SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x



Common Stock, par value $0.01 per share		~~19,194,407~~21,228,071
Class		Outstanding as of ~~August 3, 2017~~July 27, 2018

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

(In thousands, except per share data)

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

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 June 30, ~~2017~~2018 and ~~2016~~2017 and the financial position at June 30, ~~2017.~~2018; however, these results are not necessarily indicative of results which may be expected for the full year. The interim condensed consolidated financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended March 31, 2018, and notes thereto, included in the Company’s annual report on Form 10-K for the year ended March 31, 2018 filed with the Securities and Exchange Commission on June 6, 2018.

The Company has experienced recurring operating losses and as of June 30, ~~2017,~~2018, the Company had an accumulated deficit of ~~$970.8~~$993.0 million. In addition, the Company has experienced recurring negative operating cash flows. At June 30, ~~2017,~~2018, the Company had cash and cash equivalents of ~~$37.5 million.~~$26.8 million, with no outstanding debt other than ordinary trade payables. Cash used in operations for the three months ended June 30, ~~2017~~2018 was ~~$5.4~~$6.9 million.

From April 1, 2011 through the date of this filing, the Company has reduced its global workforce substantially, including a restructuring action announced on April 4, 2017 which led to a $1.3 million restructuring charge in the three months ended June 30, 2017. See Note 13 "Restructuring" for further discussion of this action. The Company has taken actions to consolidate certain business operations to reduce facility costs.substantially. As of June 30, ~~2017,~~2018, the Company had a global workforce of ~~326~~231 persons. The Company plans to closely monitor its expenses and, if required, expects to further reduce operating costs and capital spending to enhance liquidity.

Over the last several years, the Company has entered into several debt and equity financing arrangements in order to ~~enhance liquidity.~~raise capital. Since April 1, 2012, the Company has generated aggregate cash flows from financing activities of $85.0 million. Included in this amount are proceeds of approximately $17.0 million after deducting underwriting discounts and commissions and offering expenses payable by the Company, from the Company's equity offering completed on May 10, 2017, which includes the subsequent exercise by the underwriters of their option in full to purchase additional shares. The Company terminated its At Market Issuance Sales Agreement ("ATM") with FBR Capital Markets & CoCo. in conjunction with this equity offering. See Note ~~12 “Stockholders~~14 “Stockholders' Equity” for further discussion of these financing arrangements.

On July 3, 2018, the Company and its wholly-owned subsidiaries Suzhou AMSC Superconductor Co. Ltd. (“AMSC China”) and AMSC Austria GMBH (“AMSC Austria”) entered into a settlement agreement (the “Settlement Agreement”) with Sinovel Wind Group Co., Ltd. (“Sinovel”). The Settlement Agreement settles the litigation and arbitration proceedings between the Company and Sinovel, as further described in Note 15 “Commitments and Contingencies". Under the terms of the Settlement Agreement, Sinovel has agreed to pay AMSC China an aggregate cash amount in Renminbi (RMB) equivalent to $57.5 million, consisting of two installments. Sinovel paid the first installment of $32.5 million on July 4, 2018, and has agreed to pay the second installment of $25.0 million (the “Second Payment”) within ten (10) months after the U.S. District Court for the Western District of Wisconsin (the “District Court”) delivers the first sentence against Sinovel in the criminal case entitled United States v. Sinovel Wind Co., Ltd., Case Number 3:13-cr-00084-jdp. On July 6, 2018, the District Court delivered such sentence, and therefore the Second Payment is due by May 6, 2019 (the “Second Payment Due Date”). On July 24, 2018, AMSC China paid $30.7 million to AMSC Austria to settle outstanding inter-company balances.

On February 5, 2018, the Company entered into a Purchase and Sale Agreement (the “PSA”) with 64 Jackson, LLC (the “Purchaser”) and Stewart Title Guaranty Company (“Escrow Agent”), to effectuate the sale of certain real property located at 64 Jackson Road, Devens, Massachusetts, including the building that had served as the Company’s headquarters (collectively, the “Property”), in exchange for total consideration of $23.0 million, composed of (i) cash consideration of $17.0 million, and (ii) a $6.0 million subordinated secured commercial promissory note payable to the Company (the "Seller Note"). Subsequently, the Seller, the Purchaser and Jackson 64 MGI, LLC (“Assignee”) entered into an Assignment of Purchase and Sale Agreement (the “Assignment Agreement”), pursuant to which the Purchaser assigned all of its rights and interests in the PSA to the Assignee and the Assignee agreed to assume all of the Purchaser’s obligations and liabilities under the PSA. The transaction closed on March 28, 2018, at which time the Company received, from the Assignee, cash consideration, net of certain agreed upon closing costs, of $16.9 million, and the Seller Note at an interest rate of 1.96%. The Seller Note is secured by a subordinated second mortgage on the Property and a subordinated second assignment of leases and rents.

In December 2015, the Company entered into a set of strategic agreements valued at approximately $210.0 million with Inox Wind Ltd. (“Inox” or "Inox Wind"), which includes a multi-year supply contract pursuant to which the Company will supply electric control systems to Inox and a license agreement allowing Inox to manufacture a limited number of electrical control systems. After Inox purchases the specified number of electrical control systems required under the terms of the supply contract, Inox agreed that the Company will continue as Inox’s preferred supplier and Inox will be required to purchase from the Company a majority of its electric control systems requirements for an additional three-year period.

The Company believes that based on the information presented above and its quarterly management assessment, ~~that~~ it has sufficient liquidity to fund its operations and capital expenditures for the next twelve months following the issuance of the financial statements for the three months ended June 30, ~~2017.~~2018. The Company’s liquidity is highly dependent on its ability to increase revenues, including its ability to collect revenues under our agreements with Inox, its ability to control its operating costs, and its ability to raise additional capital, if necessary. There can be no assurance

that the Company will be able to continue to raise additional capital, on favorable terms or at all, from other sources or execute on any other means of improving liquidity described above.

2. Revenue Recognition

On April 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, and all the related amendments and applied it to all contracts that were not completed as of April 1, 2018 using the modified retrospective method. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment of less than $0.1 million to the opening balance of accumulated deficit. Prior period amounts have not been restated and continue to be reported under the accounting standards in effect for those periods.

The adoption of this guidance will lead to recognizing certain revenue transactions sooner than in the past on certain contracts, as the Company will need to estimate the revenue it will be entitled to upon contract completion, and later on other contracts, such as Consulting and Statement of Work transactions, due to the lack of an enforceable right to payment for performance obligations satisfied over time, specifically in the technology product line. The Company does not expect a material impact to its consolidated statements of operations on an ongoing basis from the adoption of the new standard.

In addition, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Non-financial Assets (Subtopic 610-20), in February 2017, to amend ASC 610-20, Other Income - Gains and Losses from the Derecognition of Non-financial Assets, (issued at the same time as ASC 606), which provides a model for the measurement and recognition of gains and losses on the sale of nonfinancial assets, such as property and equipment, including real estate. As a result of adopting ASU 2017-05 on April 1, 2018, the Company recognized an adjustment to the opening balance of accumulated deficit for the deferred gain from the March 28, 2018, sale of the Company's former headquarters in Devens, Massachusetts in the amount of $0.1 million.

The cumulative effect to the Company’s consolidated April 1, 2018 balance sheet from the adoption of the new revenue standard and the sale of nonfinancial assets was as follows (in thousands):



	March 31, 2018			Opening Adjustment			April 1, 2018
Assets:
Inventory	$	19,780		$	(1,599	)	$	18,181
Prepaid expenses and other current assets	2,947			1,599			4,546
Notes receivable, long term portion	2,559			105			2,664

Liabilities and Stockholders' Equity:
Accounts payable and accrued expenses	$	(12,625	)	$	(2,729	)	$	(15,354	)
Deferred revenue	(13,483		)	2,657			(10,826		)

Accumulated deficit	$	(988,333	)	$	(33	)	$	(988,366	)

Included in the opening adjustment are reclassifications for deferred program costs and deferred revenue for previous balances related to agreements that no longer meet the definition of a customer contract under ASC 606. The impact of adoption on the Company’s opening balances and for the three months ended June 30, 2018, in all financial statement line items impacted by ASC 606 was immaterial from the amount that would have been reported under the previous guidance.

The Company’s revenues in its Grid segment are derived primarily through transmitting and distributing power, providing planning services that allow it to identify power grid needs and risks, and developing ship protection systems for the US Navy. The Company’s revenues in its Wind segment are derived primarily through supplying advanced power electronics and control systems, licensing our highly engineered wind turbine designs, and providing extensive customer support services to wind turbine manufacturers. The Company records revenue based on a five-step model in accordance with ASC 606. For its customer contracts, the Company identifies the performance obligations, determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) control of goods or services is transferred to the customer. As of June 30, 2018, 82% of revenue was recognized at the point in time when control transferred to the customer, with the remainder being recognized over time.

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

In the Company's service and technology development product line, there are multiple different types of transactions but each of them begins with a contract with a customer that summarizes each product sold to a customer, which typically represents distinct performance obligations. The technology development transactions are primarily for activities that have no alternative use and for which a profit can be expected throughout the life of the contract. In these cases, the revenue is recognized over time, but in the instances where the profit cannot be assured throughout the entire contract then the revenue is recognized at a point in time. Each contract's transaction price is allocated to each distinct performance obligation using the respective standalone selling price which is determined primarily using the cost plus expected margin approach. The ongoing service transactions are for service contracts that provide benefit to the customer simultaneously as the Company performs its obligations, and therefore this revenue is recognized ratably over time throughout the effective period of these contracts. The transaction prices on these contracts are allocated based on an adjusted market approach which is re-assessed annually for reasonableness. The field service transactions include contracts for delivery of goods and completion of services made at the customer's requests, which are not deemed satisfied until the work has been completed and/or the requested goods have been delivered, so all of this revenue is recognized at the point in time when the control changes, and at allocated prices based on the adjusted market approach driven by standard price lists. The royalty transactions are related to certain contract terms on transactions in the Company's equipment and systems product line based on activity as specified in the contracts. The transaction prices of these agreements are calculated based on an adjusted market approach as specified in the contract. The Company reports royalty revenue for usage-based royalties when the sales have occurred. In circumstances when collectability is not assured and a contract does not exist under ASC 606, revenue is deferred until a non-refundable payment has been received for substantially all the amount that is due and there are no further remaining performance obligations.

The Company's service contracts can include a purchase order from a customer for specific goods in which each item is a distinct performance obligation satisfied at a point in time at which control of the goods is transferred to the customer which occurs based on the contracted delivery terms or when the requested service work has been completed. The transaction price for these goods is allocated based on the adjusted market approach considering similar transactions under similar circumstances. Service contracts are also derived from ongoing maintenance contracts and extended service-type warranty contracts. In these transactions, the Company is contracted to provide an ongoing service over a specified period of time. As the customer is consuming the benefits as the service is being provided the revenue is recognized over time ratably.

The Company’s policy is to not accept volume discounts, product returns, or rebates and allowances within its contracts. In the event a contract was approved with any of these terms, it would be evaluated for variable consideration, estimated and recorded as a reduction of revenue in the same period the related product revenue was recorded.

The Company provides assurance-type warranties on all product sales for a term of typically one to two years, and extended service-type warranties at the customers’ option for an additional term ranging up to four additional years. The Company accrues for the estimated warranty costs for assurance warranties at the time of sale based on historical warranty experience plus any known or expected changes in warranty exposure. For all extended service-type warranties, the Company recognizes the revenue ratably over time during the effective period of the services.

The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with revenue-producing activities. The Company has elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized. The Company has elected to recognize incremental costs of obtaining a contract as expense when incurred except in contracts where the amortization period would exceed twelve months; in such cases the long term amount will be assessed for materiality. The Company has elected to not adjust the promised amount of consideration for the effects of a significant financing component if the period of financing is twelve months or less.

The Company’s contracts with customers do not typically include extended payment terms and may include milestone billing over the life of the contract. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from delivery.

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



	Three months ended June 30, 2018
Product Line:	Grid		Wind
Equipment and systems	$	7,462	$	3,492
Services and technology development	1,467		186
Total	$	8,929	$	3,678

Region:
Americas	$	7,496	$	23
Asia Pacific	808		3,595
EMEA	625		60
Total	$	8,929	$	3,678

As of June 30, 2018 and March 31, 2018, the Company’s contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations. The Company's accounts receivable balance is made up entirely of customer contract related balances. Changes in the Company’s contract assets, which are included in “Unbilled AR” and "Deferred program costs" (see Note 7, “Accounts Receivable” and Note 8, "Inventory" for a reconciliation to the condensed consolidated balance sheet) and contract liabilities, which are included in the current portion and long term portion of “deferred revenue” in the Company’s condensed consolidated balance sheets, are as follows:



	Unbilled AR			Deferred Program Costs			Contract Liabilities
Beginning balance as of March 31, 2018	$	3,016		$	2,567		$	21,937
Impact of adoption of ASC 606	—			(1,599		)	(2,657		)
Increases for costs incurred to fulfill performance obligations	—			1,132			—
Increase (decrease) due to customer billings	(3,221		)	—			4,281
Decrease due to cost recognition on completed performance obligations	—			(48		)	—
Increase (decrease) due to recognition of revenue based on transfer of control of performance obligations	4,824			(9		)	(3,324		)
Other changes and FX impact	(16		)	34			(764		)
Ending balance as of June 30, 2018	$	4,603		$	2,077		$	19,473

The Company’s remaining performance obligations represent the unrecognized revenue value of the Company’s contractual commitments. The Company’s performance obligations may vary significantly each reporting period based on the timing of major new contractual commitments. As of June 30, 2018, the Company had outstanding performance obligations on existing contracts under ASC 606 to be recognized in the next twelve months of approximately $50.6 million. There is also approximately $8.1 million of outstanding performance obligations to be recognized over a period of thirteen to sixty months. The remaining performance obligations are subject to customer actions and therefore the timing of revenue recognition cannot be reasonably estimated. The twelve month performance obligations include anticipated shipments to Inox based on the twelve month rolling forecast provided by Inox on the multi-year supply contract. The quantities specified in any forecast provided by Inox related to the multi-year supply contract are firm and irrevocable for the first three months of a twelve month rolling forecast. The timing of the performance obligations beyond the Inox twelve month provided forecast are not determinable and therefore are not included in the total remaining performance obligations.

The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three months ended June 30, 2018 and 2017:



	Reportable Segment	June 30, 2018		June 30, 2017
Inox Wind Limited	Wind	25	%	22	%
Vestas	Grid	36	%	—	%
U.S. Navy	Grid	<10%		35	%

3. Stock-Based Compensation

The Company accounts for its stock-based compensation at fair value. The following table summarizes stock-based compensation expense by financial statement line item for the three months ended June 30, ~~2017~~2018 and ~~2016~~2017 (in thousands):

The Company issued 34,480 shares of immediately vested common stock and 276,000 shares of restricted stock awards during the three months ended June 30, 2018, and issued 33,487 shares of immediately vested common stock during the three months ended June 30, ~~2017, and 25,000 shares of immediately vested common stock and 136,000 restricted stock awards during the three months ended June 30, 2016.~~2017. These restricted stock awards generally vest over 2-3 years. Awards for restricted stock include both time-based and performance-based awards. For options and awards that vest upon the passage of time, expense is being recorded over the vesting period. Performance-based awards are expensed over the requisite service period based on probability of achievement. In addition, the Company issued 16,667 restricted stock units under the 2007 Stock Incentive Plan during the three months ended June 30, 2017, each of which represents the right to receive one share of common stock in connection with a

severance agreement entered into with one of ~~our~~the Company's former executive officers. These restricted stock units vested and were settled in shares of common stock on the eighth day after receipt of an irrevocable release.

The estimated fair value of the Company’s stock-based awards, less expected annual forfeitures, is amortized over the awards’ service period. The total unrecognized compensation cost for unvested outstanding stock options was ~~$0.4~~$0.2 million at June 30, ~~2017.~~2018. This expense will be recognized over a weighted average expense period of approximately ~~1.7~~0.7 years. The total unrecognized compensation cost for unvested outstanding restricted stock was ~~$1.3~~$3.5 million at June 30, ~~2017.~~2018. This expense will be recognized over a weighted-average expense period of approximately ~~1.4~~2.1 years.

The Company did not grant any stock options during the three months ended June 30, ~~2017~~2018 or ~~2016.~~2017.

3.4. Computation of Net Loss per Common Share

Basic net loss per share (“EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Where applicable, diluted EPS is computed by dividing the net loss by the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period, calculated using the treasury stock method. Common equivalent shares include the effect of restricted stock, exercise of stock options and warrants and contingently issuable shares. For the three months ended June 30, 2018, 1.1 million shares were not included in the calculation of diluted EPS as they were considered anti-dilutive, of which 0.2 million relate to outstanding stock options, and 0.9 million relate to outstanding warrants. For the three months ended June 30, 2017, 1.5 million shares were not included in the calculation of diluted EPS as they were considered anti-dilutive, of which 0.3 million relate to outstanding stock options, and 1.2 million relate to outstanding warrants. For the three months ended June 30, 2016, 1.6 million shares were not included in the calculation of diluted EPS as they were considered anti-dilutive, of which 0.4 million relate to outstanding stock options, and 1.2 million relate to outstanding warrants.

The following table reconciles the numerators and denominators of the earnings per share calculation for the three months ended June 30, ~~2017~~2018 and ~~2016~~2017 (in thousands, except per share data):

4.5. Acquisition and Related Goodwill

Acquisition of Infinia Technology Corporation

On September 25, 2017, the Company acquired Infinia Technology Corporation ("ITC") for approximately $3.8 million (the "Acquisition"). Located in Richmond, Washington, ITC is a technology firm founded in 2009 specializing in the design, development and commercialization of cryo-coolers for a wide range of applications. This technology supports the Company's efforts with the U.S. Navy and Ship Protection Systems (“SPS”) products.

The results of ITC's operations, which were not significant from the date of acquisition until June 30, 2018, are included in the Company’s consolidated results from the date of Acquisition of September 25, 2017, through the three months ended June 30, 2018. Assuming the Acquisition had occurred on April 1, 2017 and 2016, the impact on the consolidated results of the Company would not have been significant.

At the time of the Acquisition, the Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the date of Acquisition. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired of $1.7 million has been recorded as goodwill in the Company's Grid segment. Goodwill represents the value associated with the acquired workforce and synergies related to the merger of the two companies.

The Company did not identify any triggering events in the three months ended June 30, 2018, that would require interim impairment testing of goodwill.

6. Fair Value Measurements

A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:

The Company provides a gross presentation of activity within Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments. The Company did not have any transfers of assets and liabilities from Level 1, ~~and~~ Level 2 toor Level 3 of the fair value measurement hierarchy during the three months ended June 30, ~~2017.~~2018.

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value on a recurring basis, measured as of June 30, ~~2017~~2018 and March 31, ~~2017~~2018 (in thousands):

The table below reflects the activity for the Company’s major classes of liabilities measured at fair value on a recurring basis (in thousands):

Warrants
April 1, 2017 $ 1,923
Mark to market adjustment (925 )
Balance at June 30, 2017 $ 998

Warrants
April 1, 2016 $ 3,227
Mark to market adjustment (1,304 )
Balance at March 31, 2017 $ 1,923



	Warrants
April 1, 2018	$	1,217
Mark to market adjustment	464
Balance at June 30, 2018	$	1,681



	Warrants
April 1, 2017	$	1,923
Mark to market adjustment	(925		)
Balance at June 30, 2017	$	998

Valuation Techniques

Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificates of deposits and money market accounts.

Warrants were issued in conjunction with a Securities Purchase Agreement (the “Purchase Agreement”) with Capital Ventures International (“CVI”) ~~in April 2012,~~, an equity offering to Hudson Bay Capital in November 2014, and a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”) ~~in June 2012 and through subsequent amendments.~~. These warrants issued to CVI expired on October 4, 2017. See Note ~~10, “Debt,” and Note 11~~13 “Warrants and Derivative Liabilities,” for additional information. ~~These~~Outstanding warrants are subject to revaluation at each balance sheet date, and any change in fair value will be recorded as a change in fair value in derivatives and warrants until the earlier of their exercise or expiration.

The Company relies on various assumptions in a lattice model to determine the fair value of warrants. The Company has valued the warrants within Level 3 of the valuation hierarchy. See Note ~~11,~~13, “Warrants and Derivative Liabilities,” for a discussion of the warrants and the valuation assumptions used.

5.7. Accounts Receivable

Accounts receivable at June 30, ~~2017~~2018 and March 31, ~~2017~~2018 consisted of the following (in thousands):



	June 30, 2018			March 31, 2018
Accounts receivable (billed)	$	6,983		$	4,403
Accounts receivable (unbilled)	4,603			3,016
Less: Allowance for doubtful accounts	(54		)	(54		)
Accounts receivable, net	$	11,532		$	7,365

Inventory, net of reserves, at June 30, ~~2017~~2018 and March 31, ~~2017~~2018 consisted of the following (in thousands):

The Company recorded inventory write-downs of $0.1 million and $0.3 million for ~~each of~~ the three months ended June 30, 2018 and 2017, ~~and 2016.~~respectively. These write downs were based on evaluating its inventory on hand for excess quantities and obsolescence.

Deferred program costs as of June 30, ~~2017~~2018 and March 31, ~~2017~~2018 primarily represent costs incurred on programs ~~accounted for under contract accounting~~ where the Company needs to complete ~~development milestones~~performance obligations before the related revenue and costs will be recognized.

7.9. Note Receivable

The Company entered into a purchase and sale agreement dated February 1, 2018, for the sale of the Devens facility (including land, building and building improvements) located at 64 Jackson Road, Devens, Massachusetts to 64 Jackson Road, LLC, a limited liability company, in the amount of $23.0 million. The terms for payment included a $1.0 million security deposit, and a note receivable for $6.0 million payable to the Company with the remaining cash net of certain adjustments for closing costs at the date of settlement. The note receivable is due in two $3.0 million installments plus accrued interest at a rate of 1.96% on March 31, 2019 and March 31, 2020. The note is subordinate to East Boston Savings Bank's mortgage on the Devens property.

The note receivable was discounted to its present value of $5.7 million utilizing a discount rate of 6%, which was based on management’s assessment of what an appropriate loan at current market rates would be. The $0.3 million discount was recorded as an offset to the long term portion of the note receivable, and is being amortized to interest income over the term of the note. In addition, the resulting gain of $0.1 million from the sale of the Devens property which was deferred previously was recorded as a component of the cumulative effect of an accounting change upon the adoption of ASU 2017-05 which was issued as a part of ASU 2014-09. This gain was recorded as an offset to the opening accumulated deficit.

Note receivable as of June 30, 2018 and March 31, 2018 consisted of the following (in thousands):



Current assets	June 30, 2018			March 31, 2018
Note receivable, current	$	3,000		$	3,000
Total current note receivable	$	3,000		$	3,000

Long term assets
Note receivable, long term	$	3,000		$	3,000
Note receivable discount	(280		)	(336		)
Deferred gain on sale	—			(105		)
Total long term note receivable	$	2,720		$	2,559

10. Property, Plant and Equipment

The cost and accumulated depreciation of property and equipment at June 30, ~~2017~~2018 and March 31, ~~2017~~2018 are as follows (in thousands):

Depreciation expense was ~~$4.2~~$1.1 million and ~~$1.7~~$4.2 million for the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Included in depreciation expense for the three months ended June 30, 2017 is $2.5 million of accelerated depreciation recorded to cost of ~~goods sold~~revenues related to revised estimates of the remaining useful lives of certain pieces of manufacturing equipment. Construction in progress - equipment primarily includes capital investments in the Company's newly leased facility in Ayer, Massachusetts.

8.11. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at June 30, ~~2017~~2018 and March 31, ~~2017~~2018 consisted of the following (in thousands):

The Company generally provides a one to ~~three~~two year warranty on its products, commencing upon ~~installation.~~delivery or installation where applicable. A provision is recorded upon revenue recognition to cost of revenues for estimated warranty expense based on historical experience.

Product warranty activity was as follows (in thousands):

The Company recorded an income tax ~~expense~~benefit of less than $0.1 ~~million and $0.3~~ million in the three months ended June 30, 2018. The Company recorded income tax expense of $0.1 million in the three months ended June 30, 2017.

On December 22, 2017, the Tax Cuts and ~~2016, respectively.~~ Jobs Act of 2017 (the “Act”) was signed into law. ASC Topic 740 requires deferred tax assets and liabilities to be measured using the enacted rate for the period in which they are expected to reverse. Accordingly, the new 21% U.S. Federal corporate tax rate was used to measure the U.S. deferred tax assets and liabilities that will reverse in future periods. The Company's deferred tax attributes are generally subject to a full valuation allowance in the U.S. and thus, this adjustment to the attributes did not impact the tax provision. In addition, the new legislation includes a one-time transition tax in which all foreign earnings are deemed to be repatriated to the U.S. and taxable at specified rates included within the Act. The Company reviewed the accumulated foreign earnings aggregated across all non U.S. subsidiaries, net of foreign deficits. The Company believes it is in an aggregate net foreign deficit position for U.S. tax purposes and therefore not liable for the transition tax. The SEC staff issued Staff Accounting Bulletin No. 118, which provides guidance for companies that have not completed their accounting for the income tax effects of the Act in the period of enactment, allowing for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. The Company made reasonable estimates and does not anticipate significant revisions to the accounting for the tax impact of the Act, but has not completed the accounting for the tax effects of the Act at June 30, 2018. The Company will continue to assess its provision for income taxes as future guidance is issued, but does not currently anticipate significant revisions will be necessary. The ultimate impact may differ from the Company's provisional estimates, possibly materially, due to additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be used and actions the Company may take as a result of the Act. The accounting is expected to be complete within the one year measurement period in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if, based on the technical merits, it is more likely than not the position will be sustained upon audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company

re-evaluates these uncertain tax positions on a quarterly basis. The evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Any changes in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision. The Company did not identify any uncertain tax positions in the three months ended June 30, ~~2017~~2018 and did not have any gross unrecognized tax benefits as of March 31, ~~2017.~~2018.

~~10. Debt~~13. Warrants and Derivative Liabilities

~~Senior Secured Term Loans~~

On December 19, 2014, the Company entered into a second amendment to its Loan and Security Agreement with Hercules (the “Hercules Second Amendment”) and entered into a new term loan, borrowing an additional $1.5 million (the “Term Loan C”). After closing fees and expenses, the net proceeds to the Company for the Term Loan C were $1.4 million. The Company ~~made interest only payments~~accounts for its warrants and contingent consideration as liabilities due to certain adjustment provisions within the instruments, which require that they be recorded at fair value. The warrants are subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of warrants until the earlier of its expiration or its exercise at which time the warrant liability will be reclassified to equity. The Company calculated the fair value of the warrants utilizing an ~~interest rate of 11% through March 16, 2017 when the interest rate was increased to 11.25%~~integrated lattice model. See Note 6, "Fair Value Measurements", ~~until maturity on June 1, 2017, when Term Loan C was repaid in its entirety.~~

for further discussion.

Hercules ~~received~~Warrants

The Company issued Hercules warrants to purchase 13,927 shares of common stock (the “First Warrant”) and 25,641 shares of common stock (the “Second Warrant”) in conjunction with prior term loans that have been repaid in full. Due to certain adjustment provisions within the warrants, they qualified for liability accounting. The fair value of the warrants, $0.4 million and $0.2 million, respectively, was recorded upon issuance to debt discount and a warrant liability. In conjunction with the Hercules Second Amendment, the First Warrant and Second Warrant were cancelled and replaced with the issuance of a new warrant (the “Hercules Warrant”) to purchase 58,823 shares of common stock at an exercise price of $11.00 per share, subject to adjustment. The Hercules Warrant expires on June 30, 2020. See Note 11, “Warrants and Derivative Liabilities”, for a discussion on the Hercules Warrant and the valuation assumptions used.

During the three months ended June 30, 2016, the Company recorded non-cash interest expense for amortization of the debt discount related to a prior term loan of less than $0.1 million. Under Term Loan C, the total debt discount, including the Hercules Warrant, end of term fee and legal and origination costs of $0.3 million was amortized into interest expense over the term of the Term Loan C using the effective interest method. During each of the three months ended June 30, 2017 and 2016, the Company recorded non-cash interest expense for amortization of the debt discount related to the Term Loan C of less than $0.1 million.

Interest expense on the Term Loans for the three months ended June 30, 2017 and 2016, was less than $0.1 million and $0.2 million, respectively, each of which included less than $0.1 million of non-cash interest expense related to the amortization of the debt discount on the respective Term Loans.

~~11. Warrants and Derivative Liabilities~~

~~Senior Convertible Note Warrant~~

On April 4, 2012, the Company entered into a Purchase Agreement with Capital Ventures International ("CVI"). The Purchase Agreement included a warrant to purchase 309,406 shares of the Company’s common stock (the “Original Warrant”). Pursuant to an exchange in October 2013, the Original Warrant was exchanged for a new warrant (the “Exchanged Warrant”). The Exchanged Warrant is exercisable at any time on or after the date that is six months after the issuance of the Original Warrant until its expiration on October 4, 2017. The Exchanged Warrant entitles CVI to purchase shares of the Company’s common stock for a period of five years from the date the Original Warrant becomes exercisable at an exercise price equal to $12.83 per share, subject to certain price-based and other anti-dilution adjustments. The Exchanged Warrant may not be exercised if, after giving effect to the conversion, CVI together with its affiliates, would beneficially own in excess of 4.99% of the Company’s common stock. This percentage may be raised to any other percentage not in excess of 9.99% at the option of CVI, upon at least 61-days prior notice to the Company, or lowered to any other percentage, at the option of CVI, at any time.

The Company calculated the fair value of the Exchanged Warrant, utilizing an integrated lattice model. The lattice model is an option pricing model that involves the construction of a binomial tree to show the different paths that the underlying asset may take over the option’s life. A lattice model can take into account expected changes in various parameters such as volatility over the life of the options, providing more accurate estimates of option prices than the Black-Scholes model. See Note 4, "Fair Value Measurements", for further discussion.

The Company accounts for the Exchanged Warrant as a liability due to certain adjustment provisions within the warrant, which requires that it be recorded at fair value. The Exchanged Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of derivatives and warrants until the earlier of its expiration or its exercise at which time the warrant liability will be reclassified to equity.

~~Following is a summary of the key assumptions used to calculate the fair value of the Exchanged Warrant:~~



~~Fiscal Year 17~~	~~June 30,~~ ~~2017~~
~~Risk-free interest rate~~	~~1.05%~~
~~Expected annual dividend yield~~	—
~~Expected volatility~~	~~78.25%~~
~~Term (years)~~	~~0.26~~
~~Fair value~~	$—

~~The Company recorded no change in the fair value of the Exchanged Warrant during the three months ended June 30, 2017 and 2016, respectively.~~

~~Hercules Warrant~~

On December 19, 2014, the Company entered into the Hercules Second Amendment. ~~See Note 10, “Debt” for additional information.~~ In conjunction with the agreement, the Company issued the Hercules Warrant to purchase 58,823 shares of the Company’s common stock. The Hercules Warrant is exercisable at any time after its issuance at an exercise price of ~~$8.02~~$7.85 per share, subject to certain price-based and other anti-dilution adjustments, including the equity offering in May 2017, the acquisition of ITC with common stock in September 2017 and sales of common stock under the ATM entered into in January 2017, and expires on June 30, 2020. ~~The Company accounts for the Hercules Warrant as~~This warrant had a ~~liability due to certain provisions within the warrant. The Hercules Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in~~ fair value of ~~derivatives and warrants until the earlier of its expiration or its exercise, at which time the warrant liability will be reclassified to equity.~~

~~Following is a summary of the key assumptions used to calculate the fair value of the Hercules Warrant:~~



~~Fiscal Year 17~~	~~June 30,~~ ~~2017~~
~~Risk-free interest rate~~	~~1.58%~~
~~Expected annual dividend yield~~	—
~~Expected volatility~~	~~67.76%~~
~~Term (years)~~	~~2.97~~
~~Fair value~~	~~$0.1 million~~

~~The Company recorded a net gain, resulting from a decrease of less than~~ $0.1 million ~~in fair value~~as of ~~derivatives and warrants during the three months ended~~ June 30, ~~2017~~2018 and ~~a net loss, resulting from an increase in the fair value of the Hercules Warrant of less than $0.1 million during the three months ended June 30, 2016.~~March 31, 2018.

November 2014 Warrant

On November 13, 2014, the Company completed an offering of 909,090 units of the Company’s common stock with Hudson Bay Capital. Each unit consisted of one share of the Company’s common stock and 0.9 of a warrant to purchase one share of common stock, or a warrant to purchase in the aggregate 818,181 shares (the “November 2014 Warrant”). The November 2014 Warrant is exercisable at any time, at an exercise price equal to ~~$7.98~~$7.81 per share, subject to certain price-based and other anti-dilution adjustments including those noted above, and expires on November 13, 2019. The Company accounts for the November 2014 Warrant as a liability due to certain provisions within the warrant. The November 2014 Warrant is subject to revaluation at each balance sheet date and any change in fair value is recorded as a change in fair value of derivatives and warrants until the earlier of its expiration or its exercise, at which time the warrant liability will be reclassified to equity.

Following is a summary of the key assumptions used to calculate the fair value of the November 2014 Warrant:



Fiscal Year 1718	June 30, ~~2017~~2018
Risk-free interest rate	~~1.44%~~2.40%
Expected annual dividend yield	—
Expected volatility	~~67.21%~~67.40%
Term (years)	~~2.37~~1.37
Fair value	$~~0.9~~1.6 million



Fiscal Year 17	March 31, 2018	December 31, 2017	September 30, 2017	June 30, 2017
Risk-free interest rate	2.20%	1.87%	1.49%	1.44%
Expected annual dividend yield	—	—	—	—
Expected volatility	65.86%	65.86%	65.64%	67.21%
Term (years)	1.62	1.87	2.12	2.37
Fair value	$1.1 million	$0.4 million	$0.8 million	$0.9 million

The Company recorded a net loss of $0.5 million and a net gain of $0.9 million, resulting from aan increase and decrease in the fair value of the November 2014 Warrant induring the three months ended June 30, 2018 and 2017, ~~and a net loss, resulting from an increase in the fair value of the November 2014 Warrant of $0.6 million in the three months ended June 30, 2016.~~respectively.

~~12.~~14. Stockholders’ Equity

On May 5, 2017, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc., as representative of several underwriters named therein, relating to the issuance and sale (the "Offering") of 4.0 million shares of the Company's common stock at a public offering price of $4.00 per share. The net proceeds to the Company from the Offering were approximately $14.7 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Offering closed on May 10, 2017. In addition, the Company granted the underwriters a 30-day option (the “Option”) to purchase up to an additional 600,000 shares of common stock at the public offering price. On May 24, 2017, the underwriters notified the Company that they had exercised their Option in ~~full, their Option.~~full. The net proceeds to the Company from the Option were approximately $2.3 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The total net proceeds to the Company from the Offering and the Option were approximately $17.0 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Option closed on May 26, 2017.

~~On January 27, 2017,~~ In conjunction with the equity offering, the Company ~~entered into an~~terminated a previous At Market Issuance Sales Agreement ("~~ATM"), pursuant to which,~~ATM) with FBR Capital Markets & Co. where the Company could, at its discretion, sell up to $10.0 million of the Company’s common stock through its sales agent, FBR Capital Markets & Co. ("FBR"). Sales of common stock made under the ATM were made pursuant to the prospectus supplement dated January 27, 2017, which supplements the prospectus dated October 1, 2014, included in the shelf registration statement that AMSC filed with the SEC on September 19, 2014.

During the year ended March 31, 2017, the Company received net proceeds of $2.5 million, from sales of approximately 379,693 shares of its common stock at an average sales price of approximately $6.79 per share under the ATM. No sales of the Company's common ~~stock were made under the ATM after March 31, 2017. On May 4, 2017, the Company provided to FBR a notice of termination of the ATM.~~stock.

~~13.~~15. Commitments and Contingencies

From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the consolidated financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

On ~~September 13, 2011,~~July 3, 2018, the Company, ~~commenced a series~~AMSC China and AMSC Austria entered into the Settlement Agreement with Sinovel. The Settlement Agreement settles the litigation and arbitration proceedings between the Company and Sinovel listed on Schedule 2 of ~~legal actions~~the Settlement Agreement (the “Proceedings”), and any other civil claims, counterclaims, causes of action, rights and obligations directly or indirectly relating to the subject matters of the Proceedings and the contracts between the Company and Sinovel listed on Schedules 1 and 4 of the Settlement Agreement (the “Contracts”), subject to the exception described in Section 1.1 of the Settlement Agreement. The Settlement Agreement was filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 9, 2018.

Under the terms of the Settlement Agreement, Sinovel has agreed to pay AMSC China an aggregate cash amount in Renminbi (RMB) equivalent to $57.5 million, consisting of two installments. Sinovel paid the first installment of $32.5 million on July 4, 2018, and has agreed to pay the second installment of $25.0 million (the “Second Payment”) within ten (10) months after the U.S. District Court for the Western District of Wisconsin (the “District Court”) delivers the first sentence against Sinovel in the criminal case entitled United States v. Sinovel Wind ~~Group~~ Co., Ltd. ~~(“Sinovel”~~, Case Number 3:13-cr-00084-jdp. On July 6, 2018, the District Court delivered such sentence, and therefore the Second Payment is due by May 6, 2019 (the “Second Payment Due Date”). Mr. Wenyuan Wei, former Sinovel chairman and a current Sinovel shareholder, has delivered a letter of guarantee (the “Guarantee”) to the Company for the Second Payment should Sinovel fail to make such payment by the Second Payment Due Date.

In addition, pursuant to the terms of the Settlement Agreement, the Company and AMSC Austria have granted Sinovel a non-exclusive license for certain AMSC intellectual property to be used solely in Sinovel’s doubly fed wind turbines (the “License”). AMSC has agreed not to sue Sinovel, Sinovel’s power converter suppliers or Sinovel’s customers for use of the technology covered by the License. In the event that Sinovel or Mr. Wei does not make the Second Payment by the Second Payment Due Date, the Settlement Agreement provides that the License will terminate.

The ~~Company’s~~Company and Sinovel have submitted withdrawal applications to terminate the Proceedings to the relevant Chinese ~~subsidiary, Suzhou AMSC Superconductor Co. Ltd., filed a claim for arbitration with~~courts and the Beijing Arbitration ~~Commission in accordance~~Commission. Subject to the Company and Sinovel complying with the terms of the ~~Company’s supply contracts with Sinovel. The case is captioned~~ ~~(2011) Jing Zhong An Zi No. 963. The Company alleges that Sinovel committed various material breaches of its contracts with~~Settlement Agreement, the Company and Sinovel ~~has refused~~have agreed not to pay past due amounts for prior shipments of core electrical components and spare parts. The Company is seeking compensation for past product shipments and retention (including interest) in the amount of approximately RMB 485 million (approximately $72 million) due to Sinovel’s breaches of its contracts. The Company is also seeking specific performance of its existing contracts as well as reimbursement of all costs and reasonable expenses with respect to the arbitration. The valuere-institute any of the ~~undelivered components under the existing contracts, including the deliveries refused by Sinovel in March 2011, amounts to approximately RMB 4.6 billion (approximately $679 million).~~

~~On October 8, 2011, Sinovel filed with the Beijing Arbitration Commission an application under the caption~~ ~~(2011) Jing Zhong An Zi No. 963,~~ ~~for a counterclaim against~~Proceedings. In addition, the Company ~~for breach~~and Sinovel have agreed to a mutual release and covenant not to sue covering all subject matters of the ~~same contracts under which~~Proceedings and Contracts, effective upon the Company filed its original arbitration claim. Sinovel claims, among other things, that the goods supplied by the Company do not conform to the standards specified in the contracts and claims damages in the amount of approximately RMB 1.2 billion (approximately $177 million) upon Sinovel’s requests for change of counterclaim. On February 27, 2012, Sinovel filed with the Beijing Arbitration Commission an application under the caption ~~(2012) Jing Zhong An Zi No. 157,~~ ~~against the Company for breach~~completion of the same contracts under which the Company filed its original arbitration claim. Sinovel claims, among other things, that the goods supplied by the Company do not conform to the standards specified in the contracts and claims damages in the amount of approximately RMB 105 million (approximately $15 million). The Company believes that Sinovel’s claims are without merit and it intends to defend these actions vigorously. Since the proceedings in this matter are still in the early technical review phase, the Company cannot reasonably estimate possible losses or range of losses at this time.Second Payment.

The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds. The Company is required to deposit an amount equivalent to some or all the face amount of the performance bonds into an escrow account until the termination of the bond. When the performance conditions are met, amounts deposited as collateral for the performance bonds are returned to the Company. In addition, the Company has various contractual arrangements in which minimum quantities of goods or services have been committed to be purchased on an annual basis.

As of June 30, ~~2017,~~2018, the Company had ~~$0.1 million of restricted cash included in current assets and~~ $0.2 million of restricted cash included in long-term assets. These amounts included in restricted cash primarily represent deposits to secure letters of credit for various supply contracts. These deposits are held in interest bearing accounts.

~~14.~~16. Restructuring

The Company accounts for charges resulting from operational restructuring actions in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”) and ASC Topic 712, Compensation—Nonretirement Postemployment Benefits(“ASC 712”). In accounting for these obligations, the Company is required to make assumptions related to the amounts of employee severance, benefits, and related costs and the time period over which leased facilities will remain vacant, sublease terms, sublease rates and discount rates. Estimates and assumptions are based on the best information available at the time the obligation arises. These estimates are reviewed and revised as facts and circumstances dictate; changes in these estimates could have a material effect on the amount accrued on the consolidated balance sheet.

The $0.3 million charged to operations in the three months ended June 30, 2018 is related to exit costs incurred for the move of the Company's corporate office.

On April 3, 2017, the Board of Directors approved a plan to reduce the Company’s global workforce by approximately 8%, effective April 4, 2017. The purpose of the workforce reduction was to reduce operating expenses to better align with the Company’s current revenues. Included in the $1.3 million severance pay, charged to operations in the three months ended June 30, 2017, is

~~$0.5~~ $0.5 million of severance pay for one of the Company's former executive officers pursuant to the terms of a severance agreement dated ~~as of~~ June 30, 2017. Under the terms of the severance agreement, the Company's former executive officer is entitled to 18 months of his base salary, which is expected to be paid by December 31, 2018. From and after January 1, 2018, the Company, at its discretion, may settle any remaining unpaid cash severance owed to its former executive officer through the issuance of a number of immediately vested shares of the Company’s common stock, determined by multiplying the remaining unpaid cash severance owed by 120%, and then dividing by the closing stock price per share of the Company's common stock as of the last business day prior to the issuance of the shares.

All amounts related to these restructuring activities are expected to be paid by December 31, 2018.

The following table presents restructuring charges and cash payments for the three months ended June 30, ~~2017 (in~~2018 and 2017(in thousands):



	Severance pay			Facility exit and
	and benefits			Relocation costs		Total
Accrued restructuring balance at April 1, 2017	$	—		$	—	$	—
Charges to operations	1,339			—		1,339
Cash payments	(423		)	—		(423		)
Accrued restructuring balance at June 30, 2017	$	916		$	—	$	916

All restructuring charges discussed above are included within restructuring in the Company’s unaudited condensed consolidated statements of operations. The Company includes ~~$0.7 million of~~ accrued restructuring within accounts payable and accrued ~~expenses and the remaining $0.2 million long term portion is included within other liabilities in the Company's unaudited condensed consolidated balance sheets.~~expenses.

~~15.~~17. Business Segments

The Company reports its financial results in two reportable business segments: Wind and Grid.

Through the Company’s Windtec Solutions, the Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability. The Company supplies advanced power electronics and control systems, licenses its highly engineered wind turbine designs, and provides extensive customer support services to wind turbine manufacturers. The Company’s design portfolio includes a broad range of drive trains and power ratings of 2 ~~MWs~~megawatts ("MWs") and higher. The Company provides a broad range of power electronics and software-based control systems that are highly integrated and designed for optimized performance, efficiency, and grid compatibility.

Through the Company’s Gridtec Solutions, the Grid business segment enables electric utilities and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability and affordability. The sales process is enabled by transmission planning services that allow it to identify power grid congestion, poor power quality and other risks, which helps the Company determine how its solutions can improve network performance. These services often lead to sales of grid interconnection solutions for wind farms and solar power plants, power quality systems, and transmission and distribution cable systems. The Company also sells ship protection products to the U.S. Navy through its Grid business segment.

The operating results for the two business segments are as follows (in thousands):

The accounting policies of the business segments are the same as those for the consolidated Company. The Company’s business segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment revenues and segment operating loss. The disaggregated financial results of the segments reflect allocation of certain functional expense categories consistent with the basis and manner in which Company management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. In addition, certain corporate expenses which the Company does not believe are specifically attributable or allocable to either of the two business segments have been excluded from the segment operating loss.

Unallocated corporate expenses primarily consist of stock-based compensation expense of $0.8 million and ~~$1.0~~$0.8 million in the three months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Additionally, a restructuring ~~charge~~charges of $0.3 million and $1.3 million isare included in the three months ended June 30, ~~2017.~~2018 and 2017, respectively.

Total assets for the two business segments as of June 30, ~~2017~~2018 and March 31, ~~2017~~2018 are as follows (in thousands):

June 30,
2017 March 31,
2017
Wind $ 17,162
$ 18,346
Grid 26,811
31,060
Corporate assets 60,630
50,838
Total $ 104,603
$ 100,244

~~The following table sets forth customers who represented 10% or more of the Company’s total revenues for the three months ended June 30, 2017 and 2016:~~

~~16.~~18. Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board ~~(IASB)~~("IASB") issued, ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance substantially converges final standards on revenue recognition between the FASB and IASB providing a framework on addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles. The FASB has subsequently issued ~~the following~~multiple amendments to ASU 2014-09 which are all effective for annual reporting periods beginning after December 15, 2017.

I~~n March 2016,~~As of April 1, 2018, the ~~FASB issued ASU No. 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations.~~

~~In April 2016, the FASB issued ASU No. 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations and licensing implementation guidance.~~

~~In May 2016, the FASB issued ASU No. 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients~~ related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers.

~~In December 2016, the FASB issued ASU No. 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~, which amends certain narrow aspects of the guidance issued in ASU 2014-09 including guidance related to the disclosure of remaining performance obligations and prior-period performance obligations, as well as other amendments to the guidance on loan guarantee fees, contract costs, refund liabilities, advertising costs and the clarification of certain examples.

~~The~~ Company ~~is currently evaluating the provisions of~~has adopted ASU 2014-09 and its amendments, ~~and assessing~~reported the impact in its consolidated financial statements, and has implemented changes to its business processes, systems and controls to support revenue recognition and the ~~adoption~~related disclosures under this ASU. The Company’s assessment included a detailed review of ~~this guidance will have on~~representative contracts from each of the Company’s revenue streams and a comparison of its ~~financial position, results of operations~~historical accounting policies and ~~disclosures.~~practices to the new standard. The Company ~~anticipates the adoption of this guidance will result in certain changes in the identification of deliverables in its contracts and allocation of transaction price. The Company is required to adopt~~adopted the new standards ~~in the first quarter of fiscal 2018 and expects to do so~~ retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the ~~cumulative catch-up~~modified retrospective transition method)~~. The~~ to all existing contracts that have remaining obligations as of April 1, 2018. Accordingly, the Company ~~is still evaluating~~has elected to retroactively adjust only those contracts that do not meet the ~~final~~definition of a complete contract at the date of the initial application. This guidance will lead to recognizing certain revenue transactions sooner than in the past on certain contracts, as the Company will need to estimate the revenue it will be entitled to upon contract completion, and later on other contracts, such as Consulting and Statement of Work transactions, due to the lack of an enforceable right to payment for performance obligations satisfied over time. There are no changes in the accounting for its largest revenue stream which includes Inox Wind Ltd as its primary customer. Across other revenue streams such as DVAR Equipment and DVAR Turnkey, the timing of revenue recognition will be affected for multiple types of contracts, primarily multiple performance obligation contracts in its Grid business unit, but those differences did not have a material impact ~~of this adoption method~~ on ~~it's~~its consolidated financial statements. The adjustment to opening accumulated deficit was not significant in the period commencing on April 1, 2018. Additionally, the adoption of this new standard is not expected to have any tax impact on the consolidated financial statements. As part of this analysis, the Company evaluated its information technology capabilities and systems, and did not incur significant information technology costs to modify systems currently in place.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU 2016-01 will enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This ASU is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. The Company ~~is currently evaluating the impact, if any, the adoption of~~adopted ASU 2016-01 ~~may have on~~effective April 1, 2018 and noted no significant impact to its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

In July 2018, the FASB issued ASU 2018-10, Codification improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide more clarification in regards to the application and requirements of ASU 2016-02.

This ASU isand its amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in ASU 2016-13 will provide more ~~decision useful~~decision-useful information about the

expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The ASU is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that year. The Company is currently evaluating the impact, if any, the adoption of ASU 2016-13 may have on its consolidated financial statements.

In 2016, the FASB issued the following two ASU's on Statement of Cash Flows (Topic 230). Both amendments are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that year.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in ASU 2016-15 ~~will~~ provide more guidance towards the classification of multiple different types of cash flows in order to reduce the diversity in reporting across entities.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in ASU 2016-18 ~~will~~ explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

The Company ~~is currently evaluating the impact, if any, the adoption of~~adopted ASU 2016-15 and ASU 2016-18 ~~may have on~~effective April 1, 2018 and noted no significant impact to its consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The amendments in ASU 2016-16 will improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that year. The Company ~~is currently evaluating the impact, if any, the adoption of~~adopted ASU 2016-16 ~~may have on its consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations. The amendments in ASU 2017-01 will clarify the definition of a business with the objective of adding guidance~~effective April 1, 2018 and noted no significant impact to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact the adoption of ASU 2017-01 may have on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures. The amendments in ASU 2017-03 provide additional detail surrounding disclosures required related to adoption of new pronouncements. The ASU is effective for the periods of each related pronouncement. The Company is currently evaluating the impact the adoption of ASU 2017-03 may have on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Non-financial Assets (Subtopic 610-20). The amendments in ASU 2017-05 clarify the scope of Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Non-financial Assets, and to add guidance for partial sales of non-financial assets. Subtopic 610-20, which was issued in May 2014 as a part of ~~Accounting Standards Update~~ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of non-financial assets in contracts with non-customers. The Company ~~is currently evaluating the impact the adoption of~~adopted ASU 2017-05 ~~may have~~effective April 1, 2018 and adjusted the opening balance of accumulated deficit for $0.1 million for recognition of the deferred gain on ~~its consolidated financial statements.~~the sale of the 64 Jackson Road building that occurred on March 28, 2018.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Subtopic 718) Scope of Modification Accounting. The amendments in ASU 2017-09 provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods. The Company ~~is currently evaluating the impact the adoption of~~adopted ASU 2017-09 ~~may have on~~effective April 1, 2018 and noted no significant impact to its consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivatives and Hedging (Topic 815). The amendments in ASU 2017-11 provide guidance for freestanding equity-linked financial instruments, such as warrants and conversion options in convertible debt or preferred stock, and should no longer be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those periods. The Company is currently evaluating the impact the adoption of ASU 2017-11 may have on its consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in ASU 2017-12 provide improved financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the amendments in this update make certain targeted improvements to simplify the application of the hedge accounting guidance. The ASU is effective

for annual reporting periods beginning after December 15, 2018, including interim periods within those periods. The Company is currently evaluating the impact the adoption of ASU 2017-12 may have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Non-Employee Share Based Payment Accounting. The amendments in ASU 2018-07 provide for the simplification of the measurement of share-based payment transactions for acquiring goods and services from non-employees. The ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those periods. The Company is currently evaluating the impact the adoption of ASU 2018-07 may have on its consolidated financial statements.

~~17.~~19. Subsequent Events

The Company has performed an evaluation of subsequent events through the time of filing this Quarterly Report on Form 10-Q with the SEC, apart from the Settlement Agreement with Sinovel described in Note 15, "Commitments and Contingencies," the Company has determined that there are no such events to report.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein that relate to future events or conditions, including without limitation, the statements in Part II, “Item 1A. Risk Factors” and in Part I under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, or our prospective results of operations or financial position, and anticipated payments from Sinovel may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements represent management’s current expectations and are inherently uncertain. There are a number of important factors that could materially impact the value of our common stock or cause actual results to differ materially from those indicated by such forward-looking statements. These important factors include, but are not limited to: Sinovel may not make the Second Payment (as defined herein) in the timeframe expected, or at all, and the guarantor may also fail to make the Second Payment; The relevant Chinese courts and the Beijing Arbitration Commission may not accept any re-filing by us of any proceeding with Sinovel; A significant portion of our revenues are derived from a single customer, ~~Inox;~~Inox, and we cannot predict if and when Inox’s demand dislocation will be resolved, and to the extent resolved, how successful Inox will be under India’s new central and state auction regime; We have a history of operating losses and negative operating cash flows, which may continue in the future and require us to secure additional financing in the future; Our operating results may fluctuate significantly from quarter to quarter and may fall below expectations in any particular fiscal quarter; Our financial condition may have an adverse effect on our customer and supplier relationships; Lower prices for other fuel sources may reduce the demand for wind energy development, which could have a material adverse effect on our ability to grow our Wind business. Our success in addressing the wind energy market is dependent on the manufacturers that license our designs; Our success is dependent upon attracting and retaining qualified personnel and our inability to do so could significantly damage our business and prospects; We rely upon third-party suppliers for the components and sub-assemblies of many of our Wind and Grid products, making us vulnerable to supply shortages and price ~~fluctuations;~~fluctuations, which could harm our business; Failure to successfully execute ~~any~~the move of our former Devens, Massachusetts manufacturing facility or achieve expected savings following ~~any~~the move could adversely impact our financial performance; We may not realize all of the sales expected from our backlog of orders and contracts; Our success depends upon the commercial use of high temperature superconductor products, which is currently limited, and a widespread commercial market for our products may not develop; Growth of the wind energy market depends largely on the availability and size of government subsidies, economic incentives and legislative programs designed to support the growth of wind energy; Our contracts with the U.S. government are subject to audit, modification or termination by the U.S. government and include certain other provisions in favor of the government, and additional funding of such contracts may not be approved by the U.S. Congress; Tax reform in the U.S. may negatively affect our operating results; We have operations in and depend on sales in emerging markets, including India, and global conditions could negatively affect our operating results or limit our ability to expand our operations outside of these markets; Our business and operations would be adversely impacted in the event of a failure or security breach of our information technology infrastructure; If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired and may lead investors and other users to lose confidence in our financial data; We face risks related to our intellectual property; We face risks related to our legal proceedings; We face risks relating to our settlement with Sinovel; and the important factors discussed under the caption "Risk Factors" in Part 1. Item 1A of our Form 10-K for the fiscal year ended March 31, ~~2017,~~2018, Part II. Item 1A of this Quarterly Report on Form 10-Q and our other reports filed with the SEC. These and the important factors discussed under the caption “Risk Factors” in Part 1. Item 1A of our Form 10-K for the fiscal year ended March 31, ~~2017~~2018 and under Part II. Item IA of this Quarterly Report on Form 10-Q among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Any such forward-looking statements represent management’s estimates as of the date of this Quarterly Report on Form 10-Q. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

American Superconductor®, Amperium®, AMSC®, D-VAR®, PowerModule™, D-VAR® VVO, PQ-IVR®, SeaTitan™, Gridtec Solutions™, Windtec Solutions™ and Smarter, ~~Cleaner... Better~~Cleaner...Better Energy™ are trademarks or registered trademarks of American Superconductor Corporation or our subsidiaries. We reserve all of our rights with respect to our trademarks or registered trademarks regardless of whether they are so designated in this Quarterly Report on Form 10-Q by an ® or ™ symbol. All other

brand names, product names, trademarks or service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

We are 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, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics products, engineering, and support services. In the power grid market, we enable electric utilities and renewable

energy project developers to connect, transmit and distribute power through our transmission planning services and power electronics and superconductor-based products. Our wind and power grid products and services provide exceptional reliability, security, efficiency and affordability to our customers.

Our wind and power grid solutions help to improve energy efficiency, alleviate power grid capacity constraints and increase the adoption of renewable energy generation. Demand for our solutions is driven by the growing needs for renewable sources of electricity, such as wind and solar energy, and for modernized smart grids that improve power reliability, security and quality. Concerns about these factors have led to increased spending by corporations as well as supportive government regulations and initiatives on local, state, national and global levels, including renewable portfolio standards, tax incentives and international treaties.

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

We operate our business under two market-facing business units: Wind and Grid. We believe this market-centric structure enables us to more effectively anticipate and meet the needs of wind turbine manufacturers, power generation project developers and electric utilities.

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

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

Our fiscal year begins on April 1 and ends on March 31. When we refer to a particular fiscal year, we are referring to the fiscal year beginning on April 1 of that same year. For example, fiscal ~~2017~~2018 refers to the fiscal year beginning on April 1, ~~2017.~~2018. Other fiscal years follow similarly.

On July 3, 2018, we and our wholly-owned subsidiaries Suzhou AMSC Superconductor Co. Ltd. (“AMSC China”) and AMSC Austria GMBH (“AMSC Austria”) entered into a settlement agreement (the “Settlement Agreement”) with Sinovel Wind Group Co., Ltd. (“Sinovel”). The Settlement Agreement settles the litigation and arbitration proceedings between us and Sinovel listed on Schedule 2 of the Settlement Agreement (the “Proceedings”), and any other civil claims, counterclaims, causes of action, rights and obligations directly or indirectly relating to the subject matters of the Proceedings and the contracts between us and Sinovel listed on Schedules 1 and 4 of the Settlement Agreement (the “Contracts”), subject to the exception described in Section 1.1 of the Settlement Agreement. The Settlement Agreement was filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on July 9, 2018. Under the terms of the Settlement Agreement, Sinovel agreed to pay AMSC China an aggregate cash amount in Renminbi (RMB) equivalent to $57.5 million, consisting of two installments. Sinovel paid the first installment of $32.5 million on July 4, 2018, and has agreed to pay the second installment of $25.0 million (the “Second Payment”) within ten (10) months after the U.S. District Court for the Western District of Wisconsin (the “District Court”) delivers the first sentence against Sinovel in the criminal case entitled United States v. Sinovel Wind Co., Ltd., Case Number 3:13-cr-00084-jdp. On July 6, 2018, the District Court delivered such sentence, and therefore the Second Payment is due by May 6, 2019. Mr.

Wenyuan Wei, former Sinovel chairman and a current Sinovel shareholder, has delivered a letter of guarantee to us for the Second Payment should Sinovel fail to make such payment by the Second Payment Due Date.

In addition, pursuant to the terms of the Settlement Agreement, we and AMSC Austria have granted Sinovel a non-exclusive license for certain of our intellectual property to be used solely in Sinovel’s doubly fed wind turbines (the “License”). We have agreed not to sue Sinovel, Sinovel’s power converter suppliers or Sinovel’s customers for use of the technology covered by the License. In the event that Sinovel or Mr. Wei does not make the Second Payment by the Second Payment Due Date, the Settlement Agreement provides that the License will terminate. See Note 15 “Commitments and Contingencies” for additional information on the terms of the Settlement Agreement.

On July 25, 2018, we received notice from BASF Corporation (“BASF”) that BASF will not be extending the term of the Joint Development Agreement dated March 4, 2016 (“JDA”) by and between BASF and us beyond March 3, 2019. As a result, BASF will not be required to pay $1.0 million in 2019 to us as otherwise would have been required pursuant to the terms of the JDA. To date, BASF has paid $6.0 million to us under the JDA.

Critical Accounting Policies and Estimates

The preparation of the unaudited condensed consolidated financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ under different assumptions or conditions. During the three months ended June 30, ~~2017~~2018, we adopted ASU 2014-09, which provides for new requirements in regards to revenue recognition. See Note 2, "Revenue Recognition" for further details. Aside from the adoption of ASU 2014-09, there were no significant changes in the critical accounting policies that were disclosed in our Form 10-K for fiscal ~~2016,~~2017, which ended on March 31, ~~2017.~~2018.

Results of Operations



Delaware	04-2959321
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~64 Jackson Road, Devens,~~114 East Main St. Ayer, Massachusetts	~~01434~~01432
(Address of principal executive offices)	(Zip Code)



		Page No.
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2124

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2934

Item 4.	Controls and Procedures	2934

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	2934

Item 1A.	Risk Factors	3135

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3135

Item 3.	Defaults Upon Senior Securities	3135

Item 4.	Mine Safety Disclosure	3135

Item 5.	Other Information	3135

Item 6.	Exhibits	3135

Signature		3237


	June 30, 2017			March 31, 2017			June 30, 2018			March 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	37,477		$	26,784		$	26,750		$	34,084
Accounts receivable, net	7,752			7,956			11,532			7,365
Inventory	15,639			17,462			18,353			19,780
Note receivable, current portion							3,000			3,000
Prepaid expenses and other current assets	3,303			2,703			4,709			2,947
Restricted cash	100			795
Total current assets	64,271			55,700			64,344			67,176

Property, plant and equipment, net	39,282			43,438			11,554			12,513
Intangibles, net	192			301			3,145			3,230
Note receivable, long term portion, net of discount of $280 as of June 30, 2018 and net of discount of $336 and deferred gain of $105 as of March 31, 2018							2,720			2,559
Goodwill							1,719			1,719
Restricted cash	165			165			165			165
Deferred tax assets	426			407			516			542
Other assets	267			233			283			271
Total assets	$	104,603		$	100,244		$	84,446		$	88,175

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	14,020		$	14,490		$	15,144		$	12,625
Note payable, current portion, net of discount of $19 as of March 31, 2017	—			1,481
Derivative liabilities	998			1,923			1,681			1,217
Deferred revenue	17,685			14,323
Deferred revenue, current portion							11,433			13,483
Total current liabilities	32,703			32,217			28,258			27,325

Deferred revenue	8,249			7,631
Deferred revenue, long term portion							8,040			8,454
Deferred tax liabilities	125			125			110			110
Other liabilities	209			45			98			57
Total liabilities	41,286			40,018			36,506			35,946

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 15)

Stockholders' equity:
Common stock	193			147			214			211
Additional paid-in capital	1,035,261			1,017,510			1,041,980			1,041,113
Treasury stock	(1,645		)	(1,371		)	(1,884		)	(1,645		)
Accumulated other comprehensive income (loss)	317			(503		)
Accumulated other comprehensive income							667			883
Accumulated deficit	(970,809		)	(955,557		)	(993,037		)	(988,333		)
Total stockholders' equity	63,317			60,226			47,940			52,229
Total liabilities and stockholders' equity	$	104,603		$	100,244		$	84,446		$	88,175


	Three months ended June 30,						Three months ended June 30,
	2017			2016			2018			2017
Revenues	$	8,923		$	13,345		$	12,607		$	8,923

Cost of revenues	13,409			12,482			8,714			13,409

Gross (loss)/profit	(4,486		)	863
Gross margin							3,893			(4,486		)

Operating expenses:
Research and development	2,717			2,952			2,840			2,717
Selling, general and administrative	6,138			7,216			5,786			6,138
Amortization of acquisition related intangibles	13			39
Amortization of acquisition-related intangibles							85			13
Restructuring	1,339			—			310			1,339
Total operating expenses	10,207			10,207			9,021			10,207

Operating loss	(14,693		)	(9,344		)	(5,128		)	(14,693		)

Change in fair value of derivatives and warrants	925			(678		)
Interest expense, net	(10		)	(135		)
Other (expense) income, net	(1,374		)	126
Loss before income tax expense	(15,152		)	(10,031		)
Change in fair value of warrants							(464		)	925
Interest income (expense), net							201			(10		)
Other income (expense), net							609			(1,374		)
Loss before income tax (benefit) expense							(4,782		)	(15,152		)

Income tax expense	100			324
Income tax (benefit) expense							(45		)	100

Net loss	$	(15,252	)	$	(10,355	)	$	(4,737	)	$	(15,252	)

Net loss per common share
Basic	$	(0.91	)	$	(0.76	)	$	(0.23	)	$	(0.91	)
Diluted	$	(0.91	)	$	(0.76	)	$	(0.23	)	$	(0.91	)

Weighted average number of common shares outstanding
Basic	16,778			13,676			20,167			16,778
Diluted	16,778			13,676			20,167			16,778


	Three months ended June 30,				Three months ended June 30,
	2017		2016		2018		2017
Cost of revenues	$	36	$	50	$	40	$	36
Research and development	49		30		51		49
Selling, general and administrative	669		919		694		669
Total	$	754	$	999	$	785	$	754



Level 1	-	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2	-	Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3	-	Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.


	Total Carrying Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Carrying Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017:
June 30, 2018:
Assets:
Cash equivalents	$	27,334	$	27,334	$	—	$	—	$	24,704	$	24,704	$	—	$	—
Derivative liabilities:
Warrants	$	998	$	—	$	—	$	998	1,681		—		—		1,681



	Warrants
April 1, 2016	$	3,227
Mark to market adjustment	(1,304		)
Balance at March 31, 2017	$	1,923



Fiscal Year 16	March 31, 2017	December 31, 2016	September 30, 2016	June 30, 2016	March 31, 2016
Risk-free interest rate	0.91%	0.56%	0.59%	0.48%	0.66%
Expected annual dividend yield	—	—	—	—	—
Expected volatility	44.12%	58.04%	70.50%	76.30%	76.76%
Term (years)	0.51	0.76	1.01	1.26	1.51
Fair value	$—	$0.1 million	$0.2 million	$0.4 million	$0.4 million



	Reportable	Three months ended June 30,
	Segment	2018		2017
Inox Wind Limited	Wind	25	%	22	%
Vestas	Grid	36	%	—	%
U.S. Navy	Grid	<10%		35	%



		AMERICAN SUPERCONDUCTOR CORPORATION

Date:	~~August 8, 2017~~July 31, 2018	By:	/s/ John W. Kosiba, Jr.
			John W. Kosiba, Jr.
			Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)


	June 30, 2017			March 31, 2017			June 30, 2018			March 31, 2018
Land	$	3,643		$	3,643
Construction in progress - equipment	471			601			528			654
Buildings	34,549			34,549
Equipment and software	73,345			73,445			72,466			72,760
Furniture and fixtures	1,185			1,201			1,890			1,878
Leasehold improvements	1,907			2,442			1,632			1,426
Property, plant and equipment, gross	115,100			115,881			76,516			76,718
Less accumulated depreciation	(75,818		)	(72,443		)	(64,962		)	(64,205		)
Property, plant and equipment, net	$	39,282		$	43,438		$	11,554		$	12,513

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