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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 1-11512
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SATCON TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2857552
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
161 FIRST STREET, CAMBRIDGE, MASSACHUSETTS 02142
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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(617) 661-0540
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
TITLE OF CLASS
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COMMON STOCK, $.01 PAR VALUE
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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 X NO
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INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [_]
As of December 5, 1997, 8,918,844 shares of the registrant's Common Stock,
$.01 par value, were issued and outstanding. The aggregate market value of the
registrant's voting stock held by non-affiliates of the registrant as of
December 5, 1997, based upon the closing price of such stock on the Nasdaq Stock
Market on that date ($9.500) was $50,054,379.
44 pages in this filing Index to exhibits is on page 42
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy
Statement for its 1998 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Form 10-K
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PART I
ITEM 1. BUSINESS
GENERAL
SatCon Technology Corporation (the "Company" or "SatCon") was organized as a
Massachusetts corporation in February 1985 and reincorporated in Delaware in
1992. SatCon designs, develops and manufactures "Active Motion Control"
Systems including advanced electro-mechanical products for aerospace,
transportation, industrial, and utility applications. SatCon's electro-
mechanical products are being developed for a wide variety of U.S. Government
and commercial markets. For the government, SatCon's electro-mechanical
systems provide low vibration and high power for applications ranging from
satellite attitude control to high speed drives for shipboard systems. In the
transportation segment SatCon is developing electric and hybrid electric drive
components, auxiliary power units, and advanced steering, suspension, and
braking systems. SatCon is working with major equipment producers to develop
process equipment drives, high speed and precision machine tools,
manipulators, and machinery isolation equipment. SatCon's electro-mechanical
systems may offer to the utility industry advantages in power generation,
energy storage, and power quality. In the consumer market SatCon is
developing freon-free compressors for refrigerators, variable speed motors,
and other long-life, high-efficiency machinery.
STRATEGY
The transition to a new generation of products being developed by SatCon is
being fueled by a combination of market demand for higher performance and
improved efficiency, and by the potential to satisfy these needs made possible
by advances in materials and electronics technologies. It is the Company's
strategy to accelerate leading edge developments by continuing to expand its
externally funded contract research and development from both government and
commercial sources. The Company believes that this funding can be used to
develop products which can be sold to government agencies and possibly
transition into viable commercial products. In most instances individual
components have multiple applications across these markets.
These product developments typically progress through a technology and concept
development phase and, if appropriate, into a prototype build phase. Once
demonstrated, the Company intends to leverage these prototype developments
into 'beta site' units that can be purchased by, or jointly developed with,
commercial customers for evaluation. Upon completion of beta site testing,
decisions by potential customers will determine the viability of continuing
into pre-production manufacturing and further testing and evaluation. To
further the commercialization of its product development efforts and to
protect its proprietary rights, the Company plans to continue to acquire
manufacturing companies capable of producing key components for products being
developed by SatCon. In recent years, SatCon has been successful in
developing relationships with commercial customers who ultimately purchase its
technology and prototype demonstration units. These relationships can provide
a foundation for the Company's continuing product development efforts while
building a potential market base for those products in production quantities.
DEVELOPMENTS DURING 1997
During 1997 the Company initiated several actions to advance its strategy of
commercializing products established under externally funded research and
development through the acquisition of manufacturing capabilities and the
establishment of strategic partnerships.
During 1996, the Company delivered five "beta-site" units of an integrated
suspension and motor system ("ISAM") to Applied Materials Inc., a manufacturer
of semiconductor wafer fabrication equipment, for evaluation. After successful
testing and evaluation, the Company entered into a long-term manufacturing
agreement on February 20, 1997 calling for the Company to manufacture and
supply its ISAM product to
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Applied Material Inc.. The Company began making shipments under the terms of
the agreement during the third quarter and had transitioned the manufacturing
process from its Cambridge facility to its newly acquired motor manufacturing
company, K&D MagMotor ("K&D"), by the fourth quarter.
The Technology Division, located in Cambridge, continues to participate in
several efforts with various commercial customers to develop new products and
product improvements including an improved performance alternator for
commercial vehicles; control electronics for power regulation for a turbine
for alternative fuel vehicles; and flywheel integrated power and attitude
control systems for commercial satellite applications.
During the fourth quarter of 1997 the Company decided to consolidate the space
flywheel energy storage systems segment into the Technology Division. The
consolidation will allow the Company to capitalize on the synergies between
the Tuscon and and Cambridge operations in technology, technical personnel,
and equipment involved in the development of flywheel energy storage systems.
The consolidation will further provide the Company's space customers direct
access to related research and development projects currently being conducted
by the Technology Division and Beacon Power Corporation. The development of
electro-optic sensing systems will continue to be performed at the Tucson
location.
FUNDED RESEARCH AND DEVELOPMENT
The Company continued its funded research and development with various U.S.
Government agencies during Fiscal 1997. Projects included a terrestrial based
flywheel energy storage system for the Marine Corps; variable speed drives for
auxiliary applications on U.S. Navy ships that can integrate high density
drive electronics with innovative permanent magnet motors for hydraulic pump
motors, circulating pumps and compressors; a light-weight, low volume
alternator with high efficiency power electronics for the Army. The Company
is also working with the Air Force to investigate the use of new specialty
shape memory alloys in air foil controls for greater fuel efficiency and with
several other agencies on the development of high power density electronics
modules called Power Electronic Building Blocks or PEBB's.
COMMERCIALIZATION
The Company intends to continue directing its commercialization efforts in the
following product areas:
Flywheel Energy Storage Systems
By integrating energy-storing flywheels made of high-strength materials with
high-power, permanent magnet motor/generators, the Company has developed
electro-mechanical storage systems that management believes have the potential
to offer practical solutions for mobile and stationary applications. SatCon
flywheel systems are anticipated to provide extremely high power output and
energy storage in compact packages. They may be a long-lasting, lightweight,
and environmentally sound alternative to conventional batteries.
SatCon's Flywheel Energy Storage (FES) systems offer an alternative to lead-
acid batteries as uninterruptible power supplies for the telecommunications
industry, including cable television and telephone service providers, which
are required to maintain service during power outages. In addition these
systems can be used to provide backup for critical industrial processes and
machines, as power supplies for satellites and as energy recovery systems for
electric and hybrid electric vehicle drive trains.
While flywheels have been used for centuries, practical, compact systems are a
recent development. Their arrival coincides with the commercial availability
of high-strength-to-weight composite materials, high-energy permanent magnets,
extremely efficient switching power supplies, and active electromagnetic
bearings.
During 1997, the Company made internal research and development investments in
this technology by continuing product development of its Inertial Battery
20C1000 series flywheel energy storage system for uninterruptible power supply
applications for the telecommunications market. In addition, the Company made
an investment in research and development related to the development of
flywheel energy storage technology for satellite applications.
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On May 28, 1997, the Company entered into a strategic relationship with
Duquesne Enterprises, a subsidiary of DOE, Inc., and formed Beacon Power
Corporation to manufacture and distribute SatCon's flywheel energy storage
systems. The capital required to continue product development and to startup
the manufacturing process will be partially funded by a $5,000,000 investment
in SatCon by Duquesne Enterprises. Beacon Power Corporation assumed the
activities of SatCon's Energy Systems Division. The Energy Systems Division,
located in SatCon's Cambridge offices, was formed in October 1995 to focus on
the product development and marketing of flywheel "Inertial Battery" systems
for such markets as utilities, cable television and telecommunications, where
uninterruptible power supplies (UPS) are critical to maintaining service.
Motors and High Speed Drives
SatCon designs and builds high-performance motors and drives that capitalize
on advances in materials and semiconductor technology to achieve high power
density. SatCon designs are characterized by power densities as high as 7
hp/lb. for the motors and 25 hp/lb. for the drive electronics. Through the use
of high-performance materials and careful design of the magnetic circuits,
SatCon has demonstrated electric motor prototypes that are lightweight and
have provided efficiencies in excess of 97 percent. SatCon's motor designs
are being evaluated for a wide variety of applications including electric
vehicles, shipboard motors and general industrial applications.
SatCon has teamed with United Technologies to develop a direct drive, high
speed compressor for the development of a Roof Top Air Conditioning System.
SatCon is developing a 47,000 rpm permanent magnet motor that produces 28
horse power and is driven by a Digital Signal Processor (DSP) controlled IGBT
based inverter. Existing systems use low speed, low efficiency induction
motors which due to size and weight, force compromises in the overall design
of air conditioning systems. This high speed motor technology shows great
promise in the development of high efficiency, variable speed drive air
conditioning systems.
During 1997, the Company continued to make internal research and development
investments in this product area by continuing product development of an
advanced automotive alternator that can provide more power at lower speeds.
One important key limitation with current automotive alternators is their
inability to match power requirements at idle speeds effectively. By
addressing limitations of current alternators, SatCon is attempting to
develop technology to revolutionize the automotive alternator market.
On January 23, 1997, the Company completed the acquisition of K&D MagMotor
Corporation ("K&D"). K&D, a privately held company, is a manufacturer of
custom electronic motors targeting the factory automation, medical, semi
conductor and packaging markets. Pursuant to the Asset Purchase Agreement,
dated as of January 2, 1997, by and among the Company, K&D and K&D's principal
stockholder, the Company acquired substantially all of the assets of K&D,
which became a wholly-owned subsidiary of SatCon.
Power Electronics
SatCon has developed proprietary, custom-built high-voltage hybrid modules
based on advanced power semiconductor technology at a fraction of the weight
of conventional packages. The high-density topology and innovative cooling
schemes utilized allow for higher throughput in smaller, lighter weight
packages. These electronics support SatCon's high-speed drive and flywheel
product development. This high-density topology and innovative cooling scheme
has created power throughput in excess of 1 Megawatt in a 65-pound package.
During 1997, the Company continued work on the development of an advanced,
high power-density, starter/regulator unit capable of starting and controlling
a turbine alternator being developed for a major automotive manufacturer.
SatCon has also developed an automotive Turbine Starter Rectifier Regulator
for Williams International which is designed to drive a turbine alternator
during engine light-off and to electrically load the turbine alternator to
charge the battery. This is performed by utilizing sensorless control
strategies and a novel system topology achieving an efficiency of greater than
98% measured at one-third the power. This program is a
4
significant development for hybrid electric vehicles obtained through the
efforts of SatCon, Williams International, and General Motors.
On April 16, 1997, the Company completed the acquisition of Film
Microelectronics, Inc. ("FMI"). FMI, a privately held company, is a
manufacturer of production and custom integrated circuits for the
communications, industrial, military and aerospace markets. Pursuant to the
Asset Purchase Agreement, dated April 3, 1997, by and among the Company, FMI
and FMI's principal stockholder, the Company acquired substantially all of the
assets of FMI, which became a wholly owned subsidiary of SatCon.
Magnetic Bearings and Suspension Systems
Improvements in magnetic materials and electronic control systems have led the
way to advances in electromagnetic bearings and suspension systems. SatCon has
participated in the development of such systems for spacecraft and ground-
based systems. SatCon's magnetic bearing systems feature innovative
electromagnetic and permanent magnet actuators and advanced digital control
systems. These systems have been developed for both commercial and military
applications.
By injecting electromagnetic forces along a selected bearing axis in concert
with shaft rotation, the magnetic bearings can balance a dynamic machine,
resulting in smooth and quiet operation. Similar principles guide the
application of electromagnetic suspension systems. These automated systems
provide a significant reduction of structure-borne vibration transmittal,
providing either low-vibration machinery operation, low detection, or
vibration isolation. In addition, these systems provide lubrication-free
support for rotating, reciprocating, and stationary systems. Also, through
active electronic control, these systems provide quiet, smooth, and non-
contaminating machinery operation and isolation.
SatCon has been contracted by Pratt and Whitney to develop a combination air
and magnetic bearing system for next generation military aircraft gas turbine
engines. Current engines utilize oil lubricated ball and roller bearings
which are challenged by both the high rotational speed and temperatures
required to achieve greater efficiencies. Non-contacting magnetic and air
bearings offer the promise of greater design freedom to produce smooth running
highly reliable machines that are less complex, longer lasting and require
lower maintenance. Once the advantages have been clearly demonstrated, this
technology is expected to flow down to commercial aircraft gas turbines and
other types of high speed machinery, such as, pumps and electric generators.
During 1997, the Company continued to make internal investments in this
product area by completing beta site testing and continuing product and
process development of its ISAM system. The ISAM system is designed for
semiconductor processing applications and can eliminate unwanted debris,
provide higher throughput potential, and is more easily maintained than
existing mechanical systems.
Electro-Optics Sensor Systems
SatCon is developing a commercial real time, non-contact Remote Inspection
Biological Sensor ("RIBS") for pathogen detection of contaminants, such as E.
Coli 0157:H7 and Salmonella in meat, poultry, vegetables, fruit, and fruit
juices. The detection technique is based on laser spectroscopy, which has been
used for agent identification in combustion diagnostics, emission monitoring,
bioaerosol detection, and chemical analysis of oil types. SatCon believes that
the benefits resulting from the development of a commercial sensor capable of
remotely detecting pathogens in the world's food supply are enormous. In
addition, SatCon believes the RIBS system has the potential to play a role in
implementing the recently enacted USDA's Hazard Analysis Critical Control
Point ("HACCP") regulations.
MARKETS
SatCon's objective is to capitalize on the technological developments from its
internal and contract research and development projects to become a leading
supplier of a new generation of intelligent, electro-mechanical and electro-
optic products for aerospace, transportation, industrial, utility, and food
processing applications. These products, enabled by a revolution in the size,
weight and efficiency of machines, provide competitive advantages in
performance. Management believes the following list to be representative of
market opportunities as they exist today for the Company's products.
5
Flywheel Energy Storage Systems: Electromechanical storage in SatCon's
flywheel energy storage systems may replace batteries in a variety of
industries including uninterruptible power supplies for telecommunications
providers and industrial systems, power quality for utilities, and integrated
power and attitude control for satellites.
Motors and High Speed Drives: SatCon's electric motors, generators, and drives
may offer advantages to a variety of industries including automotive
components, vehicle propulsion systems, industrial drives, machine tools,
satellites and consumer products.
Power Electronics: Light-weight, high power density electronics may offer
advantages to several markets and are key components in SatCon's system
products including motor and drive systems, systems for electric and hybrid
vehicles, aerospace, industrial controls and power management, and a variety
of military subsystems.
Magnetic Bearing and Suspension Systems: SatCon's magnetic bearing and
suspension systems have the potential to be applied to a variety of
applications such as aircraft gas turbine engines, flywheel systems,
compressors, high speed machine tools, vibration isolators and computer chip
manufacturing processing equipment.
Electro-Optic Sensor and Inspection Systems: Advanced Electro-Optic Sensor
and Detection systems have the potential to satisfy the needs of a wide range
of applications in food safety inspection, environmental monitoring, earth
mapping, mine detection, and commercial fishing for both government and
commercial customers.
COMPETITION
The Company is aware of direct and indirect competitors that employ similar
technology and have extensive research and development facilities in all of
SatCon's market opportunity areas in both government and commercial markets.
The Company is aware of large companies, as well as small companies, entering
these markets, and expects competition to intensify either through direct
competition or via alternative technologies.
Although the Company is not as well capitalized as some of its competitors and
is more limited in terms of its facilities and number of personnel, its
strategy is to compete with larger companies on the basis of its technical
skills, proprietary know-how, access to university researchers in the greater
Boston area conducting ongoing research, key personnel, many of whom are
experts in the fields of magnetics and electro-optics technologies, and the
establishment of strategic alliances with investment and commercial partners.
The industries served by the Company are highly competitive and a number of
companies are involved in extensive research and development programs designed
to address the technological challenges which the Company is seeking to
address through its development programs. Many of these companies are larger
and better financed than the Company. As a result, there can be no assurance
that customers will not select technologies developed by or under development
by other companies or that potential customers will select the Company's
technologies to address both existing and potential markets. The majority of
the Company's revenues to date from commercial contracts have been derived in
connection with prototype development contracts. As a result, the Company will
need to develop technologies that address customers' needs in a cost-effective
and timely manner. There can be no assurance that the Company will be
successful in these efforts, that technologies developed by other companies
will not be selected, or that potential customers for the Company's
technologies will utilize the Company's technologies in a timely manner, if at
all.
PATENTS AND PROPRIETARY INFORMATION
The Company currently owns eleven United States patents that expire between
2007 and 2014. The Company has fifteen patent applications pending with the
U.S. Patent and Trademark Office.
As a qualifying small business, the Company has retained commercial ownership
rights to proprietary technology developed under various U.S. Government
contracts and grants, including Small Business Innovation Research contracts.
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In addition to its patent rights, the Company also relies upon treatment of
its technology as trade secrets and upon confidentiality agreements, which all
of its employees are required to execute, assigning to the Company all patent
rights and technical or other information developed by the employees during
their employment with the Company. The Company's employees have also agreed
not to disclose any trade secret or confidential information without the prior
written consent of the Company. Notwithstanding these confidentiality
agreements, there can be no assurance that other companies will not acquire
information that the Company considers to be proprietary. Moreover, while the
Company intends to defend vigorously its patents against infringement by third
parties, there can be no assurance that the Company's patents will be
enforceable or provide the Company with meaningful protection from competitors
or that patent applications will be allowed. No assurance can be given as to
the issuance of additional patents or, if issued, as to their scope. Patents
granted may not provide meaningful protection from competitors. Even if a
competitor's products were to infringe patents owned by the Company, it would
be very costly for the Company to pursue its rights in an enforcement action,
which would also divert funds and resources which otherwise could be used in
the Company's operations. Furthermore, there can be no assurance that the
Company would be successful in enforcing intellectual property rights or that
the Company may not be infringing patent or intellectual property rights of
third parties, although the Company, to date, has not been required to defend
its patents or proprietary information against claims by third parties.
RESEARCH AND DEVELOPMENT
Approximately $8,200,000 or 66% of the Company's revenues during fiscal year
1997 are attributable to research and development activities funded by
commercial customers and U.S. Government agency sponsors. Under the
agreements funded by the U.S. Government, the government retains a royalty-
free license to use the technology developed for government purposes and the
Company retains exclusive rights to the technology for commercial and
industrial applications. The rights to technology developed under contracts
funded by commercial customers are negotiated on a case by case basis. In
addition to the research and development conducted under contract, the Company
expended $2,489,207 on internally funded research and development during 1997.
Beacon Power Corporation's Flywheel UPS product and the introduction of
SatCon's ISAM product accounted for the majority of the 1997 internally funded
costs.
GOVERNMENT REGULATION
The Company has entered into certain U.S. Government contracts that require
compliance with applicable U.S. Government regulations. The Company's
contracts with the U.S. Government consist primarily of research and
development contracts, many of which are awarded under the SBIR Program. The
research and development contracts are generally subject to competitive
bidding and extensive regulation and are generally subject to cancellation at
the U.S. Government's sole discretion. In addition, the Company has been
awarded certain classified U.S. Government contracts. Certain of the Company's
employees and directors have been required to obtain security clearance from
the federal government.
As a party to a number of contracts with the U.S. Government and its agencies,
the Company must comply with extensive regulations, including regulations with
respect to bid proposals and billing practices. As research and development
contracts are generally subject to cancellation at the U.S. Government's sole
discretion, should the U.S. Government or its agencies conclude that the
Company has not adhered to federal regulations, any contracts to which the
Company is a party could be canceled and/or the Company could be prohibited
from bidding on future contracts, which would have a material adverse effect
on the Company. All payments to the Company for work performed on contracts
with agencies of the U.S. government are subject to adjustment upon audit by
the U.S. Government Defense Contract Audit Agency, the General Accounting
Office, and other agencies. The Company could be required to disgorge any
payments received from U.S. Government agencies if it is found to have
violated federal regulations.
The commercialization of the Company's technologies for use in various
industries may also be affected by federal and state legislative and
regulatory changes affecting such industries.
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MANUFACTURING AND SUPPLIERS
Until 1997, the Company had manufactured all of its prototype products at its
facility in Cambridge, Massachusetts. The Company anticipates investing in
manufacturing equipment to further develop the manufacturing capabilities at
this facility. During 1997, the Company acquired K&D, a manufacturer of
custom electric motors, and FMI, a manufacturer of custom integrated circuits.
The Company intends to continue to transition the production of key components
of its products to these newly acquired manufacturing companies. In addition,
the Company intends to continue to acquire manufacturing capabilities to
support its product development efforts and product line expansion. If the
Company is successful in obtaining market penetration of its products, the
Company will be required to deliver large volumes of quality products or
components to its customers on a timely basis at reasonable costs to the
Company. When necessary, the Company intends to seek to supplement its
manufacturing capabilities by establishing relationships with manufacturing
organizations to deliver large volumes of its products until such time as the
Company can develop its own manufacturing expertise and capacity. No
assurance can be given that the Company will be able to successfully establish
relationships with third party manufacturing organizations, or if such
relationships are established, that they will be successful.
The principal materials and supplies used by the Company are available from
several commercial sources, and the Company does not depend on any single
source for a significant portion of its materials or supplies. Component parts
of the Company's active control systems are readily available.
BACKLOG
The Company's backlog consists primarily of research and development contracts
and orders for multi-chip modules and hybrid products. At September 30, 1997,
the backlog was approximately $10,500,000 for work to be performed and
products to be shipped during the fiscal year ending September 30, 1998 and
beyond. Many of the Company's contracts may be canceled at any time with
limited or no penalty. Also, contract awards may be subject to funding
approval from the U.S. Government and commercial entities, which involves
political, budgetary, and other considerations over which the Company has no
control. The Company's backlog at September 30, 1996 was approximately
$7,400,000.
SIGNIFICANT CUSTOMERS
The U.S. Department of Defense accounted for approximately 45% of the
Company's fiscal 1997 sales.
EMPLOYEES
At September 30, 1997, the Company employed a total of 199 people; 188 on a
regular full-time basis, 5 on a regular part-time basis, and 6 student
interns. Many of the Company's employees are affiliated with large
universities located in the greater Boston area. Approximately 83 persons are
employed in engineering, 74 in manufacturing, 32 in administration and 10 in
sales and marketing. None of these employees are represented by a union. The
Company believes that its relations with its employees are satisfactory.
8
ITEM 2. DESCRIPTION OF PROPERTIES
The Company occupies 45,820 square feet of office and laboratory space at 161
First Street, Cambridge, Massachusetts under a primary lease expiring on
October 31, 1998 and an additional 8,343 square feet located at 6245 East
Broadway Boulevard, Suite 350, Tucson, Arizona under a primary lease expiring
on March 31, 2001. The Company also occupies approximately 14,757 square feet
of manufacturing space at 530 Turnpike Street, North Andover, Massachusetts
under a primary lease expiring on July 31, 2002 and approximately 12,000
square feet at 90 Prescott Street, Worcester, Massachusetts under a month-by-
month lease arrangement.
Effective November 5, 1997 the Company entered into an agreement to sub-lease
8,930 square feet at 161 First Street to a third party.
The Company believes its facilities are adequate for its current needs and
that adequate facilities for expansion, if required, are available.
ITEM 3. LEGAL PROCEEDINGS
On December 12, 1997, SatCon Film Microelectronics Inc., a wholly-owned
subsidiary of SatCon Technology Corporation, initiated a suit against Albert
R. Snider for breach of certain representations made by Snider including
overstatements of inventory balances. The representations were made in the
Asset Purchase Agreement entered into between Snider and SatCon Film
Microelectronics Inc. dated as of April 3, 1997 relating to the purchase by
SatCon of the business of FMI. The suit was filed in the United States
District Court in Boston, Massachusetts. SatCon believes it has sufficient
reserves on the books of FMI for the overstatement in inventory balances.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report through the solicitation of
proxies or otherwise.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ Stock Market ("NASDAQ")
under the trading symbol "SATC." As of December 5, 1997 there were
approximately 180 shareholders of record.
For the periods reported below, the following table sets forth the range of
high and low bid quotations for the Common Stock as reported by NASDAQ. Such
quotations represent interdealer quotations without adjustment for retail
markups, markdowns or commissions and may not represent actual transactions.
As of December 5, 1997 the closing price for the Company's Common Stock, as
quoted in the Wall Street Journal, was $9.500.
FISCAL YEAR 1997 FISCAL YEAR 1996
------------------- -----------------
BID BID
------------------- -----------------
HIGH LOW HIGH LOW
---------- -------- -------- --------
First Quarter......... $ 8.625 $5.625 $11.375 $7.750
Second Quarter........ 9.125 5.750 12.750 6.250
Third Quarter......... 10.500 5.750 12.750 8.625
Fourth Quarter........ $13.375 $7.500 $ 9.250 $7.000
DIVIDEND POLICY
The Company has not paid cash dividends on its Common Stock since its
inception and has no intention of paying any cash dividends to its
stockholders in the foreseeable future. The Company intends to reinvest
earnings, if any, in the development and expansion of its business. Any
declaration of dividends in the future will be at the election of the Board of
Directors and will depend upon the earnings, capital requirements and
financial position of the Company, general economic conditions, requirements
of any bank lending arrangements which may then be in place and other
pertinent factors.
10
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below for the years ended September 30,
1997, 1996, 1995, 1994, and 1993 has been derived from the financial
statements of the Company which have been audited by Coopers & Lybrand L.L.P.,
independent accountants. This information should be read in conjunction with
the financial statements and notes thereto set forth elsewhere in this Report.
STATEMENT OF OPERATIONS DATA:
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ -----------
Revenue........................... $12,466,335 $ 9,384,588 $11,475,427 $18,016,987 $5,306,680
----------- ------------- ----------- ------------ -----------
Cost of Sales..................... 7,730,666 3,940,674 6,522,768 11,281,239 2,652,533
Selling, General and
Administrative
Expenses........................ 8,538,435 8,023,441 5,483,194 4,655,769 2,363,370
Research and Development.......... 2,489,207 893,628 1,937,241 461,068 119,663
Goodwill amortization............. 120,467
----------- ------------- ----------- ------------ -----------
Total Operating Expenses.......... 18,878,775 12,857,743 13,943,203 16,398,076 5,135,566
Interest Income/(Expense), Net.... 269,198 463,840 451,034 409,337 119,100
----------- ------------- ----------- ------------ -----------
Income/(loss) Before Income
Taxes............................ (6,143,242) (3,009,315) (2,016,742) 2,028,248 290,214
Provision/(benefit) for Income
Taxes............................ (144,479) (806,697) 803,356 101,288
----------- ------------- ----------- ------------ -----------
Net Income/(loss)................. $(6,143,242) $(2,864,836) $(1,210,045) $ 1,224,892 $ 188,926
Earnings/(loss) per Common and
Common Equivalent Share........... $(.77) $(.39) $(.17) $.17 $.03
============ ============= =========== ============ ===========
Weighted Average Shares
Outstanding....................... 7,959,309 7,285,756 7,079,855 7,347,098 5,628,641
BALANCE SHEET DATA:
AT SEPTEMBER 30,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ----------
Total Assets...................... $20,709,438 $17,277,517 $19,792,966 $22,274,534 $8,430,630
Total Long Term Obligations....... $ 322,897 $ 0 $ 0 $ 0 $ 11,229
Total Liabilities................. $ 2,630,301 $ 1,178,349 $ 1,040,251 $ 2,768,493 $1,241,426
Working Capital................... $10,595,294 $11,011,170 $15,615,645 $18,067,939 $6,653,681
Stockholders' Equity.............. $18,079,137 $16,099,168 $18,752,715 $19,506,041 $7,189,204
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
SatCon Technology Corporation (the "Company" or "SatCon") was organized as a
Massachusetts corporation in February 1985 and reincorporated in Delaware in
1992. SatCon designs, develops and manufactures "Active Motion Control"
Systems including advanced electro-mechanical products for aerospace,
transportation, industrial, and utility applications. SatCon's electro-
mechanical products are being developed for a wide variety of U.S. Government
and commercial markets. For the Government, SatCon's electro-mechanical
systems provide low vibration and high power for applications ranging from
satellite attitude control to high speed drives for shipboard systems. In the
transportation segment SatCon is developing electric and hybrid electric drive
components, auxiliary power units, and advanced steering, suspension, and
braking systems. SatCon is working with major equipment producers to develop
process equipment drives, high speed and precision machine tools,
manipulators, and machinery isolation equipment. SatCon's electro-mechanical
systems may offer to the utility industry advantages in power generation,
energy storage, and power quality. In the consumer market SatCon is
developing freon-free compressors for refrigerators, variable speed motors,
and other long-life, high-efficiency machinery.
It is the Company's strategy to accelerate leading edge developments by
continuing to expand its externally funded contract research and development
from both government and commercial sources. The Company can then leverage
this funding to develop products that the Company believes can both be sold to
government agencies and transition into high volume commercial products.
Recent changes in the Small Business Innovative Research program provide a new
mechanism to pursue government Phase III pre-production programs on a sole
source non-competitive basis. In most instances, individual components have
multiple applications across these markets.
This Annual Report on Form 10-K contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact 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. There are a
number of important factors that could cause the Company's actual results to
differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth below under the
caption "Factors Affecting Future Results."
RESULTS OF OPERATIONS
During 1997 the Company initiated several actions to advance the development
and market introduction of new products, to establish a product manufacturing
base capable of supplying key components of SatCon's products, and to improve
the future profitability of the Company. These actions include the
introduction of the ISAM and PowerSmart products, the formation of Beacon
Power Corporation, the acquisition of K&D and FMI, the recognition of certain
product development costs in the current year rather than amortizing them over
future years sales, and the recognition of costs associated with the Company's
plan to consolidate the Tucson Space Division into the Technology Division.
The effects of these actions on the Company's financial performance during
1997 are discussed below.
12
The following table sets forth, for the periods indicated, the Percentage of
Revenues for certain items in the Company's Statement of Operations for each
period:
YEAR ENDED SEPTEMBER 30,
--------------------------------
1997 1996 1995
--------- --------- ------
Revenues.................................. 100.0% 100.0% 100.0%
Cost of sales............................. 62.0 42.0 56.8
Selling, general and administrative
expenses................................ 68.5 85.5 47.8
Research and development.................. 20.0 9.5 16.9
expenses.................................
Goodwill amortization..................... 1.0
Total operating expenses (excluding cost
of sales)............................... 89.5 95.0 64.7
Operating income/(loss)................... (51.5) (37.0) (21.5)
Interest income/(expense) net............. 2.2 4.9 3.9
Income /(loss) before income taxes........ (49.3) (32.1) (17.6)
Provision/(benefit) for income taxes...... (1.5) (7.0)
Net income/(loss)......................... (49.3) (30.6) (10.6)
YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1996
Revenues. The Company's revenues increased $3,081,747 or 32.8% from 1996 to
1997. The increase is due to the introduction of revenue from the sale of
manufactured products as well as an increase in effort on government
development contracts. During 1997 the Company acquired K&D and FMI as wholly
owned subsidiaries which provided for incremental revenue of approximately
$1,135,000 and $2,595,000, respectively. Sales of the Company's new ISAM
product contributed approximately $540,000 of the additional revenue.
Approximately $1,295,000 of the increase in revenue related to an increase in
effort on government development contracts. These increases were partially
offset by a decrease in revenue of approximately $3,410,000 from contracts
with Chrysler Corporation for the development of drive train components as
part of the Patriot Hybrid Vehicle Program. During 1996, Chrysler Corporation
announced the cancellation of the Patriot Hybrid Vehicle Program. Chrysler
announced that it intends to transition technologies utilized in the Patriot
Program to their Hybrid Electric Vehicle (HEV) program being sponsored by the
U.S. Government's Super Car Initiative.
Cost of Sales. Cost of sales increased $3,789,992, or 96.2%, from 1996 to
1997. The increase is primarily due to the addition of cost of sales
associated with K&D and FMI of approximately $797,000 and $1,886,000,
respectively and increased effort on government development contracts
accounting for an additional $696,000. In addition, the Company established a
reserve of approximately $910,000 in connection with the cost to complete a
number of commercial development contracts. These increases were partially
offset by a decrease in effort on contracts with Chrysler Corporation.
Selling, General and Administrative. Selling, general and administrative
expenses increased $514,994 or 6.4% from 1996 to 1997. Approximately $250,000
and $570,000 of the increase is due to selling, general and administrative
expenses related to K&D and FMI, respectively. In addition, the Company
established a reserve of $498,000 for expenses, primarily lease cancellation
costs relating to consolidating the Tucson Space Division into the Technology
Division. These increases are offset by a decrease of approximately $800,000
primarily due to the management of travel and other selling and administrative
costs.
Research and Development. Internally funded research and development expenses
increased $1,595,579 from 1996 to 1997. Approximately $2,593,000 of the
increase is related to the Company's decision to recognize certain capitalized
product development cost in the current year rather than amortizing the costs
over future year's sales based on the uncertainty of future sales. These
product development cost related primarily to Beacon Power Corporation's
Flywheel UPS product development efforts and the ISAM product. These costs
are partially offset by the reversal of a reserve for a fiscal year 1996
dispute over
13
contractual terms. Management believes that the reserve is no longer necessary
and that the financial statements properly reflect the ultimate impact of this
matter.
Goodwill Amortization. The Company recognized $120,467 of goodwill
amortization in 1997 related to goodwill in connection with the acquisition of
K&D and FMI.
Net Loss. As a result of an increase in revenues being offset by the
Company's decision to recognize certain product development costs in the
current year rather than amortizing the costs over future periods sales, and
the establishment of contingency reserves associated with consolidating the
Tucson Space Division into the Technology Division, the Company realized a net
loss of $6,143,242 in 1997 compared to a net loss of $2,864,836 in 1996.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO THE YEAR ENDED SEPTEMBER 30, 1995
Revenues. The Company's revenues decreased $2,090,839, or 18.2%, from 1995 to
1996. The decrease was primarily due to a decrease in revenue of approximately
$3,945,253 from contracts with Chrysler Corporation for the development of
drive train components as part of the Patriot Hybrid Vehicle Program. During
1996, Chrysler Corporation announced the cancellation of the Patriot Hybrid
Vehicle Program. Chrysler announced that it intends to transition technologies
utilized in the Patriot Program to their Hybrid Electric Vehicle (HEV) program
being sponsored by the U.S. Government's Super Car Initiative. To date the
Company has not recorded any revenues associated with the Chrysler HEV
Program. This decrease in revenue was partially offset by increased revenues
of approximately $2,355,000 related to work on various government development
contracts.
Cost of Sales. Cost of sales decreased $2,582,094, or 39.5%, from 1995 to
1996. The decrease was primarily due to a decrease in work during 1996 on
contracts with Chrysler Corporation for the development of drive train
components as part of the Patriot Hybrid Vehicle Program. As a percentage of
revenue, cost of sales decreased from 56.8% for 1995 to 42.0% for 1996. The
decrease in cost of sales, as a percent of revenue, was primarily due to a
decrease in direct material and subcontract costs and an increase in direct
labor costs directly related to the shift from work on the Chrysler Patriot
Program, which had high material costs as a percentage of revenue, to work on
several labor intensive research and development contracts funded by the U.S.
Government which typically have higher margins.
Selling, General and Administrative. Selling, general and administrative
expenses increased $2,540,247, or 46.3%, from 1995 to 1996, a change as a
percentage of revenue from 47.8% in 1995 to 85.5% in 1996. Approximately
$500,000 is attributable to the establishment of the Space Division in Tucson,
Arizona. Approximately $600,000 was expensed in establishing the Flywheel
Energy Storage Division. Cambridge facilities expense increased approximately
$277,000 due to the exercise of an option in the Company's lease for
additional space. During 1996 the Company occupied the entire building at 161
First Street, Cambridge, Massachusetts. Depreciation expense increased
approximately $373,000 due to purchases of computer, laboratory, inspection,
test, and manufacturing equipment during fiscal 1995 and 1996. Marketing
expenses increased approximately $500,000 in efforts to broaden the customer
base in anticipation of the cancellation of the Patriot Program.
Research and Development. Research and development expenses decreased
$1,043,613, or 53.9% from 1995 to 1996. As a percentage of revenue, internal
research and development decreased from 16.9% in 1995 to 9.5% in 1996. The
decrease in research and development spending was primarily the result of a
reallocation of engineering resources from internally funded research and
development to construction of a pre-production flywheel, and additional
marketing efforts and development efforts on contracts from the U.S.
Government and commercial customers. Virtually all of 1996 revenues were for
sponsored research and development.
Net Income/(Loss). As a result of decreased revenues and increased investment
in marketing, facilities, and associated fringe costs, the Company realized a
net loss of $2,864,836 in 1996 versus a net loss of $1,210,045 in 1995.
14
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company's cash and cash equivalents were
$4,256,504 an increase of $485,579 from September 30, 1996. Cash used in
operating activities during 1997 was $6,075,232 as compared to cash used in
operating activities of $3,481,674 during 1996. The cash used in operations
was primarily the result of a net loss of $3,072,434 during 1997. The effect
of the net loss was partially offset by an increase of $535,797 in accounts
receivable and an increase in reserve balances.
Cash used in investing activities, as of September 30, 1997, was $1,224,869.
The cash provided relates primarily to the sale and maturity of approximately
$2,079,000 of marketable securities to fund operations prior to collection of
outstanding invoices. The cash provided was partially offset by purchases of
marketable securities of approximately $600,000, capital expenditures of
$2,496,726, and the acquisitions of K&D and FMI of $112,986. The capital
expenditures primarily relate to the purchase of manufacturing and inspection
equipment, furniture and fixtures, leasehold improvements, computer equipment,
and sales and demonstration equipment.
Cash provided by financing activities as of September 30, 1997, was
$5,192,122. The cash provided relates primarily to the proceeds from the
Securities Purchase Agreement, dated May 28, 1997, by and among the Company,
Beacon Power Corporation, and Duquesne Enterprises. The aggregate
consideration received by the Company was $4,817,232 net of financing
expenses.
The Company's $3,000,000 bank line of credit expired January 31, 1997. No
funds were advanced under the facility. The Company intends to seek a
replacement line of credit from its new primary bank during 1998.
The Company anticipates that its existing cash resources, cash flow from
operations, and availability of a replacement line of credit will be
sufficient to fund its operations through September 30, 1998, provided it
meets its operating plan. The Company's ability to finance its operations may
be dependent on its ability to negotiate a replacement bank line of credit.
There can be no assurance that the Company will be successful in negotiating a
replacement line of credit. To the extent cash flow from operations is
insufficient to fund the Company's activities, it may be necessary to raise
additional funds through equity or debt financing. The Company's ability to
generate cash from operations depends upon, among other things, revenue
growth, its credit and payment terms with vendors, and collections of accounts
receivable. If such sources of cash prove insufficient, the Company will be
required to make changes in its operations or to seek additional debt or
equity financing. There can be no assurances that cash generated from
operations will be sufficient to meet its operating requirements, or if
required, that additional debt or equity financing will be available on terms
acceptable to the Company.
FACTORS AFFECTING FUTURE RESULTS
The Company's future results remain difficult to predict and may be affected
by a number of factors which could cause actual results to differ materially
from the forward-looking statements contained in this Annual Report on Form
10-K and presented elsewhere by management from time to time. These factors
include business conditions within the automotive, telecommunications,
industrial machinery and semiconductor industries and the world economies as a
whole, and competitive pressures that may impact research and development
spending. The Company's revenue growth is dependent on technology
developments and contract research and development for both the government and
commercial sectors and no assurance can be given that such investments will
continue or that the Company can successfully obtain such funds. In addition,
the Company's future growth opportunities are dependent on the introduction of
new products that must penetrate automotive, telecommunications, industrial,
and computer market segments. No assurance can be given that new products can
be developed, or if developed, will be successful; that competitors will not
force prices to an unacceptably low level or take market share from the
Company; or that the Company can achieve or maintain profits in these markets.
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
Company's stock price frequently experiences significant volatility.
15
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per share." The
statement is effective for financial statements issued for periods ending
after December 15, 1997 and changes the method in which earnings per share
will be determined. Adoption of this statement by the Company is not expected
to have a material impact on earnings per share.
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
Income." The statement is effective for fiscal years beginning after December
15, 1997 and requires that an enterprise disclose, by major components and as
a single total, the change in its net assets during the period from "non-
owner" sources.
Also in June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 131, "Disclosure about Segments of
an Enterprise and Related Information." The statement is effective for
periods beginning after December 15, 1997 and establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products and services, geographic areas and major
customers.
Adoption of SFAS No. 130 and No. 131 is not expected to have a material impact
to the Company's consolidated financial position, results of operations or
cash flows and any effect will be limited to the form and content of its
disclosures.
EFFECTS OF INFLATION
The Company believes that inflation over the past three years has not had a
significant impact on the Company's sales or operating results.
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
PAGE
----
Report of Independent Accountants............................. 18
Financial Statements:
Balance Sheets as of September 30, 1997 and 1996............ 19
Statements of Operations for the Years Ended September 30,
1997, 1996, and 1995...................................... 20
Statements of Changes in Stockholders' Equity for the Years
Ended September 30, 1997, 1996, and 1995.................. 21
Statements of Cash Flows for the Years Ended September 30,
1997, 1996, and 1995...................................... 22
Notes to Financial Statements.............................. 23-36
Schedule II; Valuation and Qualifying Accounts for the Years
Ended September 30, 1997, 1996, and 1995.................. 37
17
REPORT OF INDEPENDENT ACCOUNTANTS
We have audited the accompanying consolidated balance sheets and financial
statement schedule of SatCon Technology Corporation and its subsidiaries as of
September 30, 1997 and 1996, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period ended September 30, 1997. These financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SatCon Technology
Corporation and its subsidiaries as of September 30, 1997 and 1996, and the
results of its operations and its cash flows for each of the three years in
the period ended September 30, 1997 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 9, 1997
18
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
--------------- -------------
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 4,256,504 $ 3,770,925
Marketable securities (Note B)..................................................... 1,976,400 3,435,743
Accounts receivable, net of allowance of $159,243 in 1997 and
$130,900 in 1996.................................................................. 2,965,559 2,881,790
Unbilled contract costs, net of allowance of $1,130,468 in 1997
and $432,500 in 1996 (Note C)..................................................... 1,709,826 1,658,316
Inventory, net of allowance of $758,541 in 1997 and $0 in 1996 (Note D)............ 1,577,483
Prepaid expenses and other assets.................................................. 416,926 442,745
--------------- -------------
Total current assets.......................................................... 12,902,698 12,189,519
Property and equipment, net (Note E).................................................... 4,784,355 4,347,784
Intangibles, net (Notes A and 0)........................................................ 2,992,659 485,983
Other assets............................................................................ 29,726 254,231
--------------- -------------
Total assets.................................................................. $20,709,438 $17,277,517
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................. $ 850,208 $ 605,048
Accrued payroll and payroll related expenses...................................... 392,235 183,747
Deferred revenue.................................................................. 191,128 95,062
Accrued costs for consolidation of facilities (Note G)............................ 498,000
Other accrued expenses............................................................ 290,049 294,492
Short term portion of long term debt.............................................. 85,784
--------------- -------------
Total current liabilities.................................................... 2,307,404 1,178,349
Long term liabilities:
Note Payable (Note F)............................................................. 6,737 -
Long term debt (Note P)........................................................... 316,160
--------------- -------------
Total long term liabilities.................................................. 322,897 -
Commitments (Note G)
STOCKHOLDERS' EQUITY
Preferred stock; $.01 par value, 1,000,000 shares authorized; none issued (Note K) - -
Common stock, $.01 par value, 15,000,000 shares authorized; 8,769,146 and 7,359,074
shares at September 30, 1997 and 1996, respectively, issued and outstanding
(Note J)........................................................................... 87,691 73,591
Additional paid-in capital.............................................................. 26,576,600 18,487,209
Retained earnings/(loss)................................................................ (8,564,939) (2,421,697)
Unrealized losses on marketable securities, net of tax effect (Note B) (20,215) (39,935)
--------------- -------------
Total stockholders' equity................................................... 18,079,137 16,099,168
--------------- -------------
Total liabilities and stockholders'........................................ $20,709,438 $17,277,517
=============== =============
The accompanying notes are an integral part of the consolidated financial
statements.
19
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30,
---------------------------------------
1997 1996 1995
----------- ---------- -----------
Revenue................................. $12,466,335 $ 9,384,588 $11,475,427
Cost of sales........................... 7,730,666 3,940,674 6,522,768
Selling, general and administrative
expenses............................... 8,538,435 8,023,441 5,483,194
Research and development expenses....... 2,489,207 893,628 1,937,241
Goodwill amortization................... 120,467 - -
----------- ---------- -----------
Total operating expenses................ 18,878,775 12,857,743 13,943,203
Operating loss.......................... (6,412,440) (3,473,155) (2,467,776)
Interest income, net.................... 269,198 463,840 451,034
----------- ---------- -----------
Net loss before income taxes............ (6,143,242) (3,009,315) (2,016,742)
Benefit for income taxes................ (144,479) (806,697)
----------- ---------- -----------
Net loss................................ (6,143,242) (2,864,836) (1,210,045)
=========== ========== ===========
Net loss per common and common
equivalent share........................ $ (.77) $ (.39) $ (.17)
=========== ========== ===========
Weighted average shares outstanding..... 7,959,309 7,285,756 7,079,855
The accompanying notes are an integral part of the consolidated financial
statements.
20
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
UNREALIZED
ADDITIONAL RETAINED LOSS ON TOTAL
COMMON COMMON PAID-IN EARNINGS MARKETABLE STOCKHOLDERS'
SHARES STOCK CAPITAL (LOSS) SECURITIES(1) EQUITY
--------- --------- ------------ ------------ ----------- -------------
Balance, September 30, 1994...... 7,013,726 $70,137 $17,918,587 $ 1,653,184 $(135,867) $19,506,041
Net loss......................... (1,210,045) (1,210,045)
Exercise of stock options........ 152,875 1,529 365,899 367,428
Change in unrealized losses
on marketable securities(1)... 89,291 89,291
--------- --------- ------------ ------------ ----------- -------------
Balance, September 30, 1995...... 7,166,601 $71,666 $18,284,486 $ 443,139 $ (46,576) $18,752,715
Net Loss......................... (2,864,836) (2,864,836)
Exercise of stock options........ 192,473 1,925 202,723 204,648
Change in unrealized losses on
marketable securities(1)........ 6,641 6,641
--------- --------- ------------ ------------ ----------- -------------
Balance, September 30, 1996...... 7,359,074 $73,591 $18,487,209 $(2,421,697) $ (39,935) $16,099,168
Net Loss......................... (6,143,242) (6,143,242)
Exercise of stock options........ 161,934 1,619 408,390 410,009
Change in unrealized losses
on marketable securities(1)... 19,720 19,720
Stock issued in acquisition...... 450,000 4,500 2,871,750 2,876,250
Securities purchase agreement
(Note J)......................... 798,138 7,981 4,809,251 4,817,232
--------- --------- ------------ ------------ ----------- -------------
Balance, September 30, 1997...... 8,769,146 $87,691 $26,576,600 $(8,564,939) $ (20,215) $18,079,137
========= ========= ============ ============ =========== =============
(1) Net of tax effect
The accompanying notes are an integral part of the consolidated financial
statements.
21
SATCON TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1997 1996 1995
----------- ----------- -----------
Cash flows from operating activities:
Net income/(loss).................................. $(6,143,242) $(2,864,836) $(1,210,045)
Adjustments to reconcile net income/(loss) to net cash
provided by/(used in) operating activities:
Depreciation and amortization........................ 969,010 820,991 352,143
Reserve for unbilled contract costs.................. 697,968 366,000
Allowance for doubtful accounts...................... 28,324
Write off of impaired assets......................... 2,593,558
Changes in operating assets and liabilities:
Accounts receivable.............................. 535,797 (905,787) 3,020,582
Prepaid expenses and other assets................ 62,174 222,821 (61,958)
Unbilled contract costs.......................... (749,462) (532,886) 5,290,655
Inventory........................................ (403,302)
Other assets..................................... 212,339 (221,772) 88,856
Accounts payable................................. (385,868) (19,907) (754,935)
Reserve for consolidation of business............ 498,000
Accrued expenses and payroll..................... (1,396,970) 236,225 (166,610)
Deferred income taxes............................ (173,283) (806,697)
----------- ------------ -----------
Total adjustments.................................. 2,661,568 (207,598) 6,962,036
----------- ------------ -----------
Net cash provided by/(used in) operating activities............ (3,481,674) (3,072,434) 5,751,991
----------- ------------ -----------
Cash flows from investing activities:
Purchases of marketable securities.................. (600,000) (1,450,000) (9,465,938)
Sales and maturities of marketable securities....... 2,079,064 8,407,185 6,148,814
Patent and trademark expenditures................... (150,534) (156,843) (245,140)
Deferred financing fees............................. 56,313 (56,313) (277,764)
Capital Expenditures................................ (2,496,726) (2,293,305) (999,415)
Acquisitions, net of cash acquired.................. (112,986)
----------- ------------ -----------
Net cash provided by/(used in) investing activities.. (1,224,869) 4,450,724 (4,839,443)
----------- ------------ -----------
Cash flows from financing activities:
Repayment of short-term borrowings.................. (35,119) - -
Proceeds from exercise of stock options............. 410,009 204,648 367,428
Proceeds from issuance of common stock.............. 4,817,232
Net cash provided by financing activities...................... 5,192,122 204,648 367,428
Net increase/(decrease) in cash................................ 485,579 1,582,938 1,279,976
Cash at beginning of period.................................... 3,770,925 2,187,987 908,011
----------- ------------ -----------
Cash and cash equivalents at end of period..................... $ 4,256,504 $ 3,770,925 $ 2,187,987
=========== ============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
22
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
SatCon Technology Corporation (the "Company" or "SatCon") was organized as a
Massachusetts corporation in February 1985 and reincorporated in Delaware in
1992. SatCon designs, develops and manufactures intelligent, electrical-
mechanical products for aerospace, transportation, industrial, and utility
applications. SatCon's electro-mechanical products are being developed and
manufactured for a wide variety of U.S. Government and commercial markets.
For the government, SatCon's electro-mechanical systems provide low vibration
and high power for applications ranging from satellite attitude control to
high speed drives for shipboard systems. In the transportation segment,
SatCon is developing electric and hybrid electric drive components, auxiliary
power units, and advanced suspension systems. SatCon is working with major
equipment producers to develop process equipment drives, high speed and
precision machine tools, manipulators, and machinery isolation equipment.
SatCon's electro-mechanical systems may offer to the utility industry
advantages in power generation, energy storage, and power quality. In the
consumer market, SatCon is developing variable speed motors, and other long-
life, high-efficiency machinery.
It is the Company's strategy to accelerate leading edge developments by
continuing to expand its externally funded contract research and development
from both government and commercial sources. The Company can then leverage
this funding to develop products which the Company believes can both be sold
to government agencies and transition into high volume commercial products.
Recent changes in the Small Business Innovative Research program provide a new
mechanism to pursue government Phase III preproduction programs on a sole
source non-competitive basis. In most instances, individual components have
multiple applications across these markets.
Basis of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. See "Footnote O and J" of Notes to Financial
Statements for consolidated entities.
Revenue Recognition
The Company performs research under cost type, fixed price, and time and
material contracts and sells product prototypes. Revenue is recognized on the
percentage-of-completion method based on the proportion of costs incurred to
total estimated costs for each contract. Revenues recognized in excess of
amounts billed are classified in current assets as unbilled contract costs.
Certain contracts contain provisions for performance incentives. Such
incentives are included in revenues when realization is assured. If a current
contract estimate indicates a loss, a provision is made for the total
anticipated loss. All payments to the Company for work performed on contracts
with agencies of the U.S. Government are subject to audit and adjustment by
the Defense Contract Audit Agency. Adjustments are recognized in the period
made.
The Company also designs and manufactures standard products such as multi-chip
modules and hybrids, custom electric motors, and integrated suspension and
motor systems. Revenue from product sales is recognized upon shipment.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and highly
liquid investments with a maturity of three months or less when acquired. At
September 30, 1997, $67,632 of cash and cash equivalents is reserved as
collateral for a letter of credit drawn for the deposit on a facility lease.
23
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Marketable Securities
The Company accounts for marketable securities in accordance with the
Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting
for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of its investments in
debt securities at the time of purchase and re-evaluates such determination at
each balance sheet date. Debt securities for which the Company does not have
the intent or ability to hold to maturity are classified as available for
sale.
Securities available for sale are carried at fair value, based on quoted
market prices, with the unrealized gains and losses, net of tax, reported in a
separate component of shareholders' equity except for unrealized losses
determined to be permanent in nature. Such unrealized losses are included in
the determination of net income in the period in which management determines
the decline to be permanent. The Company is not actively involved in the
purchase and sale of investments classified as trading. At September 30,
1997, the Company had no investments that qualified as trading or held to
maturity.
The amortized cost of debt securities classified as available for sale is
adjusted for amortization of premiums and accretion of discounts to maturity
or, in the case of mortgage-backed securities, over the estimated life of the
security. Such amortization and interest are included in interest income.
Realized gains and losses are included in other income or expense. The cost
of securities sold is based on the specific identification method.
At September 30, 1997, $600,000 of marketable securities is reserved as
collateral for an operating lease.
Inventory
Inventories are stated at the lower of cost or market and costs are determined
based on the first-in, first-out method of accounting.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the asset's estimated useful life. The estimated
useful lives of property and equipment are as follows:
ESTIMATED LIVES
--------------------------------
Computer equipment and software.................................. 3 - 5 Years
Electronic laboratory and shop equipment......................... 5 Years
Mechanical laboratory and shop equipment......................... 10 Years
Sales and demonstration equipment................................ 3 - 10 Years
Furniture and fixtures........................................... 7 - 10 Years
Leasehold improvements........................................... Lesser of the life of the lease or
the useful life of the improvement
When assets are retired or otherwise disposed of, the cost and related
depreciation and amortization are eliminated from the accounts and any
resulting gain or loss is reflected in other income.
24
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Intangibles
The Company periodically reviews the propriety of carrying amounts of its
intangible assets as well as the amortization periods to determine whether
current events and circumstances warrant adjustment to the carrying value or
estimated useful lives. At each balance sheet date, management evaluates
whether there has been a permanent impairment in the value of intangibles by
assessing the carrying value of intangibles against anticipated future cash
flows from related operating activities. Factors which management considers
in performing this assessment include current operating results, trends and
prospects and, in addition, demand, competition and other economic factors.
Other intangibles, which consist primarily of patents and trademarks, goodwill
and a non-compete agreement, are amortized on a straight-line basis over
periods ranging from 5 to 15 years.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
and disclosure of contingencies at the date of the financial statements.
Actual results could differ from these estimates.
Income Taxes
The Company accounts for income taxes in accordance with Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which requires a
balance sheet approach for accounting for income taxes. Under SFAS 109,
deferred tax assets and deferred tax liabilities are recognized based on
temporary differences between the basis of assets and liabilities using
statutory rates. The Company has, as required under the Internal Revenue
Code, switched from the cash to accrual method for tax reporting purposes.
Earnings/(loss) Per Common and Common Equivalent Share
Earnings/(loss) per common and common equivalent share is based upon the
weighted average number of common shares outstanding during each year,
adjusted to include the dilutive effects of stock options and warrants. For
the current year ended September 30, 1997 common share equivalents have not
been included because their effect would have been antidilutive. For all
periods presented, fully diluted earnings per share is not materially
different from primary earnings per share.
Concentration of Credit Risk
Financial instruments which subject the Company to concentrations of credit
risk consist principally of cash equivalents, investments in marketable
securities, trade accounts receivable, and unbilled contract costs.
The Company's trade accounts receivable and unbilled contract costs are
primarily from sales to U.S. Government agencies and several commercial
customers. The Company does not require collateral and has not historically
experienced significant credit losses related to receivables or unbilled
contract costs from individual customers or groups of customers in any
particular industry or geographic area.
The Company deposits its cash and invests in short-term investments and
marketable securities primarily through two regional commercial banks and one
investment company. Credit exposure to any one entity is limited by Company
policy.
Reclassifications
Certain prior year balances have been reclassified to conform to current year
presentations.
25
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
B. MARKETABLE SECURITIES
At September 30, 1997, debt securities have been categorized as available for
sale, and as a result, are stated at fair value.
As of September 30, 1997 marketable securities consist of the following:
GROSS GROSS
AMORTIZED AGGREGATE UNREALIZED UNREALIZED
SECURITY CATEGORY COST BASIS FAIR VALUE GAINS (LOSSES)
----------------- ---------- ---------- ----- ---------
Corporate debt securities..... $ 597,178 $ 568,000 - $(29,178)
Debt securities issued by
U.S. Government and its
agencies..................... 1,301,396 1,296,063 (5,333)
Mortgage-backed securities.... 111,518 112,337 819
---------- ---------- ---- --------
$2,010,092 $1,976,400 $819 $(34,511)
========== ========== ==== ========
The contractual maturities of debt securities available for sale at September
30, 1997 are as follows:
AMORTIZED AGGREGATE
COST BASIS FAIR VALUE
------------- -------------
Due within one year................................. $1,301,397 $1,296,063
Due after one year through five years............... - -
Due after five years through 10 years............... 250,352 242,500
Due after 10 years.................................. 458,343 437,837
------------ ------------
$2,010,092 $1,976,400
============ ============
The changes in net unrealized holding losses at September 30, 1997 and 1996
were $33,692 and $66,558, respectively, and are included in the balance sheet
as a separate component of stockholders' equity net of tax effect.
Proceeds from sales and maturities of marketable securities during fiscal year
1997 and 1996 were $2,079,065 and $8,407,185, respectively.
Gross realized losses from the sale of securities classified as available for
sale during fiscal year 1997, 1996 and 1995 were $0, $1,461, and $58,360,
respectively. For the purpose of determining gross realized gains and losses,
the cost of securities sold is based upon specific identification.
C. UNBILLED CONTRACT COSTS
Unbilled contract costs include retention arising from contractual provisions
of $273,814 and $111,745 at September 30, 1997 and 1996, respectively. It is
anticipated that substantially all of these unbilled retention amounts will be
collected during the fiscal year ending September 30, 1998.
D. INVENTORY
Inventory consists of the following:
SEPTEMBER 30,
------------------
1997 1996
------ ------
Raw material................ $ 651,460 -
Work-in-process............. 637,657
Finished goods.............. 288,366
---------- -------
$1,577,483 -
========== =======
26
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
E. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
SEPTEMBER 30,
----------------------
1997 1996
---------- ----------
Machinery and equipment....... $3,251,193 $3,118,538
Sales and demonstration units. 2,115,921 1,885,274
Furniture and fixtures........ 261,478 219,204
Computer software............. 529,788 385,987
Leasehold improvements........ 496,977 315,327
---------- ----------
6,655,357 5,924,330
Less accumulated depreciation
and amortization............. 1,871,002 1,576,546
---------- ----------
$4,784,355 $4,347,784
========== ==========
Depreciation expense for the fiscal years ended September 30, 1997, 1996, and
1995 was $836,924, $817,539, and $343,775, respectively.
For fiscal year ended September 30, 1997, $29,650 of the $3,251,193 machinery
and equipment related to a capital lease for equipment. There was no
equipment under capital leases for fiscal year 1996. The associated
accumulated depreciation is $13,837 and $0 for fiscal years ended September
30, 1997 and 1996, respectively.
During 1997, the Company determined that certain of its machinery and
equipment totaling $2,593,558 was impaired based on change in the needs of its
customers and as a result such assets were written off.
F. NOTES PAYABLE
In January 1995 the Company established a $3,000,000 line of credit with
Citizen's Bank replacing the existing $1,500,000 line established on December
8, 1993. The bank line of credit expired January 31, 1997. No funds were
advanced under the line of credit. The Company intends to seek a replacement
line of credit from its new primary bank during fiscal year 1998.
G. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company occupies 45,820 square feet of office and laboratory space at 161
First Street, Cambridge, Massachusetts under a primary lease expiring on
October 31, 1998. The monthly payment is $42,002 plus its pro rata share of
operating expenses and real estate taxes. An additional 8,343 square feet of
office and laboratory space is occupied at 6245 East Broadway Boulevard, Suite
350, Tucson, Arizona under a primary lease expiring on March 31, 2001. The
monthly payment is $10,430 including its pro rata share of operating expenses.
The Company also occupies approximately 14,757 square feet of manufacturing
space at 530 Turnpike Street, North Andover, Massachusetts under a primary
lease expiring on July 31, 2002. The monthly payment is $8,458 plus its pro
rata share of operating expenses and real estate taxes.
In the fourth quarter of fiscal 1997, the Company decided to consolidate its
operating facility in Tucson, AZ back to Cambridge, MA. As a result the
Company has accrued $498,000 primarily related to the buyout of the facility
lease.
27
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
G. COMMITMENTS AND CONTINGENCIES - (CONTINUED)
Future minimum annual rentals under all lease agreements at September 30, 1997
are as follows:
FISCAL YEAR
-----------
1998.......................................... $1,456,170
1999.......................................... 1,463,424
2000.......................................... 1,470,116
2001.......................................... 1,404,142
2002.......................................... 1,281,424
----------
$7,075,276
==========
Total rental expense including operating expenses and real estate taxes
for operating leases amounted to $1,245,238, $1,000,802, and $725,750 for the
years ended September 30, 1997, 1996 and 1995, respectively.
Capital Leases
As of September 30, 1997, the future minimum annual lease payments due under
capital leases, net of $361 imputed interest, amounted to $6,737.
H. EMPLOYEE BENEFIT PLAN
The Company offers a 401(k) Employee Benefit Plan (the "401(k) Plan"). Under
the 401(k) Plan, any employee who has completed one year of service and has
attained the age of 21 years is eligible to participate. Under the terms of
the 401(k) Plan, an employee may defer up to 15% of his or her compensation
through contributions to the 401(k) Plan. The Company made a matching
contribution to the 401(k) plan in the amount of $133,018 during fiscal year
1997 and $128,458 during fiscal year 1996.
I. INCOME TAXES
The provision for income taxes consists of the following:
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1997 1996 1995
------ ------ ------
Current Payable:
Federal........................ - $ 9,775 $ 4,000
State..........................
----------- ----------- ---------
- 9,775 4,000
Deferred tax
expenses/(benefit):
Federal........................ $ 1,823,584 $ 1,544,844 $(603,233)
State.......................... 680,530 (37,769) (207,464)
Change in valuation allowance.. (2,504,114) (1,661,329)
----------- ----------- ---------
- (154,254) (810,697)
=========== =========== =========
- $ (144,479) $(806,697)
=========== =========== =========
28
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
I. INCOME TAXES - (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of September 30,
1997 the components of the net deferred tax assets (liabilities) are as
follows:
1997 1996
------ ------
Accrual to cash adjustment.... (1,175,626) $(2,351,252)
Federal Net Operating Loss.... 3,176,307 3,180,017
State Net Operating Loss, net
of federal benefit........... 533,120 539,304
Unrealized losses on
marketable securities........ 13,568 26,632
Credits....................... 183,728 268,143
Depreciation.................. 407,537 (203,168)
Purchase accounting........... (564,762)
Other......................... 363,334 201,653
Valuation Allowance........... (2,937,206) (1,661,329)
---------- ----------
Net Deferred Income Taxes..... - -
---------- ----------
An increase in net deferred tax liabilities and a decrease in the valuation
allowance in the amount of $1,225,723 each has been made to account for the
acquisition of Film Microelectronics, Inc. during fiscal year ended September
30, 1997.
The provision for income taxes differs from the Federal statutory rate due to
the following:
YEARS ENDED SEPTEMBER 30,
-------------------------
1997 1996 1995
------ ------ ------
Tax at statutory rate....... (34.0)% (34.0)% (34.0)%
State taxes - net of
federal benefit............ (7.3) (0.8) (6.8)
Other...................... .6 2.1 .8
Change in valuation
allowance.................. 40.7 27.9
------ ----- -----
Effective tax rate.......... - % (4.8)% (40.0)%
====== ====== =====
At September 30, 1997 the Company had Net Operating Loss Carryforwards of
$9,342,000 and $8,503,000 for federal and state income tax purposes,
respectively, of which $1,038,475 relates to deductions attributable to the
exercise of non-qualified stock options and employees early disposition of
stock acquired through incentive stock options. The federal net operating
losses expire beginning September 30, 2008 through 2012. The state net
operating losses expire beginning September 30, 1998 through 2002. The use of
these losses may be limited due to ownership change limitations under Section
382 of the Internal Revenue Code of 1986.
Research and experimental credit carryforward at September 30, 1997 was
$222,000 for federal income tax purposes which begin to expire September 30,
2003 through 2012.
J. STOCK OPTIONS
Under the Company's 1986 Stock Option Plan, both qualified and nonqualified
stock options may be granted to certain officers and key employees. Options
under the 1986 Plan become exercisable as vested over four years, and expire
December 31, 1996. At September 30, 1997 and 1996, all of the 553,196 stock
options available for grant under the Company's 1986 Stock Option Plan have
been granted.
In June 1992, the Company adopted its 1992 Stock Option Plan which provides
for the grant to employees, officers, directors and consultants of qualified
and nonqualified stock options to purchase up to 450,000 shares of the
Company's common stock. At September 30, 1997 and 1996, 449,199 and 440,866,
respectively, of the 450,000 stock options available for grant under the
Company's 1992 Stock Option Plan have been granted.
29
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
J. STOCK OPTIONS - (CONTINUED)
In February 1994, the Company adopted its 1994 Stock Option Plan which was
subsequently adopted by the Company's stockholders in June 1994. The Plan
provides for the grant to employees, officers, directors, and consultants of
qualified and nonqualified stock options to purchase up to 300,000 shares of
the Company's common stock. At September 30, 1997 and 1996, 293,033 and
277,092, respectively, of the 300,000 stock options available for grant under
the Company's 1994 Stock Option Plan have been granted.
During fiscal year 1996, the Company adopted its 1996 Stock Option Plan which
provides for the grant to employees, officers, directors, and consultants of
qualified and non qualified stock options to purchase up to 300,000 shares of
the Company's common stock. At September 30, 1997 and 1996, 113,000 and
"zero," respectively, of the 300,000 stock options available for grant under
the Company's 1996 Stock Option Plan have been granted.
The 1986, 1992, 1994, and 1996 Stock Option Plans (collectively the "Plans")
are subject to the following provisions:
The aggregate fair market value (determined as of the date the option is
granted) of the common stock that any employee may purchase in any calendar
year pursuant to the exercise of incentive stock options may not exceed
$100,000. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option to him or her, more than 10% of the
total combined voting power of all classes of stock of the Company shall be
eligible to receive any incentive stock options under the Plans unless the
option price is at least 110% of the fair market value of the common stock
subject to the option, determined on the date of grant. Nonqualified options
are not subject to this limitation.
Incentive stock options are issuable only to employees of the Company, while
nonqualified options may be issued to nonemployee directors, consultants, and
others, as well as to employees of the Company. Options granted under the
Stock Option Plans may not be granted with an exercise price less than 100% of
fair value of the Company's common stock, as determined by the Board of
Directors on the grant date.
Options under the Plans must be granted within 10 years from the effective
date of the Plan. Incentive stock options granted under the Plans cannot be
exercised more than 10 years from the date of grant except that incentive
stock options issued to 10% or greater stockholders are limited to five year
terms. All options granted under the Plans provide for the payment of the
Company's exercise price in cash, or by delivery to the Company of shares of
common stock already owned by the optionee having fair market value equal to
the exercise price of the options being exercised, or by a combination of such
methods of payment. Therefore, an optionee may be able to tender shares of
common stock to purchase additional shares of common stock and may
theoretically exercise all of his stock options with no additional investment
other than his original shares.
The Plans contain antidilutive provisions authorizing appropriate adjustments
in certain circumstances. Shares of common stock subject to options which
expire without being exercised or which are canceled as a result of the
cessation of employment are available for further grants.
A summary of the status of the Company's stock option plans as of September
30, 1997, 1996, and 1995, and changes during the years ending of those dates
is presented below.
30
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
J. STOCK OPTIONS - (CONTINUED)
1997 1996 1995
------------------------- ---------------------------- -----------------------
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ------- --------- ------- --------- -------
Outstanding at beginning
of year................... 713,392 $ 7.08 904,503 $ 5.91 901,844 $ 4.53
Granted.................... 144,000 8.97 20,000 7.00 156,200 10.43
Exercised.................. (144,466) 2.25 (185,773) .91 (152,875) 2.38
Canceled................... (12,499) 10.71 (25,338) 10.39 (666) 10.50
--------- --------- --------
Outstanding at end of
year..................... 700,427 $ 8.44 713,392 $ 7.08 904,503 $ 5.91
========= ========= ========
Options exercisable at
year-end.................. 503,660 $ 8.14 579,776 $ 6.49 679,225 $ 4.55
The following table summarizes information about stock options outstanding
as of September 30, 1997.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ------------------------------------
NUMBER WEIGHTED NUMBER
RANGE OF OUTSTANDING AVERAGE WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES AT 9/30/97 REMAINING LIFE EXERCISE PRICE AT 9/30/97 EXERCISE PRICE
- - ------------------------- ------------ -------------- ---------------- ----------- ----------------
$5.00 - $7.00 258,694 5.5 $ 5.73 250,028 $ 5.69
$8.75 - $10.50 350,068 8.1 9.45 171,968 9.68
$11.00 - $13.38 91,665 7.2 12.25 81,664 12.39
- - ------------------------- ------------ -------------- ---------------- ----------- ----------------
$5.00 - $13.38 700,427 7.0 $ 8.44 503,660 $ 8.14
=============== ===============
An additional 194,768 and 329,269 shares were available for future grants at
September 30, 1997 and 1996, respectively. All outstanding options vest at
various rates over periods up to four years and expire at various dates from
December 31, 1996 to August 3, 2007.
In addition to options granted pursuant to the Plans, the Company in March
1992 issued non-qualified options to purchase up to 33,500 shares of common
stock to certain of its professional advisors. These options are exercisable
at a price of $5.25 per share and expire in March 1997. At September 30,
1997, all 33,500 options have been exercised.
In connection with its initial public offering in November 1992, the Company
also issued to the underwriter warrants to purchase up to (i) 150,000 shares
of common stock at an exercise price of $8.25 per share and (ii) 150,000
shares of common stock at an exercise price of $11.55 per share. At
September 30, 1997, 1,066 of these warrants have been exercised. In November
1997 such warrants were exercised for a total of $1,237,458. The remainder of
the options expired on November 11, 1997.
31
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
J. STOCK OPTIONS - (CONTINUED)
On May 28, 1997, SatCon Technology Corporation entered into a Securities
Purchase Agreement (the "Agreement"), dated as of May 28, 1997, by and among
the Company, Beacon Power Corporation, a new wholly-owned subsidiary of the
Company ("Beacon"), and Duquesne Enterprises ("Duquesne"). Pursuant to the
terms of the Agreement, Duquesne purchased from the Company and the Company
issued, sold and delivered to Duquesne 798,138 shares (the "Shares") of the
Company's Common Stock and received warrants (the "Beacon Warrant") to
purchase 500,000 shares of Beacon's Common Stock, $.01 par value per share
("Beacon's Common Stock"), at a purchase price of $6.00 per share. The
Beacon warrant expires on the earlier of May 28, 1999 and 30 days prior to the
filing of a registration statement with respect to Beacon's Common Stock. The
aggregate consideration received by the Company was $5,000,000. In exchange
for certain intangible assets and a capital contribution equal to its proceeds
from Duquesne, the Company received all of the capital stock of Beacon,
consisting of 3,000,000 shares of Beacons' Common Stock and 1,000,000 shares
of Beacon's preferred stock, par value $.01 per share ("Beacon's Preferred
Stock"). Duquesne also entered into agreements pursuant to which it will act
as exclusive distributor of Beacon's products, subject to certain exceptions,
in seven Mid-Atlantic States and the District of Columbia. Duquesne is also
entitled to purchase sufficient securities in future Beacon equity financings
to increase its ownership in Beacon to 20% of the voting securities of Beacon
(assuming the Beacon Warrant is exercised). The foregoing purchase right
expires (i) upon the expiration of the Beacon Warrant if the Beacon Warrant is
not exercised in full; or (ii) if the Beacon Warrant is exercised in full,
upon the closing of an initial public offering of Beacon's Common Stock.
During a recapitilization of Beacon Power Corporation on December 24, 1997,
the Company has converted a significant portion of its ownership of Beacon
Power Corporation to preferred stock. The Company now holds less than 20% of
the common stock of Beacon. The Company's investment in Beacon will be
accounted for going forward on a cost basis.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS 123 is effective for
periods beginning after December 15, 1995. SFAS 123 requires that companies
either recognize compensation expense for grants of stock, stock options, and
other equity instruments based on fair value, or provide pro forma disclosure
of net income and earnings per share in the notes to the financial statements.
The Company adopted the disclosure provisions of SFAS 123 for year ended
September 30, 1997 and has applied APB Opinion 25 and related interpretations
in accounting for its plans. There were no compensation costs recognized in
fiscal year ended September 30, 1997 and 1996.
Had compensation cost for the Company's stock-based compensation plans been
determined based on fair value at the grant dates as calculated in accordance
with SFAS 123, the Company's net income and earnings per share for fiscal
years ended September 30, 1997 and 1996 would have been reduced to the pro
forma amounts indicated below:
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------------------- ---------------------------------
EARNINGS PER EARNINGS PER
NET INCOME SHARE NET INCOME SHARE
------------ -------------- ------------- -----------------
As reported $(6,143,242) $ (.77) $(2,864,836) $ (.39)
Pro forma $(6,215,049) $ (.78) $(2,883,079) $ (.40)
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to
fiscal year 1996 and additional awards in future years are anticipated.
The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions: an expected life of 7.0 years, expected volatility of 57.9%, no
dividends, and risk-free interest rate of 6.125% for September 30, 1997. The
weighted average price of the fair value of options granted for years ended
September 30, 1997 and 1996 are $5.80 and $4.53, respectively.
32
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
J. STOCK OPTIONS - (CONTINUED)
Cash provided by financing activities as of September 30, 1997, was
$5,192,122. The cash provided relates primarily to the proceeds from the
Securities Purchase Agreement, dated May 28, 1997, by and among the Company,
Beacon Power Corporation, and Duquesne Enterprises. The aggregate
consideration received by the Company was $4,817,232 net of financing fees.
K. PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred Stock,
$.01 par value. The Preferred Stock may be issued in one or more series, the
terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may include voting
rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. No Preferred Stock is currently outstanding and
the Company has no present plans for the issuance thereof. However, the
issuance of any such preferred Stock could affect the rights of the holders of
Common Stock, and therefore, reduce the value of the Common Stock. In
particular, specific rights granted to future holders of Preferred Stock could
be used to restrict the Company's ability to merge with or sell its assets to
a third party, thereby preserving control of the Company by present owners.
L. RECENT PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per share." The
statement is effective for financial statements issued for periods ending
after December 15, 1997 and revises the traditional computation presentation
and disclosure requirements for earnings per share. Adoption of this
statement will not have a material impact on the Company's reported earnings
per share.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
Income." The statement is effective for fiscal years beginning after
December 15, 1997 and requires that an enterprise disclose, by major
components and as a single total, the change in its net assets during the
period from "non-owner" sources.
Also in June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 131, "Disclosure about Segments of
an Enterprise and Related Information." The statement is effective for periods
beginning after December 15, 1997 and establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products and services, geographic areas and major customers.
Adoption of SFAS No. 130 and No. 131 will not have a material impact to the
Company's consolidated financial position, results of operations or cash flows
and any effect will be limited to the form and content of its disclosures.
33
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
M. SIGNIFICANT CUSTOMERS
Significant customers, defined as those customers whose gross sales account
for 10% or more of total gross sales in a Fiscal year, were as follows:
YEARS ENDED SEPTEMBER 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
U.S. Government:
N.A.S.A..................... 2.9% 18.2% 13.3%
U.S. Department of Defense.. 44.6 33.6 7.0
------------ ------------ ------------
47.5% 51.8% 20.3%
------------ ------------ ------------
Commercial:
Automotice.................. 9.7% 38.2% 72.9%
Avonics..................... 20.8%
------------ ------------ ------------
30.5% 38.2% 72.9%
Other: 22.0 10.0 6.8
------------ ------------ ------------
100.0% 100.0% 100.0%
============ ============ ============
N. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest and Income Taxes Paid
Cash paid for interest and income taxes were as follows:
YEARS ENDED SEPTEMBER 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Interest...................... $ 13,933 $ 330 $1,277
============ ======== =======
Income taxes.................. $ 5,800 $36,900 $8,620
============ ======== =======
Acquisition of subsidiaries Cash paid for the acquisition of Film
Microelectronics, Inc. is as follows:
YEARS ENDED SEPTEMBER 30,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Fair value of assets............. $ 4,723,408 - -
Cost in excess of net assets
of companies acquired, net..... 987,678
Liabilities assumed.............. (2,624,836)
Stock issued..................... (2,876,250)
Cash paid........................ $ 210,000 - -
Less: Cash acquired.............. (97,014)
Net cash paid for acquisitions... $ 112,986 - -
Non-Cash Transaction
During fiscal year 1996, plant equipment with the fair market value of
$100,000 was received in exchange for the relief of $100,000 of accounts
receivable.
34
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
O. ACQUISITIONS
K&D MagMotor
On January 23, 1997, the Company acquired substantially all of the assets and
assumed certain of the liabilities of K&D MagMotor Corporation ("K&D")
pursuant to the terms of an Asset Purchase Agreement, dated as of January 2,
1997, by and among the Company, K&D and K&D's principal stockholder (the
"Stockholder") (the "Asset Purchase Agreement"). The aggregate consideration
paid by the Company for the acquired assets of K&D was approximately $210,000
in cash and 30,000 shares of the Company's common stock, par value $.01 per
share valued at $6.625 per share or $198,750. K&D assets, machinery and
equipment and inventory, were recorded at their estimated market value of
$250,000 and $160,000, respectively.
The terms of the Asset Purchase Agreement were determined on the basis of
arms-length negotiations. Prior to the execution of the Asset Purchase
Agreement, the Company did not have any material relationship with K&D or the
Stockholder.
K&D, headquartered in Worcester, Massachusetts, is a manufacturer of custom
electric motors targeting the factory automation, medical, semi conductor and
packaging markets. The Company currently intends to continue to use the
assets in the same manner in which they were used by K&D immediately prior to
the acquisition.
The Company has included in its consolidated results of operations the
acquisition of K&D under the purchase method of accounting.
Film Microelectronics, Inc.
On April 16, 1997, the Company completed the acquisition of Film
Microelectronics, Inc. ("FMI"). FMI, a privately held company, is a
manufacturer of production and custom integrated circuits for the
communications, industrial, military and aerospace markets. Pursuant to the
Asset Purchase Agreement, dated as of April 3, 1997, by and among the Company,
FMI and FMI's principal stockholder, the Company acquired substantially all of
the assets of FMI, which became a wholly-owned subsidiary of SatCon. The
aggregate consideration paid by the Company for the acquired assets of FMI was
420,000 shares of the Company's common stock, par value $.01 per share (the
"Common Stock"). The 420,000 shares of Common Stock were valued at
approximately $2,677,500 based on a closing price of $6.375 per share on
April 16, 1997. In addition, the Company assumed trade payables aggregating
approximately $900,000 and the assumption of indebtedness of approximately $1
million. FMI's assets have been recorded at their estimated market values
with the excess purchase price assigned to goodwill which will be amortized
over 15 years.
The Company has included in its consolidated results of operations the
acquisition of FMI under the purchase method of accounting. The following
unaudited pro forma financial information combines SatCon and FMI's results of
operations as if the acquisition had taken place on October 1, 1996 and 1995.
The pro forma results are not necessarily indicative of what the results of
operations actually would have been if the transaction had occurred on the
applicable dates indicated and are not intended to be indicative of future
results of operations.
YEARS ENDED SEPTEMBER 30,
---------------------------
1997 1996
------ ------
Net Sales........... $14,974,765 $13,794,481
Net Income.......... $(6,517,857) $(3,522,463)
Earnings per share.. $ (.82) $ (.45)
35
SATCON TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
P. LONG TERM DEBT
YEARS ENDED SEPTEMBER 30,
---------------------------
1997 1996
------ ------
Note payable due in 52 weekly payments..
The total note of $443,804 commenced
on April 16, 1997 at an interest rate
of 6.5%................................ $401,944 $ -
Less: Current Portion................... 85,784
--------- ---------
$316,160 $ -
========= =========
Long-term debt maturities payable for the five years and thereafter subsequent
to September 30, 1997 are as follows:
1998.................................... $ 85,784
1999.................................... 91,534
2000.................................... 224,626
2001....................................
2002....................................
--------
$401,944
========
36
SATCON TECHNOLOGY CORPORATION
FINANCIAL STATEMENT SCHEDULE
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT BALANCE
BEGINNING ADDITIONS CHARGED TO AT END
OF PERIOD COSTS AND EXPENSES DEDUCTIONS OF PERIOD
----------- --------------------- ---------- ---------
Year Ended September 30, 1995:
Allowance for Doubtful Accounts....... $ 130,900 - - $ 130,900
Reserve for Unbilled Contract Costs... $ 66,500 $ 66,500
Year Ended September 30, 1996:
Allowance for Doubtful Accounts....... $ 130,900 $ 130,900
Reserve for Unbilled Contract Costs... $ 66,500 $ 390,500 $ (24,500) $ 432,500
Deferred tax valuation allowance.. $1,661,329 $1,661,329
Year Ended September 30, 1997:
Allowance for Doubtful Accounts... $ 130,900 $ 30,750 $ (2,407) $ 159,243
Reserve for Unbilled Contract
Costs............................ $ 432,500 $ 909,100 $( 211,132) $1,130,468
Deferred tax valuation allowance.. $1,661,329 $1,275,877 $2,937,206
Reserve for obsolete inventory.... $ 758,541 $ 758,541
Reserve for product warranty
expense.......................... $ 16,511 $ 16,511
Reserve for consolidation of
business......................... $ 498,000 $ 498,000
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
38
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information with respect to directors required under this item is
incorporated herein by reference to the information set forth under the
section entitled "Election of Directors" in the Company's Proxy Statement for
the 1998 Annual Meeting of Stockholders to be held February 25, 1998, (the
"1998 Proxy Statement"). Information relating to certain filings of Forms 3,
4, and 5 of the Company is contained in the 1998 Proxy Statement under the
caption "Compliance with Section 16 Reporting Requirements."
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated by reference to the
section entitled "Compensation of Executive Officers" in the 1998 Proxy
Statement.
The sections entitled "Compensation Committee Report on Executive
Compensation" and "Comparative Stock Performance Graph" in the 1998 Proxy
Statement are not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated by reference to the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated by reference to the
section entitled "Certain Relationships and Related Transactions" in the 1998
Proxy Statement.
39
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements:
Balance Sheets as of September 30, 1997 and 1996
Statements of Operations for the Years Ended September 30, 1997, 1996, and
1995
Statements of Changes in Stockholders' Equity for the Years Ended September
30, 1997, 1996, and 1995
Statements of Cash Flows for the Years Ended September 30, 1997, 1996, and
1995
Notes to the Financial Statements
2. Financial Statement Schedule:
Schedule II; Valuation and Qualifying Accounts
All other financial statement schedules not listed have been omitted because
they are either not required, not applicable, or the information has been
included elsewhere in the financial statements or notes thereto.
3. Exhibits:
The Exhibits listed in the Exhibit Index immediately preceding such exhibits
are filed as part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
1. The Company filed a current report on Form 8-K, dated January 23, 1997, in
connection with the acquisition of K&D MagMotor Corporation.
2. The Company filed a current report on Form 8-K and 8-K/A, dated April 16,
1997, in connection with the acquisition of Film Microelectronics,
Incorporated.
3. The Company filed a current report on Form 8-K, dated May 28, 1997, in
connection with the Securities Purchase Agreement, dated as of May 28, 1997,
by and among the Company, Beacon Power Corporation, a wholly owned subsidiary
of the Company, and Duquesne Enterprises.
4. No reports on Form 8-k were filed during the last quarter of the period
covered by this report.
40
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CAMBRIDGE, COMMONWEALTH OF MASSACHUSETTS ON DECEMBER , 1997.
--
SatCon Technology Corporation
By: /s/ DAVID B. EISENHAURE
--------------------------------
DAVID B. EISENHAURE, PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
NAME CAPACITY DATE
---- -------- ----
President, Chief Executive
/s/ DAVID B. EISENHAURE Officer, and Chairman of the December 29, 1997
- - --------------------------- Board of Directors
DAVID B. EISENHAURE
Vice President, Chief Operation December 29, 1997
/s/ WILLIAM E. STANTON Officer and Director
- - ---------------------------
WILLIAM E. STANTON
/s/ MICHAEL C. TURMELLE Vice President, Chief Financial December 29, 1997
- - --------------------------- Officer, Treasurer and Director
MICHAEL C. TURMELLE
/s/ JAMES L. KIRTLEY, JR. Director December 29, 1997
- - ---------------------------
JAMES L. KIRTLEY, JR.
/s/ JOHN P. O'SULLIVAN Director December 29, 1997
- - ---------------------------
JOHN P. O'SULLIVAN
/s/ MARSHALL J. ARMSTRONG Director December 29, 1997
- - ---------------------------
MARSHALL J. ARMSTRONG
/s/ ANTHONY J. VILLIOTTI Director December 29, 1997
- - ---------------------------
ANTHONY J. VILLIOTTI
41
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- - ------------- --------------------------------------
2.1 (1) - Asset Purchase Agreement by and among SatCon Technology
Corporation, K&D MagMotor Corporation, and Herbert S.
Peterson dated as of January 2, 1997.
2.2 (2) - Amended and Restated Asset Purchase Agreement among SatCon
Film Microelectronics, Inc., Film Microelectronics Inc., and
Albert R. Snider, dated as of April 3, 1997.
3.1 (3) - Certificate of Incorporation
3.2 (3) - Bylaws
3.3 (4) - Certificate of Amendment of Certificate of Incorporation of
SatCon Technology Corporation filed on May 12, 1997
3.4 (4) - Amendment of Bylaws of SatCon Technology Corporation,
approved on January 2, 1997
4.1 (3) - Specimen certificate for Common Stock $.01 par value
4.2 (3) - Warrant Agreement between the Company and Continental Stock
Transfer and Trust Company (including specimen warrant
certificate)
10.1 (3) - Employment Agreement dated July 1, 1992 between the Company
and Mr. Eisenhaure
10.2 (3) - Employment Agreement dated July 1, 1992 between the Company
and Mr. Turmelle
10.3 (3) - Employment Agreement dated July 1, 1992 between the Company
and Mr. Stanton
10.4 (3) (*) - 1986 Stock Option Plan
10.5 (3) (*) - 1992 Stock Option Plan
10.6 (5) (*) - 1994 Stock Option Plan
10.7 (3) - Lease dated October 1993 between the Company and
Gunwyn/First Street Limited Partnership
10.8 (6) - Line of Credit Agreement dated January 13, 1995 between the
Company and First NH Bank
10.9 (3) - Subcontract No. 9770-A-0012 dated October 5, 1992 between
the Company and Itek Optical Systems, as amended
10.10 (7) (*) - 1996 Stock Option Plan
10.11 (7) - Amendment to Credit Agreement between the Company and First
NH Bank, dated March 13, 1996
10.12 (4) - Manufacturing Agreement between Applied Materials, Inc. and
its wholly owned subsidiaries and SatCon Technology
Corporation and its wholly owned subsidiaries, dated as of
February 20, 1997
10.13 (8) - Securities Purchase Agreement, dated as of May 28, 1997, by
and among SatCon Technology Corporation, Beacon Power
Corporation, and Dusquene Enterprises.
11 - Statement re Computation of Earnings Per Share
21 - Subsidiaries of the Registrant
23 - Consent of Coopers & Lybrand L.L.P.
27 - Financial Data Schedule
(*) Management contract or compensatory plan or compensatory plan or
arrangement filed in response to Items 14 (a) and 14 (c) of the
instructions to Form 10-K.
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 23, 1997.
(2) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated April 16, 1997.
(3) Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 33-49286.
(4) Incorporated by reference to the Registrant's Quarterly Report on Form 10-
Q for the period ended March 31, 1997.
(5) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the period ended September 30, 1994.
(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the period ended September 30, 1995.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the period ended September 30, 1996.
(8) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated May 28, 1997.