American Superconductor : Fiscal 2023 Annual Report

AMSC Stockholders,

In fiscal year 2023, AMSC delivered terrific operational performance, the culmination of our efforts to build a more diversified and financially stronger company. AMSC delivered outstanding operational performance with three consecutive quarters of non-GAAP net income and operating cash flow; expanded gross margins dramatically versus a year ago and ended the year with over $90 million in cash. The strength of our balance sheet is critical to support larger orders and presents opportunities for further business growth.

Our financial performance was remarkable. We saw total revenue grow over 35% to nearly $146 million dollars in fiscal year 2023. Wind revenue increased by more than 100%, while Grid revenue grew by nearly 30%, in both cases versus the year ago period. We reported non-GAAP net income and positive operating cash flow for the fiscal year. We booked on average over $37 million of new orders per quarter during fiscal year 2023, and our robust twelve-month backlog stands at $140 million at the end of March 2024.

We saw diverse revenue in renewable, industrial, mining, Navy projects and semiconductors. About one third of our sales in fiscal year 2023 were to renewable projects while another quarter was from industrials. Metals, mining, and materials projects were over 15%, the Navy was above 10% and semiconductor projects accounted for nearly 10% of total revenues.

Our orders for the power grid include the U.S. military resiliency markets, a new market in which we provide efficient and reliable shore power to naval vessels. These orders serving the U.S. military represent an exciting new opportunity for AMSC's new energy power systems. We reached nearly

$20 million in total military revenue, which includes both ship protection and new energy power systems revenue.

For another consecutive year, AMSC achieved strong gains in the military market. We have a total of five Ship Protection Systems, or SPS, for the San Antonio Class platform. We successfully delivered and tested the first ship protection system, which is now operating on the ship. We delivered our second ship protection system and are currently delivering the third.

Furthermore, in fiscal year 2023 we announced our proprietary High-Temperature Superconductor Mine Countermeasure (or MCM) system to be designed, built, integrated, and deployed on the U.S. Navy's Mine Countermeasure-Unmanned Service Vehicle. This is a capability that is incorporated into an unmanned service vehicle and launched during mine countermeasure operations that patrol for and neutralize mines.

Most recently, in June 2024, we announced the expansion of our SPS to an allied navy with a $75 million dollar contract for multiple Canadian Surface Combatants. This contract award marks the first AMSC Ship Protection production systems delivery to an allied navy and represents the success of the very deliberate actions we have taken to diversify our business, drive growth and expand scale both domestically and internationally.

Our grid business is thriving. Our Resilient Electric Grid system in Chicago has performed as planned and has become a

showcase for the technology. Currently, we are in discussions with several utilities about possible future projects.

Additionally, in our wind business we more than doubled our year-over-year growth as Inox business prospects demonstrate improvement and our 3-megawatt ECS demonstrates its capabilities. In fiscal year 2023, we secured nearly $15 million of 2-megawatt wind turbine ECS demand from INOX. We also announced an initial 3-megawatt class wind turbine ECS order of $5 million dollars, followed by an additional $8 million dollar order. We shipped most of the ordered 2MW and 3MW ECS systems against these orders during fiscal year 2023. We completed type certification for the 3 MW class wind turbine. The 3MW class wind turbine is now operating in the field and is expected to drive additional customer demand. We are supporting Inox's growth through our proprietary technology that can enable our partner to deliver superior products to the marketplace.

We believe our company's diverse bookings, strengthened balance sheet, and operational success in fiscal year 2023 have laid the groundwork for AMSC's long term growth. We are optimistic our business may benefit from the investments in our key growth markets: renewables, mining and metals, semiconductors, and military.

The business is in the best position in more than a decade and continues to improve!

Our transformative power solutions are helping to move the world forward. We are executing on our vision and believe that our creativity can meet today's challenges and help us progress to a better future. This means using future-facing technologies to harmonize the world's desire for decarbonization and clean energy with the need for more reliable, effective, and efficient power delivery. We are committed to powering progress by designing, developing, and deploying power control solutions that harmonize an increasingly complex energy system.

We have tremendous opportunities ahead of us. I am immensely proud of our team as we continue to serve our customers, shareholders, and markets.

I look forward to reporting to you again next year on AMSC's bright future.

Daniel Patrick McGahn

Chairman, President and Chief Executive Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the fiscal year ended March 31, 2024

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Transition Period from

to

Commission file number 000-19672

American Superconductor Corporation

(Exact Name of Registrant as Specified in Its Charter)

	Delaware			04-2959321
	(State or Other Jurisdiction				(IRS Employer
	of Incorporation or Organization)			Identification Number)
	114 East Main Street
	Ayer, Massachusetts			01432
	(Address of Principal Executive Offices)				(Zip Code)
		Registrant's telephone number, including area code:
			[phone]
		Securities registered pursuant to Section 12(b) of the Act:
	Title of each class	Trading Symbol(s)		Name of each exchange on which registered
Common Stock,	AMSC		Nasdaq Global Select Market
$0.01 par value per share
		Securities registered pursuant to Section 12(g) of the Act:
			None
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes ' No È
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	Yes ' No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No '

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes È No '

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer	'	Accelerated filer	È
Non-accelerated filer	'	Smaller reporting company	È
		Emerging growth company	'

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 has filed a report on and attestation to its management's assessment of the effectiveness of its

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. È

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. '

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).'

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ' No È

The aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant on September 30, 2023, based on the closing price of the shares of Common Stock on the Nasdaq Global Select Market on that date ($7.55 per share) was $219.5 million.

Number of shares outstanding of the registrant's Common Stock, as of May 24, 2024 was 36,994,517.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the annual meeting of stockholders scheduled to be held on August 2, 2024, to be filed with the Securities and Exchange Commission (the "SEC"), are incorporated by reference in answer to Part III of this Form 10-K.

AMERICAN SUPERCONDUCTOR CORPORATION

INDEX

Item

Page

PART I

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

1C. Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

PART II

5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 39 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . . . . . 86 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . 90

PART III

10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . . . . 91

14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

PART IV

15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

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This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any statements in this Annual Report that relate to future events or conditions, including without limitation, the statements in Part I, "Item 1A. Risk Factors" and in Part II under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and located elsewhere herein regarding industry prospects, our addressable markets, our competitive position, the benefits of our acquisitions, financial results and financial condition, expectations for when our products become operational, capabilities and potential uses of our products, steps taken to enhance liquidity, or our prospective results of operations or financial position, 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. Such factors include the important factors discussed under the caption "Risk Factors" in Part 1. Item 1A of this Form 10-K for the fiscal year ended March 31, 2024, which 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K.

American Superconductor®, Amperium®, AMSC®, D-VAR®, PowerModule™, D-VAR VVO®, PQ-IVR®, SeaTitan®, Gridtec™ Solutions, Windtec™ Solutions, Smarter, Cleaner...Better Energy™, orchestrate the rhythm and harmony of power on the grid™, actiVAR®, armorVAR™, NEPSI™, Neeltran™ and SafetyLOCK™ 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 Annual Report on Form 10-K by an ® or ™ symbol. All other brand names, product names, trademarks or service marks appearing in this Annual Report on Form 10-K are the property of their respective holders.

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PART I

Item 1. BUSINESS

Overview

American Superconductor Corporation (together with its subsidiaries, "AMSC®" or the "Company") was founded on April 9, 1987. At AMSC, we believe that our creativity can meet today's challenges and help us progress to a better future. That means using future-facing technologies to harmonize the world's desire for decarbonization and clean energy with the need for more reliable, effective and efficient power delivery. Already, our transformative power solutions are moving the world forward.

We are a leading system provider of megawatt-scale power resiliency solutions that orchestrate the rhythm and harmony of power on the grid™, and protect and expand the capability of the Navy's fleet. Our system level products leverage the Company's proprietary "smart materials" and "smart software and controls" to provide enhanced resiliency and improved performance of megawatt-scale power flow.

Right now, we are powering the evolution of a grid that is fit for the future: a more reliable and resilient grid that can incorporate renewable energy sources and our pioneering products, software and control solutions are creating more cost-effective ways for renewables to deliver a cleaner, less carbon-intensive tomorrow. This exciting energy future also depends on computer chips, batteries and fuel cells that are built from silicon, lithium and carbon. All of these building blocks must be mined, processed and assembled. Industrial manufacturers of these essential materials as well as semiconductor manufacturers must be able to power their factories in ways that scale without adding complexity or size. Our voltage compensators, capacitors, transformers and rectifiers can power the energy-intensive factories of the future while reducing the risk of costly power interruptions that could hinder this journey to a better future.

What's more, in an age of increasing global tensions, we are helping to move U.S. Navy ships into the future by installing protection systems that help them stay hidden from our enemies. We help protect and expand the capability of the U.S. Navy surface fleet with advanced superconductor-based systems that provide superior performance advantages to the traditional methods of mine field protection. We see the nascent business serving the Navy as an extension of what we do with our Grid business - this ship is a microcosm of the grid. Our products help manage power with a purpose.

In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics and control system products, engineering, and support services. Our power grid and wind products and services provide exceptional reliability, security, efficiency, and affordability to our customers.

Our power system solutions help to improve energy efficiency, alleviate power capacity and other constraints, improve system resiliency, and increase the adoption of renewable energy generation. Demand for our solutions is driven by: the growing needs for modernized grids that improve power reliability, security, and quality, the U.S. Navy's effort to upgrade in-board power systems to support fleet electrification, and the need for increased renewable sources of electricity, such as wind and solar energy. Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state and national levels, including renewable portfolio standards, tax incentives, and international treaties. We estimate that the total annual addressable global market for our products and solutions is nearly $9 billion.

Our Company's addressable market is driven by (i) the nearly $500 billion investment in renewables to update the aging grid for better support in the adoption of intermittent renewable power sources, (ii) the nearly $100 billion investment in the mining and processing of materials as well as the $160 billion investment in semiconductor capacity-both of which are driven by the electrification of transportation, the need to prioritize

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energy security and bolster domestic supply chains-and (iii) the over $30 billion investment by the U.S. federal government in U.S. military ship systems and capabilities to help ensure performance and security amid geopolitical uncertainty.

Market opportunities

We provide solutions that address four key drivers of our business:

• the global demand for renewable energy;
• the global demand for materials for the electrification of transportation, in particular for electric vehicles;
• the global demand for semiconductors, driven by the electrification of everything; and
• the electrification of the Naval fleet to enhance capability.

This all requires an electric grid that is fit for the future.

The Global Demand for Renewables:

We design wind turbines and provide electrical control systems for inside the turbine that control the wind turbine's voltage, current, frequency, pitch and yaw. At the substation level, we provide interconnection solutions that allow wind farms to meet utility's grid code requirements for voltage, power factor and dynamic performance of the plant during unforeseen system disturbances, by utilizing our dynamic voltage management solutions as well as our static voltage management solutions and harmonic filters. We provide field service and spare parts to our global installed base of over 17 Gigawatts ("GW").

The Global Demand for Materials and Electric Vehicles:

We provide transformation, rectification, voltage management and harmonic filtering systems at the substation level that manage input power from the grid and control power for the operation of large-scale industrial equipment such as furnaces, chemical plants, or semiconductor fabrication plants. Our capabilities to control and convert power help ensure continuous flow of stable high-quality power for our customers.

The Global Demand for Semiconductors:

We provide sag mitigation systems, which are a substation level power conditioning system. These systems protect and isolate the factory's critical processes from power system events that could otherwise trip these sensitive processes causing severe disruptions and loss of a customer's manufactured products. These systems monitor the semiconductor fabrication plant's incoming electric supply very closely and react in sub-cycle time frames to mitigate voltage sags and swells to provide a conditioned power to the processes. These sag mitigation systems can include both our dynamic and static voltage management as well as our harmonic filter solutions which are specifically designed to improve the facility's overall power factor and harmonic compliance needs.

The Electrification of the Navy Fleet:

We provide advanced ship protection systems, that are designed to help fleets increase system efficiencies, enhance warfare capabilities, and boost reliability, performance, and security. We are developing additional solutions for this important market which may include power management and power generation similar to what we do for electric grids.

Our power system products address the renewable power generation and electrical grid and power infrastructure markets:

• Transmission grid. We provide complete systems that enable electric utilities and renewable energy project developers to connect and transmit power with exceptional efficiency, reliability, security and

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affordability. We provide 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 and power quality systems for wind farms and solar power plants.

• Distribution grid. We provide a direct-connect power quality system that is installed on the primary distribution network in communities, business parks, or wherever enhanced power quality is beneficial and is designed to increase the reliability and resiliency of the distribution grid to serve the needs of modern energy consumers. Our systems save utilities time and money by avoiding costly options to strengthen the distribution grid. Our offerings also serve industrial customers looking to power the energy-intensive factories of the future without the risk of costly power interruptions. These industrial customers utilize our voltage compensators, capacitors, harmonic filters, transformers and rectifiers.
• Urban Grid Infrastructure. We design systems to increase the reliability, security and capacity of the urban grid infrastructure. Today, many urban substations are not networked and can only power a small section of a city. Our power dense technology based on proprietary smart materials allows for the inter- connection of substations, controlling the high fault currents that naturally result from such interconnections. If one substation is compromised, other substations help increase capacity and reliability. Our system allows instantaneous power outage recovery, potentially doubling to quadrupling a city's reliability and resiliency while minimizing grid investment. We design systems that leverage existing grid assets while protecting cities against storms, outages, and cyber- and physical attacks.
• Marine protection systems. We sell advanced degaussing systems to the U.S. Navy. Degaussing systems reduce a naval ship's magnetic signature, making it much more difficult for a mine to detect and damage a ship. Our degaussing system is comprised of much smaller, lighter and higher performing HTS cable coils eliminating an estimated 50-80% of the system weight and reducing overall energy consumption versus copper-based degaussing systems.
• Solar Power. Our solutions enable the grid to handle more distributed generation in the form of rooftop solar. Our products are designed to allow the existing grid to handle more renewable capacity.
• Wind Power. Our solutions enable 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.

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 2023 refers to the fiscal year that began on April 1, 2023. Other fiscal years follow similarly.

Competitive strengths

We believe our competitive strengths position us well to execute on our growth plans in the markets we serve.

• Differentiated technologies. Our products leverage the Company's proprietary smart materials and smart software and controls to provide enhanced resiliency and improved performance of megawatt- scale power flow. Conventional conductors of electricity, such as aluminum and copper wire, lose energy due to resistance. Using a compound of yttrium barium copper oxide ("YBCO"), we manufacture and provide high-temperature superconductor ("HTS") wire that can conduct many times

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more electricity than conventional conductors with minimal power loss. Our proprietary Amperium® superconductor wire was engineered to allow us to tailor the product via laminations to meet the electrical and mechanical performance requirements of widely varying end-use applications, including power cables and fault current limiters for the Grid market. Our PowerModule™ power converters are based on proprietary software and hardware combinations and are used in a broad array of applications, including our D-VAR® grid interconnection and voltage control systems, as well as our wind turbine electrical control systems. Our unique proprietary cooler technology enables our ship protection systems ("SPS") to perform in harsh environmental conditions in a quiet and efficient manner.

• Turnkey systems. We have developed full system solutions that we sell directly to customers. This business model leverages our applications expertise, drives value beyond our power electronic and our superconductor based products, and enables us to recognize revenue and take ownership over the marketing and sales of the full systems. Industrial manufacturers of these essential materials must be able to power their factories in ways that scale without adding complexity or size.
• Scalable, low-costmanufacturing platform. Our manufacturing of proprietary wind turbine electrical control systems and power electronics products are primarily assembly operations with minimal fixed costs. We can increase the production of these products at costs that we believe are low relative to our competitors. Our proprietary manufacturing technique for Amperium superconductor wire is modular in nature, which allows us to expand manufacturing capacity at a relatively low incremental cost and differentiate ourselves from solutions assembled in the field.
• Robust patent position and engineering expertise. We have a robust portfolio of awarded patents and patent applications worldwide and have rights through exclusive and non-exclusivelicenses to additional patents and patent applications worldwide. We believe our technology and manufacturing knowledge base, customer and product expertise and patent portfolio provide a strong competitive position.
• Unique solutions for the markets we serve. We believe we provide wind turbine manufacturers with a unique and integrated approach for wind turbine design and engineering, customer support services and power electronics and control systems. We also believe we are the only company in the world that is able to provide transmission planning services, grid interconnection and voltage control systems, as well as superconductor-based distribution systems for power grid operators. This unique scope of supply provides us with greater insight into our customers' evolving needs and greater cross-selling opportunities.

Strategy

Building on these competitive strengths, we plan to focus on driving revenue growth and enhancing our operating results through the objectives defined below.

• Provide solutions from power generation to delivery. From the generation source to the distribution system, we focus on providing best-in-classengineering, support services, technologies and solutions that make the world's power supplies smarter, cleaner and more resilient.
• Focus on "megawatt-scale"power offerings. Our research, product development, and sales efforts focus on megawatt-scale offerings ranging from designs of power electronics for large wind turbine platforms to systems that stabilize power flows, integrate renewable power into the grid and carry power to and from transmission and distribution substations.
• Product innovation. We have a strong record of developing unique solutions for megawatt-scale power applications and intend to continue our focus on investing in innovation. Recently, our product development efforts have included our Resilient Electric Grid ("REG") system for the transmission electricity grid, SPS for the U.S. Navy, and D-VAR Volt Var Optimization ("VVO") for the distribution electricity grid.

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• Provide resiliency and protection capabilities. Our products provide resiliency and protection capabilities that support an evolving power grid and protect the navy fleet from rising global threats.
• Pursue Emerging Overseas Markets and Serve Key Markets Locally. We focus our sales efforts on overseas markets that are investing aggressively in renewable energy and power grid projects. As part of our strategy, we serve our key target markets with local sales and field service personnel, which enables us to understand market dynamics and more effectively anticipate customer needs while also reducing response time. We currently serve target markets such as Australia, Canada, Chile, India, Japan, Jordan, Mexico, Singapore, South Africa, South Korea, the United Kingdom, and the United States.

Grid market overview

It is widely believed that the electricity grids around the world require modernization through widespread technology upgrades if they are to maintain reliability while solving rapidly evolving challenges such as more frequent severe weather, threats of physical- and cyber-attacks, expanded renewable generation (both large and small scale) and new types of customer loads such as electric vehicles. In fact, a series of reports written by the Electric Power Research Institute ("EPRI") in 2016 emphasize the need for increased resiliency, flexibility and connectivity in electric grids. According to the EPRI reports, the number of geophysical, meteorological, hydrological, and climatological events in the U.S. rose to an all-time high of 247 events in 2010 - up from approximately 200 in 2009 and less than 200 in all years combined from 1980 to 2010. Available data further indicate that the existing U.S. electrical grid has been stressed by U.S. wind power generation increasing from 6 GW in 2003 to approximately 149 GW in 2023, and photovoltaics ("PV") power generation increasing from almost zero in 2003 to approximately 103 GW as of the end of 2023.

Growth in both wind power and PV is expected to continue with the vast majority of such intermittent generation sources unsupported by energy storage, placing stress on the power grid. Finally, the Edison Electric Institute estimates that the number of electric vehicles on the road in the U.S. is projected to reach 18.7 million in 2030, up from more than 1.0 million at the end of 2018. These facts and the dependence on the safety, security and economy of the electricity grid have prompted broad recognition worldwide of the need to modernize and enhance the reliability and security of power grids.

The Biden Administration's energy plan could positively impact the demand for our new energy power systems solutions. The energy plan intends to reform and extend the tax incentives that generate energy efficiency and clean energy jobs as well as to develop financing mechanisms that leverage private sector dollars to maximize investment in the clean energy revolution. We plan to seek to collaborate with top tier wind turbine manufacturers to provide new wind farm connectivity to the U.S. power grid.

The Biden Administration also intends to spur the installation of millions of solar panels - including utility- scale, rooftop, and community solar systems. Our systems are primarily focused on addressing renewable energy installations for project developers and wind turbine manufacturers. Because solar power is dynamic and intermittently variable in nature, distribution grids will need to enhance their network's capabilities to accommodate this new resource, while maintaining efficiency and power quality for their customers. Our system offers electric utilities superior power quality, environmental benefits, and significant cost-savings over traditional solutions.

The Biden Administration's energy policy also focuses on the next generation of electric grid transmission and distribution, which has been the heart of our long-term growth strategy. We believe our new energy power systems products are well suited to address this enormous challenge.

The Inflation Reduction Act of 2022 (the "Inflation Reduction Act") was enacted in August 2022, in part, to address the challenges of climate change. The Inflation Reduction Act is expected to result in the investment of

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