. Our accumulated deficit as of June 30, 2003 was $281,466,000.

We expect to continue to incur operating losses until at least the end of fiscal 2005, and there can be no assurance that we will ever achieve profitability.

We believe, based upon our current business plan, that our existing capital resources will be sufficient to fund our operations until the end of fiscal 2004. However, recognizing that we may need additional funds sooner than anticipated to fund current operations and to accelerate our investment in our second generation wire development program, we are currently pursuing financing transactions to raise additional capital to strengthen our cash position. There can be no assurance that such funds will be available, or available under terms acceptable to us. Please see the discussion under “Liquidity and Capital Resources” above.

There are a number of technological challenges that must be successfully addressed before our superconductor products can gain widespread commercial acceptance.

Many of our products are in the early stages of commercialization and testing, while others are still under development. We do not believe any company has yet successfully developed and commercialized significant quantities of HTS wire or wire products. There are a number of technological challenges that we must successfully address to complete our development and commercialization efforts. We also believe that several years of further development in the cable and motor industries will be necessary before a substantial number of additional commercial applications for our HTS wire in these industries can be developed and proven. We may also need to improve the performance and/or reduce the cost of our HTS wire to expand the number of commercial applications for it. We may be unable to meet such technological challenges. Delays in development, as a result of technological challenges or other factors, may result in the introduction or commercial acceptance of our products later than anticipated.

The commercial uses of superconductor products are very limited today, and a widespread commercial market for our products may not develop.

To date, there has been no widespread commercial use of HTS products. Commercial acceptance of low temperature superconductor (LTS) products, other than for medical magnetic resonance imaging and superconductor magnetic energy storage products, has been significantly limited by the cooling requirements of LTS materials. Even if the technological hurdles currently limiting commercial uses of HTS and LTS products are overcome, it is uncertain whether a robust commercial market for those new and unproven products will ever develop. It is possible that the market demands we currently anticipate for our HTS and LTS products will not develop and that superconductor products will never achieve widespread commercial acceptance.

We have limited experience manufacturing our HTS products in commercial quantities.

To be financially successful, we will have to manufacture our products in commercial quantities at acceptable costs while also preserving the quality levels we have achieved in manufacturing these products in limited quantities. This presents a number of technological and engineering challenges for us. We cannot make assurances that we will be successful in developing product designs and manufacturing processes that permit us to manufacture our HTS products in commercial quantities at commercially acceptable costs while preserving quality. In addition, we may incur significant unforeseen expenses in our product design and manufacturing efforts.

We have limited experience in marketing and selling our products.

Our management team has limited experience directing our commercialization efforts, which are essential to our future success. To date, we have only limited experience marketing and selling our products, and there are very few people anywhere who have significant experience marketing or selling superconductor products. Once our products are ready for commercial use, we will have to develop a marketing and sales organization that will effectively demonstrate the advantages of our products over both more traditional products and competing superconductor products or other technologies. We may not be successful in our efforts to market this new and unfamiliar 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 HTS wire, are included as a component of a larger product, such as a motor. For example, we have a marketing and sales alliance with GE Industrial Systems giving GE the exclusive right to offer our Distributed-SMES (D-SMES) and D-VAR^™ product lines in the United States and South America to utilities and the right to sell industrial Power Quality-Industrial Voltage Restorers (PQ-IVR^™) to one of GE’s global industrial accounts. We also have a distribution agreement with Bridex Technologies Pte, Ltd., a power system solution integrator and technology company in

Singapore, whereby Bridex markets and sells our integrated power electronic systems within Asia Pacific markets. By entering into marketing and sales alliances, the financial benefits to us of commercializing our products are dependent on the efforts of others. We may not be able to enter into marketing or distribution arrangements with third parties on financially acceptable terms, and third parties may not be successful in selling our products or applications incorporating our products.

Our products face intense competition both from superconductor products developed by others and from traditional, non-superconductor products and alternative technologies.

As we begin to market and sell our superconductor products, we will face intense competition both from competitors in the superconductor field and from vendors of traditional products and new technologies. There are many companies in the United States, Europe, Japan and China engaged in the development of HTS products, including Sumitomo Electric Industries, Intermagnetics General, European Advanced Superconductors GmbH, Fujikura, Furukawa Electric, and Innova Superconductor Technology. The superconductor industry is characterized by rapidly changing and advancing technology. Our future success will depend in large part upon our ability to keep pace with advancing HTS and LTS technology and developing industry standards. Our SMES products and integrated power electronic products, such as D-VAR^™, compete with a variety of other products such as dynamic voltage restorers (“DVRs”), static VAR compensators (“SVCs”), static compensators (“STATCOMS”), flywheels, power electronic converters and battery-based power supply systems. Competition for our PowerModules^™ includes products from Ecostar, Inverpower, SatCon, Semikron and Trace. The HTS motor and generator products that we are developing face competition from copper wire-based motors and generators, and from permanent magnet motors that are being developed. Research efforts and technological advances made by others in the superconductor field or in other areas with applications to the power quality and reliability markets may render our development efforts obsolete. Many of our competitors have substantially greater financial resources, research and development, manufacturing and marketing capabilities than we have. In addition, as the HTS wire, HTS electric motors and generators, and power electronic systems markets develop, other large industrial companies may enter those fields and compete with us.

Third parties have or may acquire patents that cover the high temperature superconductor materials we use or may use in the future to manufacture our products.

We expect that some or all of the HTS materials and technologies we use in designing and manufacturing our products are or will become covered by patents issued to other parties, including our competitors. If that is the case, we will need either to acquire licenses to these patents or to successfully contest the validity of these patents. 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 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.

There are numerous patents issued in the field of superconductor materials and our patents may not provide meaningful protection for our technology.

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 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.

Our success is dependent upon attracting and retaining qualified personnel.

Our success will depend in large part upon our ability to attract and retain highly qualified research and development, management, manufacturing, marketing and sales personnel. Hiring those persons may be especially difficult due to the specialized nature of our business.

We are particularly dependent upon the services of Dr. Gregory J. Yurek, our co-founder and our Chairman of the Board, President and Chief Executive Officer, and Dr. Alexis P. Malozemoff, our Chief Technical Officer. The loss of the services of either of those individuals could significantly damage our business and prospects.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk through financial instruments, such as investments in marketable securities, is not material.

Item 4.

Controls and Procedures

The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2003. In designing and evaluating the Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the Company’s chief executive officer and chief financial officer concluded that, as of June 30, 2003, the Company’s disclosure controls and procedures were (1) designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the 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.

No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

Not Applicable

Item 2.

Changes in Securities and Use of Proceeds

Not Applicable

Item 3.

Defaults Upon Senior Securities

Not Applicable

Item 4.

Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5.

Other Information

Not Applicable

Item 6.

Exhibits and Reports on Form 8-K

Exhibits

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated herein by this reference.

Reports on Form 8-K

On May 14, 2003, we furnished a Current Report on Form 8-K, dated May 14, 2003, to report under Item 9 the information required by Item 12 with respect to financial results for the fiscal year ended March 31, 2003.

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 14, 2003						/s/ GREGORY J. YUREK
Date						Gregory J. Yurek Chairman of the Board, President and Chief Executive Officer

August 14, 2003						/s/ KEVIN M. BISSON
Date						Kevin M. Bisson Senior Vice President and Chief Financial Officer (Principal Financial Officer)

August 14, 2003						/s/ THOMAS M. ROSA
Date						Thomas M. Rosa Vice President of Finance and Accounting (Principal Accounting Officer)

Exhibit Index

Exhibit No.		Description

†10.1		License Agreement, dated as of June 10, 2003, between the Registrant and Sumitomo Electric Industries, Ltd.

†10.2		Agreement, dated as of February 28, 2003, between the Registrant and the U.S. Office of Naval Research

†10.3		Fifth Amendment dated as of April 18, 2003 between the Registrant and the Massachusetts Institute of Technology (“M.I.T.”) amending the License Agreement dated as of July 6, 1987 between the Registrant and M.I.T.

31.1		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.

31.2		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.

32.1		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.

32.2		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.

†

Confidential treatment has been requested with respect to certain portions of this exhibit, which portions have been filed separately with the Securities and Exchange Commission.

LICENSE AGREEMENT

Exhibit No. 10.1

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

LICENSE AGREEMENT

This License Agreement (“Agreement”) is made June 10, 2003 between Sumitomo Electric Industries, Ltd. (“SEI”), a Japanese corporation having its principal place of business at 5-33 Kitahama, 4-chome, Chuo-ku, Osaka Japan, and American Superconductor Corporation (“AMSC”), a Delaware corporation having its principal place of business at Two Technology Drive, Westborough, MA 01581-1727.

WITNESSETH:

WHEREAS, SEI has been engaged in the development of Bi Based Superconductor products and has acquired a substantial number of patents in respect thereof;

WHEREAS, AMSC desires to obtain, and SEI is willing to grant a license with respect to AMSC making, using, or selling Products hereinafter defined under certain such patents owned by SEI in accordance with the terms and conditions herein;

WHEREAS, AMSC has been engaged in the development of Bi Based Superconductor products and has acquired a substantial number of patents in respect thereof;

WHEREAS, SEI desires to obtain, and AMSC is willing to grant a license with respect to SEI making, using, or selling Products hereinafter defined under certain such patents owned by AMSC in accordance with the terms and conditions herein; and

WHEREAS, SEI and AMSC desire to avoid patent related disputes and seek opportunities to work on cable opportunities in the United States and in Europe in good faith;

NOW, THEREFORE, the Parties agree as follows:

ARTICLE 1

In this Agreement, including Exhibits, unless the context otherwise requires:

words denoting the singular shall include the plural and vice versa;

words denoting persons shall include corporations and vice versa;

words denoting any gender shall include all genders; and

headings are for convenience only and shall not affect interpretation.

ARTICLE 2 (DEFINITIONS)

In this Agreement, the following words and phrases shall have the following meanings, unless the context clearly requires otherwise:

2.1

Assignment Date

“Assignment Date” shall mean the date when AMSC assigns this Agreement to a third party as described in Article 16.

2.2

Competitor

“Competitor” means a manufacturer of electric power transmission and/or distribution cables.

2.3

Consideration Territory

“Consideration Territory” is the United States of America, Canada, Germany, United Kingdom, France, Italy, Australia and New Zealand.

2.4

Effective Date

“Effective Date” shall mean October 1, 2002.

2.5

Existing Patents

“Existing Patents” shall mean all the Patents listed in Exhibit A and their continuations, continuations-in-part, and divisionals.

2.6

Fair Market Value

“Fair Market Value” shall mean, with respect to any Product or Wire Product sold, leased or put into use, the selling price of the Product or Wire Product, or, in the case of a Product or Wire Product embedded as a component of a larger product, the equivalent selling price which a seller would realize from an unaffiliated buyer in an arm’s length sale of the most nearly identical Product or Wire Product in the same quantity and at the same time and place as such sale, lease or putting into use.

In determining selling price, the following may be excluded:

(a)

packaging costs;

(b)

costs of insurance and transportation;

(c)

import, export, excise, sales and value-added taxes, and customs duties;

(d)

royalties owed to third parties.

2.7

Future Patents

“Future Patents” shall mean all existing and future Patents:

(a)

which directly or indirectly claim priority from a date on or before the Last Priority Date,

(b)

which are owned by a Party or Affiliate or under which a Party has a right to grant a license or sublicense without the need to receive the approval of a third party, and

(c)

which are not included in Exhibit A or Exhibit B.

For avoidance of doubt, Future Patents include patents filed by third parties but later owned by a Party, or for which a Party was later granted a license with the right to grant a royalty-free sublicense to others, including at least the other Party herein.

Any Patents filed by third parties for which a Party is later granted a license with the right to grant a royalty-bearing sublicense to others, including at least the other Party herein shall be excluded from the Future Patents. However, each Party hereto grants to the other Party hereto an option to sublicense any patent directed to the design and/or manufacture of wires, coils, and/or current leads per se with respect to which it may obtain a license with the right to grant royalty-bearing sublicenses, at any time subsequent to the execution of this Agreement. The terms and conditions of such royalty-bearing sublicense later granted by one Party to the other Party hereto shall be subject to the terms of the patent license to the one Party but otherwise consistent with the terms and conditions of the Future Patent license granted hereunder, and the royalty terms and conditions shall be no less favorable than the sublicensing royalty terms and conditions of the patent license to the one Party.

2.8

Have Made Right

“Have Made Right” shall mean the right, under a license granted to a Party under this Agreement, to have a third party make for the Party (i) portions of Wire Products that have in total a Fair Market Value less than [**]% of that of the Wire Product of which such portions are to become a part and (ii) Products or portions of Products, other than Wire Products, if the Wire Products used in such Products are a Party’s Wire Products.

2.9

Last Priority Date

“Last Priority Date” is December 31, 2007.

2.10

Licensed Equipment

“Licensed Equipment” shall mean equipment or products sold by a Manufacturing Customer which contain Products purchased directly or indirectly from AMSC or its Affiliates and for which Manufacturing Customer’s sales price, from which packaging, insurance, transportation, and duties and taxes are subtracted, of such equipment or product is at least [**] times higher than the Fair Market Value of the Products contained therein. In the case AMSC’s existing SuperMachines Business Unit (“SuperMachines BU”) or SuperMachines Subsidiary (defined below) intend to export its products to Japan, Licensed Equipment shall also mean Rotating Machinery Products exported by SuperMachines BU or SuperMachines Subsidiary to Japan, provided that the Fair Market Value of such Rotating Machinery Products is at least [**] times higher than the Fair Market Value of the Wire Products contained in such Rotating Machinery Products. Licensed Equipment excludes Wire Products and electric power cables per se.

2.11

Manufacturing Customer

“Manufacturing Customer” shall mean a non-Japanese manufacturer outside Japan, including any Future AMSC Subsidiary but excluding AMSC itself, AMSC’s Subsidiaries and Affiliates, except for the Future AMSC Subsidiaries, who directly or indirectly purchase Products from AMSC or its Affiliates and use such Products to produce Licensed Equipment. Notwithstanding the foregoing, SuperMachines BU and SuperMachines Subsidiary may be considered as a Manufacturing Customer with respect

to and solely to the extent that Rotating Machinery Products shipped by it to Japan constitute Licensed Equipment pursuant to Article 2.10.

2.12

Party and Related Entities

The word “Party” shall mean SEI or AMSC, as the case may be.

“Affiliate” of a Party shall mean (i) any Subsidiary of such Party, or (ii) the Parent Company of such Party.

“Subsidiary” or “Subsidiaries” of a Party shall mean a corporation, limited liability company, partnership or other legal entity (a) fifty percent (50%) or more of whose shares or other securities entitled to vote for election of directors (or other managing authority) is now or hereafter controlled by such Party either directly or indirectly; or (b) in cases in which the entity does not have outstanding shares or securities, fifty percent (50%) or more of whose ownership interest representing the right to manage such entity is now or hereafter owned and controlled by such Party either directly or indirectly; provided that any such corporation or other legal entity shall be deemed to be a “Subsidiary” of such Party only as long as such control or ownership exists.

“Parent Company” of a Party shall mean a corporation or other legal entity of which such Party is a Subsidiary.

Notwithstanding the foregoing, [**] corporation having its principal place of business at [**] shall be excluded from being a Subsidiary of SEI.

Irrespective of the above limitations on the meaning of Subsidiary, a Subsidiary of AMSC shall include any separate legal entity incorporating substantially all of the assets of AMSC’s SuperMachines BU (such separate legal entity shall be referred to herein as the “SuperMachines Subsidiary”), provided that the sublicense or waiver granted to it under Article 3 shall be limited to the field of rotating machinery and provided that such entity is not a Competitor of SEI and is not majority owned by a Competitor of SEI and provided further that AMSC shall cause the SuperMachines Subsidiary, to the extent it can do so, not to sue SEI in any forum for infringement by Products of any of the SuperMachines Subsidiary’s Existing Patents or Future Patents. If the SuperMachines Subsidiary sues SEI in any forum for infringement by Products of any of the SuperMachines Subsidiary’s Existing Patents or Future Patents, any sublicense and waiver of suit granted to the SuperMachines Subsidiary, pursuant to Articles 3.1, 3.2 or 3.5 of this Agreement, shall cease immediately.

“Future AMSC Subsidiary” shall mean an AMSC Subsidiary who becomes an AMSC Subsidiary during the term of this Agreement by means of the acquisition of the stock or ownership interest of such Manufacturing Customer and who was a Manufacturing Customer prior to such acquisition.

2.13

Patents

“Patents” or “Patent” shall mean any and all patents worldwide issuing from patent applications directly or indirectly claiming priority to a date before the Last Priority Date, and further including design patents and utility models directly or indirectly claiming priority to a date before the last Priority Date.

2.14

Pirelli

“Pirelli” shall mean Pirelli S.p.A., an Italian corporation having its principal place of business at Viale Sarca, 222-20126 Milano Italy.

2.15

License Fee for Pirelli

“License Fee for Pirelli” shall mean [**] US dollars (US$[**]) which is paid by Pirelli to SEI in consideration of the license to Pirelli as described in Article 3.6.

2.16

Products and Wire Products

“Products” shall mean Bi-based superconducting wires, and magnets, coils and current leads including Bi-based superconducting wires. For clarity, Products do not include other products which incorporate Bi-based wires, magnets, coils or current leads as a component of a larger system.

“Wire Products” shall mean Bi-based superconducting wires. For clarity, Wire Products exclude magnets, coils, current leads and other products, but include the Wire Products contained in any magnet, coil, current lead or other product.

“Rotating Machinery Products” shall mean superconducting rotating machines, including but not limited to motors, generators and dynamic synchronous condensers. Rotating Machinery Products shall also mean superconducting coils per se, intended for use in rotating machinery applications.

2.17

Sub-Contractor

“Sub-Contractor” shall mean a subcontractor of a Manufacturing Customer.

2.18

Then Current Future Patents

“Then Current Future Patents” shall mean only Future Patents which directly or indirectly claim priority from a date on or before the Assignment Date.

2.19

Territory

“SEI’s Territory” shall mean worldwide.

“AMSC’s Territory” shall mean worldwide except Japan.

“Territory” shall mean “SEI’s Territory” or “AMSC’s Territory” as the case may be.

ARTICLE 3 (GRANT FROM SEI TO AMSC)

3.1

SEI hereby grants to AMSC a royalty-bearing license under the Existing Patents of SEI to make, use, sell and offer to sell Products and Products contained in products in AMSC’s Territory, with the right of AMSC to grant sub-licenses under that license only to its Subsidiaries. AMSC shall write notes in the terms and conditions of sale of the Products “This product is not licensed for sale, or lease in Japan,” and notify its customers that the Products may not be exported to Japan except in the form of Licensed Equipment. A Have Made Right for Products under the Existing Patents of SEI is also granted to AMSC.

3.2

SEI hereby grants to AMSC a worldwide, non-exclusive, royalty-free license under the Future Patents of SEI to make, use, sell and offer to sell Products and Products contained in products, with the right of AMSC to grant sub-licenses under that license only to its

Subsidiaries. A Have Made Right for Products under the Future Patents of SEI is also granted to AMSC. For the avoidance of doubt, the license to make, use, sell and offer to sell Products contained in products is limited to the Products themselves and does not include a license to a combination of the Products with the products in which they are contained.

3.3

Any sub-license granted by AMSC pursuant to this Article will become effective only after notification to SEI of the sublicense, providing in that notification the name of the sublicensee and information to establish that it is a Subsidiary of AMSC.

3.4

SEI will not sue in any forum a Manufacturing Customer, or its direct or indirect customers, for infringement by Products under Patents listed in Exhibit B, Existing Patents, or Future Patents of SEI, with respect to Licensed Equipment sold by a Manufacturing Customer worldwide including Japan. In addition to the foregoing, SEI will not sue in Japan a Manufacturing Customer who brings Products sold by AMSC or its Affiliates outside of Japan into Japan to have a Sub-Contractor in Japan assemble Licensed Equipment, provided that the Licensed Equipment sold in Japan is sold by such Manufacturing Customer under such Manufacturing Customer’s name. For avoidance of doubt, SEI may sue a Manufacturing Customer or Sub-Contractor for infringement by products for a reason other than that such products include Products.

3.5

During the period beginning with the Effective Date and ending with the expiration of all the Existing Patents and Future Patents of SEI, SEI will not sue AMSC or its Affiliates in any forum for infringement by Products of any of its Existing Patents, Future Patents or co-owned Patents, whether covered by grants hereunder or not, for making, using, selling, and offering to sell Products or equipment containing Products in AMSC’s Territory except to the extent that SEI has a now existing obligation to cooperate with a co-owner or licensor of any such patents and such co-owner or licensor requires SEI to sue AMSC or to assist such co-owner or licensor to exercise its patent rights against AMSC. Exhibit C lists the co-owned Existing Patents in respect of which SEI has such obligation. Further SEI shall notify from time to time AMSC of any co-owned Future Patents in respect of which SEI will have such obligation. The agreement not to sue under this paragraph shall extend to third parties to the extent that the activities of such third parties are exercising a Have Made Right for AMSC or its Affiliates. For the avoidance of doubt, SEI may sue AMSC or its Affiliates for infringement by equipment for a reason other than that such equipment includes Products.

3.6

SEI hereby agrees to grant to Pirelli a Patent license as set forth in Exhibit D, which shall be executed by SEI and Pirelli prior to or on the same day of this Agreement and effective as of the Effective Date; provided any such grant to Pirelli will not become exercisable until a License Fee for Pirelli is paid by Pirelli to SEI.

3.7

SEI shall cooperate with AMSC in good faith to register the non-exclusive license of any of the Patents granted herein in any country, provided that AMSC bears the cost of such registration.

ARTICLE 4 (GRANT FROM AMSC TO SEI)

4.1

AMSC hereby grants to SEI a royalty-bearing license under the Existing Patents of AMSC to make, use, sell and offer to sell Products and Products contained in products in

SEI’s Territory, with the right of SEI to grant sub-licenses under that license only to its Subsidiaries. A Have Made Right for Products under the Existing Patents of AMSC is also granted to SEI.

4.2

AMSC hereby grants to SEI a worldwide, non-exclusive, royalty-free license under the Future Patents of AMSC to make, use, sell and offer to sell Products and Products contained in products, with the right of SO to grant sub-licenses under that license only to its Subsidiaries. A Have Made Right for Products under the Future Patents of AMSC is also granted to SEI. For the avoidance of doubt, the license to make, use, sell and offer to sell Products contained in products is limited to the Products themselves and does not include a license to a combination of the Products with the products in which they are contained.

4.3

Any sub-license granted by SEI pursuant to this Article will become effective only after notification to AMSC of the sublicense, providing in such notification the name of the sublicensee and information to establish that it is a Subsidiary of SEI.

4.4

During the period beginning with the Effective Date and ending with the expiration of all the Existing Patents and Future Patents of AMSC, AMSC will not sue SEI or its Affiliates in any forum for the infringement by Products of any of its Existing Patents, Future Patents or co-owned Patents, whether covered by grants hereunder or not, for making, using, selling and offering to sell Products or equipment containing Products in SEI’s Territory except to the extent that AMSC has a now existing obligation to cooperate with a co-owner or licensor of any such patent and such co-owner or licensor requires AMSC to sue SEI or to assist such co-owner or licensor to exercise its patent rights against SEI. Exhibit C lists the co-owned Existing Patents in respect of which AMSC has such obligation. Further AMSC shall notify from time to time SO of any co-owned Future Patents in respect of which AMSC will have such obligation. The agreement not to sue under this paragraph shall extend to third parties to the extent that the activities of such third parties are exercising a Have Made Right for SO or its Affiliates. For the avoidance of doubt, AMSC may sue SEI or its Affiliates for infringement by equipment for a reason other than that such equipment includes Products.

4.5

AMSC shall cooperate with SEI in good faith to register the non-exclusive license of any of the Patents granted herein by AMSC in any country, provided that SEI bears the cost of such registration.

4.6

Certain of AMSC’s Existing Patents are Patents which it exclusively licenses from the Massachusetts Institute of Technology (MIT) pursuant to an AMSC and MIT License Agreement effective as of July 6, 1987 and attached hereto as Exhibit E. The exclusivity period extends until the expiration of the last to expire of the MIT Patents listed in Exhibit A. AMSC has the right to sublicense such Patents to SEI provided SEI agrees to the sublicensing obligations AMSC has to MIT under the AMSC and MIT License Agreement. Therefore, SEI agrees that in order for the sublicense to become and remain effective it agrees to all of the terms and conditions of the AMSC and MIT License Agreement applicable to it as if it were a party to that Agreement. Notwithstanding the above, a) AMSC agrees that it will pay to MIT any royalties or other amounts due to MIT as a result of the sublicense granted to SEI, and SEI has no obligation to pay these

royalties, and b) reporting requirements shall be those specified in the present Agreement between SEI and AMSC.

ARTICLE 5 (TERM OF AGREEMENT)

This Agreement shall become effective on the Effective Date, and, unless sooner terminated as provided in this Agreement, shall be in full force until all of the Existing Patents and Future Patents of both Parties expire.

ARTICLE 6 (SECRECY)

6.1

Nothing in this Agreement shall be construed as conferring upon either Party or its Subsidiaries any right to include in advertising, packaging or other commercial activities related to Products, any reference to the other Party (or any of its Subsidiaries), its trade names, trademarks or service marks in a manner which would be likely to cause confusion or to indicate that such Products are in any way endorsed or certified by the other Party hereto or its Subsidiaries.

6.2

The Parties hereto shall not disclose the contents of this Agreement to any third party, except as required by law, government regulation or court order, or as required to meet requirements of AMSC’s exclusive license agreements with MIT and Industrial Research Limited/Superlink and AMSC’s agreements with Pirelli. In addition, AMSC and its Affiliates may disclose the contents of this Agreement to their distributors and Manufacturing Customers, but only to the extent required to convey to distributors and Manufacturing Customers their rights and obligations as set forth in Articles 2.10, 2.11, 3.1 and 3.4, provided that such distributors and Manufacturing Customers agree in writing to be bound by confidential obligations and shall not disclose the contents of this Agreement to any third parties except for SEI or AMSC and their Affiliates, and in the case of distributors to their manufacturing customers under written confidentiality agreements.

ARTICLE 7 (CONSIDERATION)

7.1

In consideration of the license under Existing Patents of SEI granted under Article 3 herein to AMSC, AMSC shall pay to SEI an amount equal to [**] percent of the Fair Market Value of Wire Products, and of Wire Products contained in Products, made, sold, or leased by AMSC, and AMSC’s sublicensees under Article 3.1 or 3.2, in the Consideration Territory. Only one royalty shall be due with respect to any given Wire Product or Wire Product contained in a Product, irrespective of the number of different countries in the Consideration Territory where such Wire Product or Product is made, sold or leased, and irrespective of the value of the product of which the Product may be a part. When all of the Existing Patents expire in all of the countries of the Consideration Territory where a given Product is made, sold, or leased, then no payment set forth above for that Product will be required, but the payment obligation in other countries in the Consideration Territory where unexpired Existing Patents exist shall remain for Products made, sold, or leased in those other countries. No payment obligation will be required on any Product outside the Consideration Territory. The payments due hereunder for Products made, sold, or leased during the period from January 1 to June 30 of any year

shall be made by September 1 of that year, and the payments for Products made, sold, or leased during the period from July 1 to December 31 of any year shall be made by March 1 of the next year. At the time of each payment AMSC shall furnish SEI with a detailed report setting forth the basis for the payment.

7.2

In consideration of the license under Existing Patents of AMSC granted under Article 3 herein to SEI, SEI shall pay to AMSC an amount equal to [**] percent of the Fair Market Value of Wire Product, and Wire Products contained in Products, made, sold or leased by SEI and SEI’s sublicensees under Article 4.1 or 4.2 in the Consideration Territory. Only one royalty shall be due with respect to any given Wire Product or Wire Product contained in a Product, irrespective of the number of different countries in the Consideration Territory where such Wire Product or Product is made, sold, or leased, and irrespective of the value of the product of which the Product may be a part. When all of the Existing Patents expire in all of the countries of the Consideration Territory where a given Product is made, sold, or leased, then no payment set forth above for that Product will be required, but the payment obligation in other countries in the Consideration Territory where unexpired Existing Patents exist shall remain for other Products made, sold, or leased in those other countries. No payment obligation will be required on any Product outside the Consideration Territory. The payments due hereunder for Wire Products made, sold, or leased during the period from January 1 to June 30 of any year shall be made by September 1 of that year, and the payments for Products made, sold, or leased during the period from July 1 to December 31 of any year shall be made by March 1 of the next year. At the time of each payment SEI shall furnish AMSC with a detailed report setting forth the basis for the payment.

7.3

In consideration of the license under the Existing and Future Patents of SEI granted to AMSC under Article 3, AMSC shall pay to SEI an amount of [**] US dollars (US$[**]) on or before ten (10) business days after the last signature date of this Agreement (the “Signature Date”). Further, on or before July 11, 2003, AMSC shall pay to SEI an additional [**] US dollars (US$[**]). Also, on or before ten (10) business days after Signature Date, each Party shall pay to the other Party all royalties due, if any, pursuant to Articles 7.1 and 7.2 from the Effective date through the Signature Date. AMSC shall pay SEI an additional amount of [**] US dollars (US$[**]) by the later of April 10, 2004 or within ten (10) business days after an Agreement between AMSC and SEI sublicensing to AMSC Bi-based superconductor patents which includes the patents [**] is signed by both Parties (“The Third Payment”). This Agreement will continue in full force and effect, subject to the termination provisions of Article 9, and all royalty payments due pursuant to Articles 7.1 and 7.2 shall continue to be due irrespective of whether [**] has been signed by the Parties. If the [**] is not and will not be signed by the Parties, then AMSC shall have no obligation to pay The Third Payment to SEI pursuant to this Article.

7.4

All payments due to AMSC under this Agreement shall be non-refundable and shall be remitted in US dollars at the then current rate of exchange, by telegraphic transfer to the following account of AMSC:

Fleet National Bank

One Federal Street

Boston, MA 02110

USA

011-000-138 (ABA #)

[**] (Account #)

American Superconductor Corporation (Account Name)

7.5

All payments due to SEI under this Agreement shall be non-refundable and shall be remitted by telegraphic transfer in United States Dollars to the following account of SEI:

Sumitomo Mitsui Banking Corporation

Osaka Head Office

6-5, Kitahama 4-chome, Chuo-ku,

Osaka, 541-0041, Japan

Account No.: [**]

7.6

All taxes payable as a result of the payment of the monies due to SEI in accordance with this Article 7 shall be borne by SEI. If required to deduct tax at source from any payments made to SEI, AMSC shall provide SEI with a statement or certificate showing the amount of tax so paid in respect of the said monies duly signed by an appropriate tax official.

7.7

All taxes payable as a result of the payment of the monies due to AMSC in accordance with this Article 7 shall be borne by AMSC. If required to deduct tax at source from any payments made to AMSC, SEI shall provide AMSC with a statement or certificate showing the amount of tax so paid in respect of the said monies duly signed by an appropriate tax official.

ARTICLE 8 (NO LICENSE EXCEPT FOR PRODUCTS)

AMSC and SEI hereby agree that the licenses contemplated herein shall not constitute or imply any license or agreement with respect to any products other than Products, nor a license with respect to any other patents except the Existing Patents and Future Patents, nor any agreement with respect to any other patents except the Existing Patents and Future Patents.

ARTICLE 9 (TERMINATION)

9.1

Either Party (the “Initiating Party”) may terminate the license and waiver of suit granted to the other Party (the “Breaching Party”) by written notice to the Breaching Party on or at any time after one of the following events occur. The license and waiver granted the Breaching Party is automatically terminated at the time of the occurrence of any of the events set forth in section (b), (c) or (d):

(a)

the Breaching Party committing a remediable breach under this License Agreement and failing to remedy the breach within two (2) months starting on the day after receipt of written notice from the Initiating Party giving details of the breach and requiring the Breaching Party to remedy the breach;

(b)

the Breaching Party passing a resolution for its winding-up, a court of competent jurisdiction making an order for the Breaching Party’s winding-up or the presentation of a petition for the Breaching Party’s winding-up (other than, in each case, for the purposes of solvent amalgamation or reconstruction and in such manner that the entity resulting from the amalgamation or reconstruction effectively agrees to be bound by or assume the Breaching Party’s obligations under this Agreement);

(c)

the making of an administrative order in relation to the Breaching Party or the appointment of a receiver over, or an encumbrancer taking possession of or selling an asset of the Breaching Party;

(d)

the Breaching Party making an arrangement or composition with its creditors generally or making an application to a court of competent jurisdiction for protection from its creditors generally (including, without limitation, proceedings under chapter 11 of the US Bankruptcy Code);

(e)

the direct or indirect control of [**]% or more of the Breaching Party’s voting shares by any person, firm, corporation or organization (including persons or parties acting in concert), which is a Competitor of the non-Breaching Party.

9.2

In the event of termination of the license and waiver as set forth in Article 9.1, the license and waiver granted to the Initiating Party survives for the term set forth in Article 5, whether or not the Breaching Party retains ownership of the Existing Patents or Future Patents, provided that the Initiating Party continues to satisfy all of its obligations under this Agreement.

ARTICLE 10 (ARBITRATION)

10.1

The Parties shall attempt to settle all disputes, differences or claims between the Parties arising from this Agreement in an amicable fashion. Should, however, a mutually agreed solution to any such dispute, difference or claim not be found possible, the Parties shall submit the matter to arbitration. The arbitration shall be conducted by three (3) arbitrators, one to be appointed by each Party and a third being nominated by the two arbitrators so selected or, if they cannot agree on a third arbitrator, appointed in accordance with the Commercial Arbitration Rules of the London Court of International Arbitration.

The arbitration will be conducted in English and in accordance with the Commercial Arbitration Rules of the London Court of International Arbitration, which shall administer the arbitration and act as appointing authority. The arbitration, including the rendering of the award, shall take place in London, England, and shall be the exclusive forum for resolving such dispute, controversy or claim. For the purposes of any arbitration, the provisions of this Agreement and all rights and obligations thereunder shall be construed in accordance with the laws of England. The decision or decisions resulting from any such arbitration shall be binding upon the Parties, and the expense of the arbitration (including without limitation the award of attorneys’ fees to the prevailing party) shall be paid as the arbitrators determine. The decision of the arbitrators shall be executory and judgment thereon may be entered in any court of competent jurisdiction.

10.2

Until a decision is made by the arbitrators both Parties agree to take no action which may upset the status quo or prejudice the respective positions of the Parties in respect of the matter in controversy except for such actions as may otherwise be permitted by the terms of this Agreement.

ARTICLE 11 (NOTICES)

Any notice given under this Agreement (“Notice”) shall be deemed to have been duly and sufficiently given for all purposes, if made initially by facsimile, and then also sent by registered or certified air mail, postage prepaid, addressed to the Party to whom the Notice is to be sent at the address for the Party set forth below. Each Party may change its address for receipt of notices by Notice to the other Party in accordance with this Article 11. Notice becomes effective upon mailing by registered or certified mail. If, however, such Notice is not initially sent by facsimile, such Notice does not become effective until the date the registered or certified mail is actually received.

If addressed to AMSC:

Director of Intellectual Property

American Superconductor Corporation

Two Technology Drive, Westborough, MA 01581-1727

U.S.A.

If addressed to SEI:

General Manager

Legal Department

Sumitomo Electric Industries, Ltd.

5-33 Kitahama, 4-chome, Chuo-ku, Osaka

Japan

ARTICLE 12 (CONTINUING OBLIGATIONS)

The obligations to keep information confidential and to submit disputes to arbitration as set out in Articles 6 (Secrecy) and 10 (Arbitration) respectively shall continue indefinitely, unless and until such information is no longer secret or there are no outstanding claims between the Parties.

ARTICLE 13 (FORCE MAJEURE)

13.1

Either Party shall be relieved of its obligations hereunder to the extent that it is hindered or prevented from carrying them out by reason of force majeure.

13.2

For the purpose of this Agreement, force majeure signifies any event or circumstance and its direct consequence which is beyond the reasonable control of the Party invoking this Article 13. Such events or circumstances include but are not limited to: fire, floods, earthquake, war, industrial disputes, strikes, lockouts, explosions, acts of God and actions of the government(s).

13.3

The Party invoking this Article 13 shall without delay advise the other Party of the force majeure event or circumstance preventing or hindering it from carrying out its obligations under this Agreement and shall also notify the other Party as soon as possible of all the facts and obligations it is able to meet only with delay, indicating the period of delay to be expected.

13.4

If the event or circumstance of force majeure results in delay of less than six (6) months, the Parties are obliged to adhere to this Agreement subject however to reasonable extensions of time for contract obligations to be met and the period of payment called for in this Agreement shall be extended appropriately to take account of any stoppages caused by reasons of force majeure. If force majeure results in an extension of due date for payment under Article 7 for more than six (6) months, the Parties shall consult together on the action to be taken. If they fail to reach agreement, then recourse will be had to arbitration in accordance with Article 10 hereof for liquidation of the contractual relations between the Parties.

ARTICLE 14 (GOVERNING LAW)

This Agreement shall be interpreted in accordance with the laws of England.

ARTICLE 15 (INTERPRETATION)

15.1

This Agreement shall be executed in the English language. No translation, if any, of this Agreement into any other language shall be of any force or effect in the interpretation of this Agreement or in determination of the intent of either of the Parties.

15.2

This Agreement may only be amended in writing signed by the duly authorized representatives of the Parties and this Agreement constitutes the entire agreement of the Parties on the matter to which it relates and there are no understandings, representations or warranties of any kind between the Parties except as expressly set forth herein.

15.3

Should any of the provisions of this Agreement be void for whatever reason, the validity of the remaining provisions shall thereby not be affected. In such case the Parties shall upon mutual consent replace the ineffective provisions by another provision which is as close in meaning as possible.

ARTICLE 16 (ASSIGNMENT)

16.1

This Agreement is personal to each of the Parties and may not be assigned by either Party without the prior written consent of the other Party which consent will not be unreasonably withheld. Notwithstanding the foregoing, without the consent of the other Party, either Party may assign this Agreement and all of its rights and obligations in connection with the sale or assignment of substantially all of the business and assets of the assigning Party to which this Agreement relates. However, no such assignment of this Agreement and all of the rights and obligations hereunder in connection with the assignment of substantially all of the business and assets of the assigning Party to which this Agreement relates may be made to any third party (“Assignee”) unless, such Assignee agrees in writing effective as of the Assignment Date, that all of Assignee’s existing and future patents and applications which have an earliest priority date on or

before the Assignment Date and which are directed to Bismuth-based wire, magnets, coils and current leads are included as Future Patents of the assigning Party, and agrees further that as of the Assignment Date, any and all license rights and promises not to sue with respect to Future Patents of the non-assigning Party directed to Bismuth-based wire, magnets, coils and current leads as described in Articles 3 and 4 of this Agreement shall thereafter be limited to Then Current Future Patents.

16.2

The assigning Party, promptly after the assignment as provided for under Article 16.1, shall notify the other Party by written notice of such assignment, and such notice shall include the name and location of and the name of the representative of the Assignee.

16.3

In the case of an assignment by a Party of all of its Patents covered under this Agreement to any assignee under this Agreement pursuant to Article 16.1, the assigning Party shall impose its licensing obligations and promises not to sue contained in Articles 3 and 4 of this Agreement on assignee with respect to any Existing Patents, or Then Current Future Patents.

16.4

In the case of an assignment by SEI of any of its Patents covered under this Agreement to a third party (Third Party Assignee) not as part of an assignment of all of SEI’s rights and obligations under this Agreement pursuant to Section 16.1, SEI shall impose its licensing obligations and its promises not to sue contained in Article 3 of this Agreement on the Third Party Assignee with respect to such assigned Patents. For the avoidance of doubt, the license and waiver from such Third Party Assignee shall be royalty free and the royalty obligations of AMSC shall remain payable only to SEI under the terms of this Agreement.

16.5

In the case of an assignment by AMSC of any of its Patents covered under this Agreement to a third party (Third Party Assignee) not as part of an assignment of all of AMSC’s rights and obligations under this Agreement pursuant to Section 16.1, AMSC shall impose its licensing obligations and its promises not to sue contained in Article 3 of this Agreement on the Third Party Assignee with respect to such assigned Patents. For the avoidance of doubt, the license and waiver from such Third Party Assignee shall be royalty free and the royalty obligations of SEI shall remain payable only to AMSC under the teems of this Agreement.

IN WITNESS WHEREOF, this Agreement has been signed on behalf of the Parties hereto.

Sumitomo Electric Industries, Ltd.

By:		/s/ Hironaga Matsubara
		Hironaga Matsubara

Date:		June 10, 2003

American Superconductor Corporation

By:		/s/ Alexis P. Malozemoff
		Alexis P. Malozemoff

Date:		June 27, 2003

Solely Owned		Exhibit A
Wire and Process		SEI Patents

No.

Country

Priority
Date

Application
No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

1986/6/17

07/063228

1987/6/17

5006289

1991/4/9

1986/6/17

07/606850

1990/10/31

5114641

1992/5/19

1986/6/17

07/883368

1992/5/15

5252288

1993/10/12

1986/6/17

08/355814

1994/12/14

5480601

1996/1/2/

1987/2/5

11422/88

1988/2/5

1988/8/11

597148

1990/9/11

1987/2/5

91119826.5

1988/2/5

475466

1992/3/18

475466

2002/6/5

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

1987/2/5

91119826.5

1988/2/5

475466

1992/3/18

475466

2002/6/6

1987/2/5

91119826.5

1988/2/5

475466

1992/3/18

475466

2002/6/5

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

1987/2/5

91119826.5

1988/2/5

475466

1992/3/18

475466

2002/6/5

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

1987/2/5

91119826.5

1988/2/5

47566

1992/3/18

475466

2002/6/5

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

1987/2/5

88400267.6

1988/2/5

281444

1988/9/7

281444

1992/12/30

[**]

1987/2/5

08/851312

1997/5/5

5981444

1999/11/9

1987/2/28

88400466.4

1988/2/29

281474

1988/9/7

281474

1994/8/17

1987/2/28

88400466.4

1988/2/29

281474

1988/9/7

281474

1994/8/17

1987/2/28

88400466.4

1988/2/29

281474

1988/9/7

281474

1994/8/17

1987/2/28

88400466.4

1988/2/29

281474

1988/9/7

281474

1994/8/17

1987/2/28

08/056615

1993/5/4

5786305

1998/7/28

1987/4/17

07/438986

1989/11/20

5100865

1992/3/31

1987/4/2

07/942481

1991/9/9

5550102

1996/8/27

1987/5/1

88401064.6

1988/5/2

290331

1988/11/9

290331

1997/3/5

1987/5/1

88401064.6

1988/5/2

290331

1988/11/9

290331

1997/3/5

1987/5/1

88401064.6

1988/5/2

290331

1988/11/9

290331

1997/3/5

1987/5/1

88401064.6

1988/5/2

290331

1988/11/9

290331

1997/3/5

1987/5/1

07/189366

1988/5/2

5122507

1992/6/16

1987/5/1

07/884137

1992/5/18

5338721

1994/8/16

1987/5/1

08/906855

1997/8/6

6301774

2001/10/16

1987/5/1

08/906855

1997/8/6

6301774

2001/10/16

1987/5/1

08/200540

1994/2/22

5424282

1995/6/13

1987/7/28

07/225207

1988/7/28

5030616

1991/7/9

1987/8/3

08/122178

1993/9/17

5409890

1995/4/25

1988/8/29

39596/89

1989/8/15

1990/3/1

611051

1991/9/25

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

No.

Country

Priority

Date

Application
No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

1988/8/29

89115862.8

1989/8/28

356969

1990/3/7

356969

1994/12/28

1988/8/29

08/459624

1995/6/2

5639714

1997/6/17

1988/8/29

08/747133

1996/11/12

6276048

2001/8/21

1989/1/26

90101530.5

1990/1/25

380115

1994/9/21

1989/1/26

90101530.5

1990/1/25

380115

1990/8/1

380115

1994/9/21

1989/1/26

90101530.5

1990/1/25

380115

1994/9/21

1989/1/26

90101530.5

1990/1/25

380115

1994/9/21

[**]

1989/1/26

08/999675

1997/10/14

6357105

2002/3/19

1989/12/28

68479/90

1990/12/24

1991/7/4

646419

1994/6/10

1989/12/28

90125575.2

1990/12/27

435286

1991/7/3

435286

1997/3/19

1989/12/28

90125575.2

1990/12/27

435286

1991/7/3

435286

1997/3/19

1989/12/28

90125575.2

1990/12/27

435286

1991/7/3

435286

1997/3/19

1989/12/28

90125575.2

1990/12/27

435286

1991/7/3

435286

1997/3/19

1989/12/28

90125575.2

1990/12/27

435286

1991/7/3

435286

1997/3/19

[**]

1989/12/28

08/955323

1997/10/20

6311384

2001/11/6

1990/3/16

08/283498

1994/8/1

5670459

1997/9/23

1990/3/16

08/858842

1997/5/19

5910222

1999/6/8

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

91104628.2

1991/2/23

449161

1991/10/2

449161

1995/12/6

1990/3/26

08/385240

1995/2/8

5610123

1997/3/11

1990/3/30

08/747881

1996/11/13

6205345

2001/3/20

[**]

1990/7/16

08/291237

1994/8/16

5508254

1996/4/16

1990/7/16

80310/91

1991/7/10

1992/1/16

647801

1994/7/19

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

91111685.3

1991/7/12

467238

1992/1/22

467238

1994/11/2

1990/7/16

08/376461

1995/1/20

5877125

1999/3/2

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

No.

Country

Priority
Date

Application
No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

1990/8/8

911113271

1991/8/7

470595

1992/2/12

470595

1995/5/24

1990/8/8

07/742255

1991/8/8

5236891

1993/8/17

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

91115196.7

1991/9/9

475315

1992/3/18

475315

1995/12/13

1990/9/10

07/757103

1991/9/10

5378684

1995/1/3

1990/9/10

08/316262

1994/9/29

5663120

1997/9/2

1991/1/19

10229/92

1992/1/14

1992/7/23

646538

1994/6/10

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

92100672.2

1992/1/16

496281

1992/7/29

496281

1995/12/6

1991/1/19

08/167581

1993/12/15

2002-
0050053

2002/5/2

1991/2/25

11018/92

1992/2/18

1992/8/27

653983

1995/2/15

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

92103099.5

1992/2/24

501394

1992/9/2

501394

1995/5/3

1991/2/25

08/446349

1995/5/22

5949131

1999/9/7

1991/2/25

09/112970

1998/7/9

6194226

2001/2/27

1991/3/20

08/186219

1994/1/25

5434130

1995/7/18

1991/3/20

13053/92

1992/3/19

1992/9/24

654529

1995/2/28

1991/3/20

08/479898

1995/6/7

5869430

1999/2/9

1991/3/20

13034/92

1992/3/19

1992/9/24

650956

1994/10/25

1991/3/20

92104806.2

1992/3/19

504894

1992/9/23

504894

1994/12/28

1991/3/20

92104806.2

1992/3/19

504894

1992/9/23

504894

1994/12/28

1991/3/20

92104806.2

1992/3/19

504894

1992/9/23

504894

1994/12/28

1991/3/20

92104806.2

1992/3/19

504894

1992/9/23

504894

1994/12/28

1991/3/20

92104806.2

1992/3/19

504894

1992/9/23

504894

1994/12/28

1991/3/20

07/854127

1992/3/19

5369088

1994/11/29

No.

Country

Priority
Date

Application
No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

1991/3/20

08/295297

1994/8/24

5462920

1995/10/31

1992/2/20

33148/93

1993/2/19

1993/8/26

663355

1996/1/23

1992/2/20

93102579.5

1993/2/18

556837

1993/8/25

556837

1997/9/17

1992/2/20

93102579.5

1993/2/18

556837

1993/8/25

556837

1997/9/17

1992/2/20

93102579.5

1993/2/18

556837

1993/8/25

556837

1997/9/17

1992/2/20

93102579.5

1993/2/18

556837

1993/8/25

556837

1997/9/17

1992/2/20

93102579.5

1993/2/18

556837

1993/8/25

556837

1997/9/17

1992/2/20

08/019976

1993/2/19

5358929

1994/10/25

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

96105592.8

1996/4/9

736914

1996/10/9

736914

2002/5/15

1995/4/7

08/627281

1996/4/4

6305069

2001/10/23

1995/4/7

09/954577

2001/9/18

2002-

0028749

2002/3/7

1996/3/26

97105031.5

1997/3/25

798749

1997/10/1

1996/3/26

08/823907

1997/3/25

5929000

1999/7/27

1996/3/26

09/055287

1998/4/6

6192573

2001/2/27

1996/5/13

19090/97

1997/4/24

1997/11/20

727324

2001/3/22

1996/5/13

97106381.3

1997/4/17

807994

1997/11/19

807994

2002/8/14

[**]

1996/5/13

09/941104

2001/8/28

2002-

0020546

2002/2/21

6414244

1997/2/25

98103197.4

1998/2/24

860705

1998/8/26

1997/2/25

09/028929

1998/2/24

5936394

1997/2/27

98905635.3

1998/2/25

1018748

200/7/12

[**]

1997/2/27

PTC/JP98/0

0754

1998/2/27

WO98/386

1998/9/3

[**]

1998/4/28

09/264570

1999/3/8

6311385

1998/7/30

99114300.9

1999/7/30

977282

2000/2/2

1998/7/30

09/363816

1999/7/30

US-2001-

0017220

2001/8/30

6337307

[**]

1999/2/26

PCT/JP00/0

0952

2000/2/18

WO00/527

2000/9/8

No.

Country

Priority

Date

Application
No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

[**]

1999/12/28

403701.6

2000/12/28

1113508

2001/7/4

[**]

1999/12/28

403702.4

2000/12/28

EP111350

7A2

2001/7/4

[**]

1999/11/4

971734.9

2000/11/1

1158543

2001/11/28

1999/11/4

1109218.6

2000/11/1

1039396A

2002/4/19

[**]

2000/4/25

1401033.4

2001/4/24

1150362

2001/10/31

2000/4/25

1108327.6

2001/11/27

1037784A

2002/2/15

2000/4/25

09/820870

2001/3/30

2001-
0044385

2001/11/22

[**]

2000/2/22

1400472.5

2001/2/22

1128447

2001/8/29

2000/2/22

1108125.0

2001/11/17

1037274A

2002/2/1

[**]

2000/7/14

1401877.4

2001/7/13

1172868

2002/1/16

[**]

2000/7/14

90116220

2001/7/3

157041

2002/9/27

2000/7/14

09/903622

2001/7/13

2002-
0022576

2002/2/21

[**]

2000/8/29

1402252.9

2001/8/29

1187233

2002/3/13

2000/8/29

09/920947

2001/8/3

2002-
0073298

2002/4/18

[**]

Magnet Application

No.

Country

Priority

Date

Application No.

File Date

Publication No.

Publication Date

Patent No.

Issue Date

1989/11/14

66627/90

1990/11/14

1991/5/23

642681

1994/2/22

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

90121806.5

1990/11/14

428993

1991/5/29

428993

1995/5/10

1989/11/14

07/612023

1990/11/13

5340943

1994/8/23

1990/8/24

91114090.3

1991/8/22

472197

1992/2/26

472197

1994/12/21

1990/8/24

91114090.3

1991/8/22

472197

1992/2/26

472197

1994/12/21

1990/8/24

91114090.3

1991/8/22

472197

1992/2/26

472197

1994/12/21

1990/8/24

91114090.3

1991/8/22

472197

1992/2/26

472197

1994/12/21

1990/8/24

08/301923

1994/9/6

5506198

1996/4/9

1991/4/2

13948/92

1992/3/31

1992/10/8

654339

1995/2/21

1991/4/2

08/385571

1995/2/8

5512867

1996/4/30

1996/5/13

97107591.6

1997/5/7

807939

1997/11/19

807939

2001/10/17

1996/5/13

97107591.6

1997/5/7

807939

1997/11/19

807939

2001/10/17

1996/5/13

97107591.6

1997/5/7

807939

1997/11/19

807939

2001/10/17

1996/5/13

97107591.6

1997/5/7

807939

1997/11/19

807939

2001/10/17

1996/5/13

08/848464

1997/5/8

5861788

1999/1/19

1996/7/19

97112288.2

1997/7/17

820071

1998/1/21

820071

2002/1/9

1996/7/19

08/897605

1997/7/21

5787714

1998/8/4

1997/5/8

98108366

1998/5/7

877395

1998/11/11

1997/5/8

09/073953

1998/5/7

6081179

2000/6/27

1997/10/24

98119952.4

1998/10/21

911839

1999/4/28

1997/10/24

09/176327

1998/10/22

6094333

2000/7/25

Current Lead

No.

Country

Priority
Date

Application No.

File Date

Publication No.

Publication Date

Patent No.

Issue Date

1987/3/31

88105209.6

1988/3/30

285147

1988/10/5

285147

1993/3/31

1987/3/31

88105209.6

1988/3/30

285147

1988/10/5

285147

1993/3/31

1987/3/31

88105209.6

1988/3/30

285147

1988/10/5

285147

1993/3/31

1987/3/31

88105209.6

1988/3/30

285147

1988/10/5

285147

1993/3/31

1987/3/31

07/174468

1988/3/28

4965247

1990/10/23

1989/8/9

07/564217

1990/8/7

5114908

1992/5/19

1990/4/13

07/935664

1992/8/24

5276281

1994/1/4

Exhibit A

AMSC Patents

Solely Owned/Exclusively Licensed

BSCCO/PIT Wire and Process

No.

Country

Priority

Date

Application No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

03/27/1987

74273/91

03/01/1988

642,229

03/01/1988

03/27/1987

12529/88

03/01/1988

605,251

04/29/1991

03/27/1987

562311

02/24/1988

1,340,849

12/14/1999

03/27/1987

236643/93

03/22/1988

2-691126

01/29/1997

03/27/1987

07/031,407

03/27/1987

4,826,808

05/12/1989

03/27/1987

07/061,233

06/10/1987

5,204,318

04/20/1993

03/27/1987

07/879,155

04/30/1992

5,189,009

02/23/1993

03/27/1987

08/056,605

05/03/1993

5,439,880

08/08/1995

03/27/1987

08/273,408

07/11/1994

5,545,613

08/14/1996

03/27/1987

08/414,288

03/31/1995

5,643,856

07/01/1997

03/27/1987

08/819,285

03/18/1997

5,883,052

03/16/1999

10/16/1989

07/422,227

10/16/1989

5,116,810

03/02/1992

06/30/1992

P69331631.4

06/24/1993

DE
69331631

02/06/2003

06/30/1992

93916729.2

06/24/1993

648,379

04/19/1995

648,379

01/17/2002

06/30/1992

93916729.2

06/24/1993

648,379

04/19/1995

648,379

01/17/2002

06/30/1992

93916729.2

06/24/1993

648,379

04/19/1995

648,379

01/17/2002

06/30/1992

93916729.2

06/24/1993

648,379

04/19/1995

648,379

01/17/2002

06/30/1992

08/462,130

06/05/1995

6,218,340

04/17/2001

06/30/1992

09/797,487

03/01/2001

2001-
0009888

07/26/2001

6,495,765

12/17/2002

Japan

06/24/1993

503095/95

06/23/1994

500351/97

01/14/1997

06/24/1993

08/082,093

06/24/1993

5,472,527

12/05/1995

06/24/1993

08/469,438

06/06/1995

6,066,599

05/23/2000

04/10/1989

89106332.3

04/10/1989

336,450

10/16/1996

04/10/1989

89106332.3

04/10/1989

336,450

10/11/1989

336,450

10/16/1996

04/10/1989

96103591.2

04/10/1989

721,923

07/17/1996

04/10/1989

89106332.3

04/10/1989

336,450

10/16/1996

04/10/1989

89106332.3

04/10/1989

336,450

10/16/1996

04/10/1989

89106332.3

04/10/1989

336,450

10/16/1996

04/10/1989

224205

04/08/1988

224205/228132

04/11/1989

[**]

04/10/1989

09/260,292

03/02/1999

6,121,207

09/19/2000

[**]

05/28/1991

08/324,456

10/17/1994

5,618,776

04/08/1997

04/01/1993

66640/94

04/01/1994

696,752

08/26/1997

696,752

01/07/1999

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

522398/94

04/01/1994

505265/97

05/27/1997

04/01/1993

94915352.2

04/01/1994

692,147

01/17/1996

692,147

08/02/2000

04/01/1993

266058

04/01/1994

692,147

05/26/1997

266,058

12/03/1997

04/01/1993

08/041,822

04/01/1993

5,635,456

06/03/1997

02/24/1993

08/021,768

02/24/1993

5,455,223

10/03/1995

05/12/1992

08/744,278

11/06/1996

6,219,901

04/24/2001

04/28/1995

08/431,705

04/28/1995

5,758,405

06/02/1998

04/01/1993

08/198,912

02/17/1994

5,661,114

08/26/1997

04/01/1993

08/779,808

1/8/1997

5,994,275

11/30/1999

04/01/1993

09/451,742

11/30/1999

6,284,712

09/04/2001

04/01/1993

09/861,248

05/18/2001

6,436,876

08/20/2002

04/29/1994

08/235,560

04/29/1994

5,952,270

09/14/1999

04/29/1994

09/309,220

05/10/1999

6,400,970

06/04/2002

[**]

10/28/1994

08/331,184

10/28/1994

6,295,716

10/02/2001

10/28/1994

09/960,189

09/21/2001

2002-
0016265

02/07/2002

09/08/1994

95303044.0

09/08/1995

780,024

06/25/1997

780,024

02/27/2002

09/08/1994

95303044.0

09/08/1994

780,024

06/25/1997

780,024

02/27/2002

09/08/1994

95303044.0

09/08/1995

780,024

06/25/1997

780,024

02/27/2002

09/08/1994

95303044.0

09/08/1995

780,024

06/25/1997

780,024

02/27/2002

09/08/1994

95303044.0

09/08/1995

780,024

06/25/1997

780,024

02/27/2002

09/08/1994

08/302,601

09/08/1994

6,360,425

03/26/2002

06/06/1995

60419/96

07/07/1996

710,960

01/20/2000

[**]

06/06/1995

96918065.2

06/05/1996

832,050

04/01/1998

06/06/1995

09-501291

06/05/1996

11-506866

06/15/1999

06/06/1995

310093

06/05/1996

310,093

02/08/2000

06/06/1995

08/468,089

06/06/1995

6,247,224

06/19/2001

06/06/1995

08/843,041

04/11/1997

6,331,675

12/18/2001

[**]

01/28/1994

11575/97

11/07/1996

729,277

05/17/2001

[**]

01/28/1994

96942731.9

11/07/1996

860,030

08/26/1998

01/28/1994

324499

11/07/1996

324,499

02/08/2000

01/28/1994

08/553,184

11/07/1995

6,194,352

02/27/2001

10/28/1994

62532/96

06/05/1996

697,410

01/21/1999

[**]

10/28/1994

96921276.0

06/05/1996

836,752

03/05/2003

10/28/1994

96921276.0

06/05/1996

836,752

04/22/1998

836,752

03/05/2003

10/28/1994

96921276.0

06/05/1996

836,752

03/05/2003

10/28/1994

96921276.0

06/05/1996

836,752

03/05/2003

10/28/1994

96921276.0

06/05/1996

836,752

03/05/2003

10/28/1994

311254

06/05/1996

311,254

11/09/2000

10/28/1994

08/467,033

06/06/1995

5,942,466

08/24/1999

10/28/1994

09/358,245

07/21/1999

6,311,386

11/06/2001

10/28/1994

10/061,440

10/25/2001

2002-
0111276

08/15/2002

05/19/1995

57956/96

05/16/1996

709,214

12/09/1999

05/19/1995

96195325.X

05/17/1996

1190366

08/12/1998

99,008

12/25/2002

05/19/1995

96914661.2

05/17/1996

828,606

03/18/1998

05/19/1995

8-535057

05/17/1996

11-505365

05/18/1999

05/19/1995

08/862,016

05/22/1997

6,038,462

03/14/2000

05/19/1995

09/358,167

07/20/1999

6,393,690

05/28/2002

11/07/1995

69609289.1-08

10/25/1996

799,593

05/14/1997

779,593

07/12/2000

11/07/1995

96307753.2

10/25/1996

799,593

05/14/1997

779,593

07/12/2000

11/07/1995

08/554,693

11/07/1995

5,885,938

03/23/1999

11/07/1995

09/274,184

03/23/1999

6,271,475

08/07/2001

05/21/1996

08/651,688

05/21/1996

6,370,762

04/16/2002

[**]

08/30/1996

97938157.1

08/06/1997

979,519

02/16/2000

08/30/1996

08/701,333

08/30/1996

5,801,124

09/01/1998

08/30/1996

97937022.8

08/06/1997

979,518

08/06/1997

08/30/1996

08/705,811

08/30/1996

5,987,342

11/16/1999

08/30/1996

09/401,764

09/23/1999

6,230,033

05/08/2001

11/07/1995

11165/97

11/06/1996

729,033

05/10/2001

11/07/1995

96941963.9

11/06/1996

860,012

08/28/1998

[**]

11/07/1995

324089

11/06/1996

324,089

03/09/2000

11/07/1995

08/554,814

11/07/1995

6,247,225

06/19/2001

11/07/1995

09/769,705

01/25/2001

2001-
0027166

10/04/2001

10/15/1996

97308179.7

10/15/1997

837,512

04/22/1998

10/15/1996

08/731,302

10/15/1996

6,305,070

10/23/2001

10/15/1996

09/815,063

03/22/2001

6,436,875

08/20/2002

07/29/1997

98937939.1

05/27/1998

2001-
512282

08/21/2001

07/29/1997

08/902,421

07/29/1997

6,370,405

04/09/2002

05/21/1996

34732/97

05/21/1997

727,912

01/04/2001

727,912

04/19/2001

[**]

05/21/1996

97930987.9

05/21/1997

902,984

03/24/1999

[**]

05/21/1996

08/651,169

05/21/1996

5,798,318

08/25/1998

05/21/1996

09/137,733

08/21/1998

6,188,920

02/13/2001

05/21/1996

08/652,624

05/21/1996

6,205,645

03/27/2001

03/31/1997

08/831,504

03/31/1997

6,294,738

09/25/2001

[**]

09/25/1996

08/719,987

09/25/1996

6,397,454

06/04/2002

08/30/1996

97938039.1

08/06/1997

951,588

10/27/1999

08/30/1996

08/701,375

08/30/1996

6,110,606

08/29/2000

06/02/1999

00964889.0

06/02/2000

1,188,191

03/20/2002

[**]

06/02/1999

09/324,229

06/02/1999

6,159,905

12/12/2000

02/01/1999

99910945.7

02/01/1999

1,055,258

11/29/2000

[**]

02/01/1999

09/240,998

02/01/1999

6,188,921

02/13/2001

07/29/1997

08/902,588

07/29/1997

6,001,777

12/14/1999

09/10/1997

10607/99

03/07/2000

735,543

07/12/2001

735,543

10/25/2001

09/10/1997

98953164.5

09/08/1998

1,021,842

07/26/2000

09/10/1997

08/927,006

09/10/1997

6,069,116

05/30/2000

[**]

09/15/2000

09/953,813

09/17/2001

2002-
0111277

08/15/2002

[**]

06/18/1998

PCT/NZ99/00095

06/18/1999

entered national phase

06/18/1998

99931620.2

06/18/1999

1,090,398

06/18/1998

06/18/1999

2002-
518287

[**]

04/29/1994

09/548,258

04/12/2000

6,365,554

04/02/2002

01/20/2000

09/488,740

01/20/2000

6,339,047

01/15/2002

[**]

09/15/2000

09/954,123

09/17/2001

2003-
0024730

02/06/2003

03/25/1997

66127798

09/28/2000

727,072

03/15/2001

[**]

03/25/1997

98907923.1

03/25/1998

970,483

01/12/2000

[**]

03/25/1997

99121644

03/25/1998

2,183,875

06/20/2002

03/25/1997

09/380,115

09/30/1999

6,223,418

05/01/2002

07/16/1998

99932685.3

07/15/1999

1,105,744

06/13/2001

1,105,744

09/18/2002

07/16/1998

DE 69903047

07/15/1999

09/18/2002

69903047

07/16/1998

99932685.3

07/15/1999

1,105,744

09/18/2002

07/16/1998

99932685.3

07/15/1999

1,105,744

09/18/2002

07/18/1998

99932685.3

07/15/1999

1,105,744

09/18/2002

[**]

12/22/1998

99973171.4

11/29/1999

1,135,811

[**]

09/14/1999

00960365.5

09/14/2000

1,218,948

07/03/2002

[**]

PCT

11/21/2000

PCT/DK01/00777

11/21/2000

WO
02/43161

05/30/2002

Coils

No.

Country

Priority

Date

Application No.

File Date

Publication
No.

Publication
Date

Patent No.

Issue Date

01/28/1994

15558/95

12/27/1994

683,133

02/19/1998

01/28/1994

2861/98

01/30/1998

709,072

12/02/1999

01/28/1994

95907268.7

12/27/1994

741,912

11/13/1996

01/28/1994

7520047

12/27/1994

09-511099

11/04/1997

01/28/1994

08/188,220

01/28/1994

5,531,015

07/02/1996

01/28/1994

08/674,111

07/01/1996

5,798,678

08/25/1998

[**]

01/24/1994

15614/95

01/09/1995

696,169

12/17/1998

01/24/1994

95220/98

02/03/1998

739,105

01/17/2002

01/24/1994

2180738

01/09/1995

01/24/1994

69520939.6

01/09/1995

DE
69520939

05/16/2001

01/24/1994

95907349.5

01/09/1995

741,905

05/16/2001

01/24/1994

95907349.5

01/09/1995

741,905

05/16/2001

01/24/1994

95907349.5

01/09/1995

741,905

05/16/2001

01/24/1994

95907349.5

01/09/1995

741,905

05/16/2001

01/24/1994

7519578

01/09/1995

09-511098

11/04/1997

01/24/1994

279091

01/09/1995

279,091

06/12/1997

01/24/1994

08/192,724

02/07/1994

5,525,583

06/11/1996

01/24/1994

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents