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Nature of the Business and Operations and Liquidity
6 Months Ended
Sep. 30, 2014
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Nature of the Business and Operations and Liquidity

1. Nature of the Business and Operations and Liquidity

Nature of the Business and Operations

American Superconductor Corporation (“AMSC” or the “Company”) was founded on April 9, 1987. The Company is a leading provider of megawatt-scale solutions that lower the cost of wind power and enhance the performance of the power grid. In the wind power market, the Company enables manufacturers to field wind turbines through its advanced engineering, support services and power electronics products. In the power grid market, the Company enables electric utilities and renewable energy project developers to connect, transmit and distribute power through its transmission planning services and power electronics and superconductor-based products. The Company’s wind and power grid products and services provide exceptional reliability, security, efficiency and affordability to its customers.

These unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with United States generally accepted accounting principles (“GAAP”) and the Securities and Exchange Commission’s (“SEC”) instructions to Form 10-Q. The going concern basis of presentation assumes that the Company will continue operations and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those instructions. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the results for the interim periods ended September 30, 2014 and 2013 and the financial position at September 30, 2014.

Liquidity

The Company has experienced recurring operating losses and as of September 30, 2014, the Company had an accumulated deficit of $895.3 million. In addition, the Company has experienced recurring negative operating cash flows.  At September 30, 2014, the Company had cash and cash equivalents of $34.7 million. Cash used in operations for the six months ended September 30, 2014 was $11.4 million.  On August 29, 2014, the Arbitration Tribunal for the ICC International Court of Arbitration (the “ICC Court”) found the Company liable for damages in its breach of contract proceeding against Ghodawat Energy Pvt Ltd (“Ghodawat”) and awarded Ghodawat approximately €8.3 million (approximately $10.6 million) plus interest of 5.33%, which accrues from the date of award.  As of the date of this filing, the Company has not paid this award.  See Note 13, “Commitments and Contingencies” for further information.

 

From April 1, 2011 through the date of this filing, the Company has reduced its global workforce substantially.  The Company is currently in the process of consolidating certain business operations to reduce facility costs.  As of September 30, 2014, the Company had a global workforce of approximately 291 persons.  The Company plans to closely monitor its expenses and if required, expects to further reduce operating costs and capital spending to enhance liquidity.

 

On June 5, 2012, the Company entered into a Loan and Security Agreement (the “Term Loan”) with Hercules Technology Growth Capital, Inc (“Hercules”), under which the Company borrowed $10.0 million.  On November 15, 2013, the Company entered into an amendment of the Term Loan (the “New Term Loan”, and together with the Term Loan, the “Term Loans”), under which the Company borrowed an additional $10.0 million.  The Term Loans contain certain covenants and restrictions including, among others, a requirement to maintain a minimum unrestricted cash balance in the U.S. equal to the lesser of a minimum cash threshold or the remaining principal balance.  (See Note 10, “Debt”, for further information regarding these debt arrangements, including the covenants, restrictions and events of default under the agreements.) The Company believes that it is in compliance with the covenants and restrictions included in the agreements governing these debt arrangements as of the date of this Quarterly Report on Form 10-Q.

 

On November 15, 2013, the Company entered into an At Market Sales Arrangement (“ATM”) under which the Company may, at its discretion, sell up to $30.0 million of shares of its common stock (before expenses) through its sales agent, MLV & Co. LLC (“MLV”).  During the three months ended September 30, 2014, the Company received net proceeds of $3.7 million, including sales and commissions and offering expenses, from sales of approximately 2.1 million shares of its common stock at an average sales price of approximately $1.75 per share under the ATM. (See Note 12, “Stockholders’ Equity”, for further information regarding the ATM.)   At September 30, 2014, there was approximately $17.1 million of availability under the Company’s ATM (see further discussion below).  Sales of common stock under the ATM may be made from time to time, at the Company’s discretion, in order to enhance liquidity.

The Company expects that it will require additional capital, either from sales under the ATM or other sources, to fund its operations, including the Ghodawat arbitration award liability, capital expenditures and scheduled cash payments under its debt obligations through September 30, 2015. The Company’s plans include, and its liquidity is highly dependent on, its ability to increase revenues, its ability to control its operating costs, its ability to utilize the ATM to raise additional capital or raise capital from other sources, and its ability to maintain compliance with the covenants and restrictions on its debt obligations (or obtain waivers from its lender in the event of non-compliance). There can be no assurance that the Company will be able to continue to utilize the ATM or raise capital from other sources.

In addition, the Company is actively seeking to sell its minority investment in Tres Amigas, LLC, a Delaware limited liability Company (“Tres Amigas”).  The Company no longer believes its investment in Blade Dynamics is recoverable and fully impaired its remaining investment in Blade Dynamics Ltd. (“Blade Dynamics”) during the three months ended September 30, 2014. (See Note 14, “Minority Investments”, for further information about such investments.) There can be no assurance that the Company will be able to sell these investments on commercially reasonable terms or at all.