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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from to
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Commission file number 1-8403
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ENERGY CONVERSION DEVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 38-1749884
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1675 WEST MAPLE ROAD, TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 280-1900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE PER SHARE
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(Title of Class)
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, 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. [ ].
THE AGGREGATE MARKET VALUE OF STOCK HELD BY NON-AFFILIATES (BASED UPON THE
LAST SALE PRICE OF SUCH STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM ON SEPTEMBER
13, 1996) WAS APPROXIMATELY $180 MILLION. AS OF SEPTEMBER 13, 1996, THERE WERE
219,913 SHARES OF THE COMPANY'S CLASS A COMMON STOCK AND 10,490,139 SHARES OF
THE COMPANY'S COMMON STOCK OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
None
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2
PART I
ITEM 1: BUSINESS
OVERVIEW
Energy Conversion Devices, Inc. (the "Company") is a leader in the
synthesis of new materials and the development of advanced production
technology and innovative products. The Company was founded in 1960 by
Stanford R. Ovshinsky and Iris M. Ovshinsky. Under the direction of Stanford
R. Ovshinsky, principal inventor, the Company has pioneered the development of
products and production technology based on amorphous and related materials,
with an emphasis on alternative energy and advanced information technologies.
Unlike the simple, ordered, three-dimensional arrays found in most crystalline
materials, the Company's proprietary synthetic materials--Ovonic materials--are
designed to exploit unique properties that result from engineered chemical and
structural disorder. The complex chemical and structural composition of Ovonic
materials makes possible the development and commercialization of new products
with unique chemical, electrical, mechanical and optical properties and
superior performance characteristics.
The Company has used an integrated approach to product development
since its inception that seeks to minimize the customary barriers between
research and development, production design and product planning. The
Company's strategy has been to develop products that have technological
advantages over available alternatives and that are capable of being produced
commercially on an economically competitive basis. The Company is currently
engaged in manufacturing and selling its proprietary products through joint
ventures and licensing arrangements as well as through its own internal
production operations. The Company is also continuing its development efforts,
funded in part through contracts with U.S. Government agencies and the United
States Advanced Battery Consortium ("USABC"), to broaden and build upon its
product and technological base.
The Company has established a multi-disciplinary business, scientific
and technical organization to commercialize products based on its technologies.
Its activities range from research and development to manufacturing and selling
products as well as designing and building production machinery. The Company
has recognized the need to protect its technology and maintains an extensive
patent portfolio consisting currently of 349 issued United States patents and
811 foreign counterparts. The patent portfolio includes numerous basic and
fundamental patents covering amorphous and related materials as well as patents
covering products and production technologies.
The Company conducts its battery business through its 93.5%-owned
subsidiary, Ovonic Battery Company, Inc. ("Ovonic Battery"). Sanoh Industrial
Co., Ltd. ("Sanoh") and Honda Motor Company, Ltd. ("Honda") own approximately
6.5% of the outstanding stock
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of Ovonic Battery. Sanoh has been a shareholder in Ovonic Battery since 1993
and Honda acquired its interest in 1996.
The Company has also formed three joint ventures in the field of
alternative energy, GM Ovonic L.L.C. ("GM Ovonic"), United Solar Systems Corp.
("United Solar") and Sovlux Co., Ltd. ("Sovlux"). GM Ovonic was established to
manufacture and commercialize Ovonic nickel metal-hydride ("NiMH") batteries
for electric vehicle ("EV") applications. The Company's Ovonic Battery
subsidiary owns a 40% equity interest in GM Ovonic and General Motors
Corporation ("General Motors") owns a 60% equity interest. The Company and
Canon Inc. of Japan ("Canon") each own a 49.98% equity interest in United
Solar, a joint venture formed for the continued development, manufacture and
sale of photovoltaic ("solar energy") products under license from the Company.
Mrs. Haru Reischauer, a director of both the Company and United Solar, owns the
balance of the outstanding shares of United Solar. The Company also owns a 50%
equity interest in Sovlux, a joint venture with State Research and Production
Enterprise Kvant ("Kvant"), a leading energy company in Russia. Sovlux was
established to manufacture licensed photovoltaic products and batteries in
Russia for worldwide sales. In July 1996, the Russian Ministry of Atomic
Energy and its various enterprises ("MINATOM") agreed to become an equity
partner in Sovlux.
In the field of information processing technology, the Company's
Ovonic phase-change erasable optical memory technology is rapidly becoming the
international choice of major optical disk manufacturers. The Company's
licensees in this area include Matsushita Electric Industrial Co., Ltd.
("Matsushita"), Toshiba Corporation ("Toshiba"), Asahi Chemical Industry Co.,
Ltd. ("Asahi"), Hitachi, Ltd. ("Hitachi"), Plasmon Limited ("Plasmon"), Sony
Corporation ("Sony"), International Business Machines Corporation ("IBM") and
Toray Industries, Inc. ("Toray").
The Company is also developing thin-film semiconductor memory
technology which has a wide variety of computer applications and is intended to
replace conventional DRAM, SRAM and flash EEPROM memory devices.
The Company has entered into a variety of other strategic alliances
and license agreements for the commercialization of its technologies.
Certain technical terms used herein are defined in the section
captioned "Glossary of Technical Terms" appearing at the end of this Item 1.
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MAJOR BUSINESSES
The Company has invented and developed Ovonic materials, products and
production technology for use in the fields of energy, information and
synthetic materials. The Company's goals have been to develop unique,
proprietary and cost-effective products to address important environmental,
energy and new materials needs.
ENERGY GENERATION AND STORAGE.
Energy activities, specifically in the areas of rechargeable batteries
and photovoltaic systems, represent a major element of the Company's business
strategy. Environmentally-safe methods of generating and storing energy have
become critical in today's world. The Company's battery and photovoltaic
technologies are gaining worldwide recognition, particularly in light of recent
concerns about air pollution, global climate change, ozone layer depletion,
dependence on imported oil and related concerns involving military action and
international stability, balance of payments and economic development.
RECHARGEABLE BATTERIES. The Company's Ovonic Battery subsidiary has
developed a proprietary NiMH battery technology using Ovonic materials which
has achieved recognition by major battery manufacturers throughout the world.
The Company believes that all NiMH batteries are covered by the Company's basic
patents. Ovonic Battery currently has over a dozen consumer battery licensees
and has established a dominant patent position in the field of Ovonic NiMH
batteries, with 41 issued United States patents and 198 foreign counterparts.
Additional United States and foreign patent applications are in various stages
of preparation and prosecution.
The Ovonic NiMH batteries are being manufactured and sold throughout
the world under licensing and joint venture arrangements. Ovonic Battery is
also in volume production of the NiMH battery negative electrodes for sale to
its licensees and its GM Ovonic joint venture.
Ovonic NiMH batteries store over twice as much energy as standard
nickel cadmium ("Ni-Cd") or lead acid batteries of equivalent weight. In
addition, Ovonic NiMH batteries have high power, long cycle life, no memory
effect and are maintenance free. Moreover, Ovonic NiMH batteries do not
contain cadmium or lead, both environmentally hazardous substances. Ovonic
NiMH batteries can be made in a wide range of sizes and have a wide range of
applications, including hand-held consumer electronics, power tools, utility
applications, electric vehicles, including electric two- and three-wheeled
vehicles, and industrial batteries.
During the fiscal year ended June 30, 1996, Ovonic Battery produced
negative electrodes for sale to certain licensees for assembly into complete
batteries for consumer and EV applications and has expanded its production
capacity of negative electrodes from approximately 200,000 linear feet per
month to approximately 400,000 linear feet per month. Further expansion is
expected to double negative electrode production capacity during fiscal year
1997. Additionally, Ovonic Battery is producing batteries for EV
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applications engineered and designed for volume production. The Ovonic NiMH
battery, by virtue of its engineered materials, possesses superior performance
characteristics without the limitations of conventional batteries. Ovonic
Battery continues to further improve the performance characteristics of its
Ovonic NiMH batteries.
Ovonic Battery is currently focusing on three principal battery
markets: rechargeable batteries for portable electronics and consumer
applications, electric vehicle batteries and batteries for the propulsion of
two- and three-wheeled vehicles. These batteries can also serve industrial
applications such as energy storage for remote power generation and
battery-operated industrial equipment.
RECHARGEABLE PORTABLE ELECTRONICS AND CONSUMER BATTERIES. The need
for high energy density storage batteries has continued to grow in recent
years. The push toward portable electronic products--such as cellular
telephones, portable computers and cordless tools--has created a large market
for rechargeable batteries and has fueled research to investigate new, higher
energy density battery systems. Although conventional storage batteries, such
as Ni-Cd, have been further improved in design and packaging in recent years,
the demand for higher performance batteries continues to increase. At present,
conventional Ni-Cd batteries have an energy density of 30-35 watt-
hours/kilogram. Ovonic NiMH batteries have an energy density of 80
watt-hours/kilogram. Technology improvements have demonstrated an energy density
of over 95 watt-hours/kilogram in prototype batteries with larger energy
densities possible.
Ovonic NiMH batteries offer a convenient "drop in" replacement for
Ni-Cd batteries in portable electronic and household appliances. Consumer and
governmental awareness that cadmium from Ni-Cd batteries represents a serious
health problem, if improperly disposed of, has begun to move the industry away
from Ni-Cd batteries. The desire of the battery industry to be cadmium-free is
also a major factor in the growing interest in Ovonic NiMH batteries.
Ovonic Battery has licensing arrangements with many of the world's
largest battery manufacturing companies. Ovonic Battery's proprietary battery
technology has been licensed for consumer battery applications to GP Batteries
International Limited ("GP Batteries") (formerly Sylva Industries, Ltd.) in
Hong Kong, one of the world's largest manufacturers of 9-volt batteries and
button cells; Varta Batterie AG ("Varta"), Europe's largest battery company;
Sovlux, the Company's joint venture in Russia; Harding Energy Inc. ("Harding");
Eveready Battery Company, Inc. ("Eveready") (formerly Gates Energy Products,
Inc.), the largest United States rechargeable consumer battery company; Walsin
Technology Corporation ("Walsin") and Asia Pacific Investment Co. ("APIC"),
both leading Taiwanese companies; Samsung Electronics Co., Ltd. ("Samsung"), a
large electronic equipment manufacturer in Korea; Canon, Hitachi Maxell, Ltd.
("Hitachi Maxell"), Furukawa Battery Co., Ltd. ("Furukawa") and Matsushita
Battery Industrial Co., Ltd. ("MBI"), all leading Japanese companies. In
addition, the Ovonic battery technology is being used in consumer battery
applications by three consumer battery manufacturers based in Japan. A group
of battery manufacturers have also recently become Ovonic
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Battery licensees. Ovonic consumer batteries are in volume production by most
of these companies.
ELECTRIC VEHICLE BATTERIES. The strategic importance of EVs both in
the United States and worldwide has increased greatly in recent years. This
heightened interest is due to many concerns such as air pollution, global
climate change, ozone layer depletion and dependence on imported oil.
Several major automobile manufacturers have active programs underway
to develop and commercially market EVs. Since Ovonic NiMH battery technology
provides two to two-and-a-half times the range as the same mass of lead acid
batteries, several major automobile manufacturers are evaluating Ovonic NiMH
battery technology as they prepare to commercialize and market EVs.
General Motors will introduce EV1, the first modern limited-production
car designed from the ground up to be an electric vehicle, in the Fall of 1996
at Saturn dealerships in the Los Angeles and San Diego, California, and Phoenix
and Tucson, Arizona, areas. Ovonic NiMH batteries manufactured by GM Ovonic
will become available in limited quantities in the EV1 later in calendar 1997.
Honda, in addition to its investment in Ovonic Battery, has committed
to use Ovonic NiMH batteries in a test fleet of EVs scheduled for introduction
in calendar 1997.
Hyundai Motor Co. Ltd. of Korea ("Hyundai") is also introducing a
vehicle in calendar 1997 to be powered by Ovonic NiMH batteries.
GM OVONIC. In June 1994, Ovonic Battery and General Motors formed a
joint venture, GM Ovonic, to manufacture and sell Ovonic Battery's proprietary
NiMH batteries for EV applications to all EV manufacturers on a worldwide
basis. GM Ovonic is owned 40% by Ovonic Battery and 60% by General Motors.
Ovonic Battery has contributed intellectual property, licenses, production
processes, know-how, personnel and engineering services pertaining to Ovonic
NiMH battery technology to the joint venture. General Motors' contribution
consists of operating capital, plant, equipment and management personnel
necessary for the production of batteries.
GM Ovonic is currently manufacturing production-intent batteries and
is conducting production scale-up engineering activities at a manufacturing
facility in Troy, Michigan.
OTHER EV BUSINESS AGREEMENTS. In addition to its GM Ovonic joint
venture, Ovonic Battery has entered into royalty-bearing license agreements for
the manufacture of EV batteries and related products outside of the United
States with Hyundai, Varta, Sovlux, APIC and GP Batteries. Hyundai, GP
Batteries and Sovlux have restricted rights to sell EV batteries in North
America. Varta's license includes the right to manufacture EV batteries
subject to certain limitations and restrictions on manufacturing in North
America.
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USABC, a partnership among Ford Motor Company, General Motors and
Chrysler Corporation, with funding participation from the United States
Department of Energy ("DOE") and the Electric Power Research Institute, was
formed in 1991 to develop promising battery technologies for EVs. In 1992,
Ovonic Battery was awarded a cost-sharing contract by USABC for development of
a "mid-term" NiMH battery for EVs. This contract has, since 1992, been amended
and extended several times to enable Ovonic Battery to continue its development
efforts by working on advanced materials and battery design for further
improving battery performance characteristics and reducing battery cost.
Ovonic Battery believes it has the only battery technology with the
capability to meet or exceed USABC's "mid-term" goals for EV battery
performance. Ovonic Battery has been designing and building cells and modules
for independent evaluation by USABC as well as testing advanced prototype
batteries with favorable results.
USABC MID-TERM
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MAJOR TECHNICAL CURRENT OVONIC ADVANCED BATTERY
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CHARACTERISTIC GOALS PERFORMANCE(1) PERFORMANCE(2),(3)
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Energy Density 80 watt-hours/kg. 75-80 watt-hours/kg. 90-95 watt-hours/kg.
Power Density 150 watts/kg. 180 watts/kg. > 200 watts/kg.
Cycle Life 600 cycles 600 cycles 1000 cycles
Life 5 years 10 years 10 years
100% Recharge 6 hours or less 1 hour (60% in 15 1 hour (60% in 15
Time minutes) minutes)
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(1) Indicates independently verified performance with the exception of life,
which is projected based on cycle life results and history of small
portable batteries using the same materials and manufacturing process.
Based on this battery performance, purpose-built EVs have already achieved:
- More than 370 miles on a single charge
- 0 to 60 mph acceleration in 8 seconds
- Battery lifetime projected to be equal to the life of the vehicle
- Battery quick charge to 60% of its capacity in 15 minutes
Moreover, the Ovonic NiMH battery is robust, maintenance free and free
of lead, cadmium and other environmentally hazardous substances.
(2) Indicates performance already achieved on a prototype level at Ovonic
Battery. For example, Ovonic Battery licensees in small portable
batteries have achieved an energy density as high as 95
watt-hours/kilogram. Prototype batteries of advanced design have
demonstrated performance characteristics that satisfy or exceed individual
USABC mid-term goals. Optimization of all performance characteristics within
a particular cell design is an ongoing activity.
(3) With respect to energy density, Ovonic Battery believes that significant
potential for even higher performance exists. Based upon laboratory
measurements of advanced materials, optimized construction and designs,
Ovonic Battery projects that energy density can be improved to as high as
120-150 watt-hours/kilogram.
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During the May 1996 American Tour de Sol race, the Solectria Sunrise
electric sedan, powered by Ovonic NiMH batteries, again set a new electric
vehicle range record--373 miles on a single charge. Another Solectria vehicle
powered by Ovonic NiMH batteries, the Solectria Force, achieved a record 244
miles on a single charge. The Force competed in the production vehicle
category and outdistanced all other production competitors.
TWO- AND THREE-WHEELED VEHICLES. Ovonic Battery has installed Ovonic
NiMH batteries in scooters converted to electric power and successfully
demonstrated the application of its battery for two-wheeled electric vehicles.
Ovonic Battery considers two- and three-wheeled electric vehicles a potential
large-volume market since these types of vehicles are the primary mode of
transportation in many European and developing countries throughout the world,
such as India, China and Taiwan. Electric two- and three- wheeled vehicles
using Ovonic NiMH batteries should improve the acute air pollution problems in
these regions caused by conventional two- and three-wheeled vehicles.
The Company has entered into royalty-bearing license agreements for
the manufacture and sale of Ovonic NiMH batteries for two- and three-wheeled
vehicles with Walsin, Sanoh and APIC, an affiliate of Taiwan's largest
industrial conglomerate, the Formosa Plastics Group.
In June 1996, the Company entered into an agreement with Piaggio
Veicoli Europei, S.P.A. ("Piaggio") to design, build and field test electric
scooters in Europe. The Company has started to manufacture the Ovonic NiMH
batteries for the fleet of scooters. The agreement also calls for technical
cooperation and Piaggio's participation in a future joint venture to produce
Ovonic NiMH scooter batteries in Europe. Piaggio is the developer of the
world-famous Vespa scooter and ranks third among the world's scooter
manufacturers.
In July 1996, the Company entered into an agreement with MINATOM for
the expansion of its Sovlux joint venture to manufacture Ovonic NiMH batteries
for two- and three-wheeled vehicles and address markets in Asia and Europe.
Subject to further definitive agreements, MINATOM has agreed to purchase for
Sovlux an initial $7 million of new battery production equipment from the
Company.
OTHER LARGE BATTERY APPLICATIONS. Several licensees of Ovonic NiMH
battery technology, such as Canon and Sovlux, have been granted rights to
manufacture and sell large batteries for energy storage applications for
electricity generated by photovoltaics, remote power generation, utility
applications and battery-operated industrial equipment.
PHOTOVOLTAICS. Photovoltaic (PV) systems provide a clean and simple
solid-state method for direct conversion of sunlight into electrical energy.
The major barrier to the widespread use of direct solar-to-electrical energy
conversion has been the lack of an inexpensive solar cell technology. The
Company and its American joint venture, United
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Solar, are leaders in thin-film amorphous photovoltaic technology and have
pioneered a unique approach to the manufacture of photovoltaic products.
Compared to PV products produced by other PV technologies, the ECD/United Solar
PV products are substantially lighter, more rugged, require much less energy to
produce and can be produced in high volume at significantly lower cost. The
Company's proprietary position in photovoltaics ranges from the invention of
materials and the development of products to the design and manufacture of
production equipment. The Company and United Solar have more than 160 U.S.
patents and numerous foreign counterpart patents.
Crystalline silicon was the original materials technology used by the
photovoltaic industry. First widely used in space satellites, conventional
crystalline silicon solar cells are fabricated in a step-and-repeat, batch
process from small wafers of single crystal or polycrystalline silicon
semiconductor materials. Notwithstanding the substantial advances that have
been made in the development of this technology, the cost of crystalline
photovoltaic modules still is high because of high materials costs and because
many processing steps are needed to manufacture the modules. Crystalline
silicon solar cell modules also are bulky and break easily.
The Company has developed technology to reduce the materials cost in a
solar cell using the Company's proprietary thin film, vapor-deposited
amorphous silicon (a-Si) alloy materials. Because a-Si absorbs light more
efficiently than its crystalline counterpart, the a-Si solar cell thickness
can be 50 to 100 times less, thereby significantly reducing material cost.
Amorphous cells with different light absorption properties also can be
deposited one on top of another to capture the broad solar spectrum more
effectively, which increases the energy-conversion efficiency of the multi-cell
device and improves performance stability.
The Company and its United Solar joint venture hold current world
records for both large- and small-area conversion efficiency for amorphous
silicon solar cells, as measured by the DOE's National Renewable Energy
Laboratory ("NREL"). Conversion efficiency is the percentage of sunlight that
is converted into electricity. In 1994, the DOE and United Solar announced
that United Solar had set a world record of 10.2% stabilized energy conversion
efficiency for large area (one-square foot) amorphous silicon alloy
photovoltaic modules, which the DOE characterizes as a major breakthrough.
To further reduce the manufacturing cost of photovoltaic modules, the
Company has pioneered the development of a fundamentally unique approach
utilizing proprietary continuous roll-to-roll solar cell deposition process.
Using a roll of flexible stainless steel that is typically a half-mile long and
14 inches wide, nine thin-film layers of a-Si alloy are deposited sequentially
in a high yield, automated machine to make a continuous, stacked three-cell
structure. The roll of solar cell material then is processed further for use
in a variety of photovoltaic products. This basic approach that the Company
has pioneered is unique in the industry and has significant manufacturing cost
advantages.
The Company believes that in high-volume production its photovoltaic
modules will be significantly less expensive than conventional crystalline
silicon and other thin-film solar
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modules produced on glass and can be cost competitive with fossil fuels. The
Company and United Solar have also developed unique products for the building
industry such as PV shingles and metal roofing products to emulate conventional
roofing materials in form, construction, function and installation.
The Company has formed two joint ventures to manufacture photovoltaic
modules and systems and to sell them throughout the world.
In 1990, the Company and Canon formed United Solar for the continued
development, manufacture and sale of Ovonic solar cells under license from the
Company. United Solar is owned 49.98% by the Company and 49.98% by Canon.
Canon has invested $50,000,000 in United Solar.
In 1992, a memorandum of understanding was signed by Canon and the
Company stating that should United Solar require additional funding beyond what
Canon has already agreed to invest, Canon would assist United Solar in finding
means of raising funds to continue the expansion of United Solar's operations
to profitability which would not result in the dilution of the Company's
interest in United Solar.
The Company and United Solar have been producing a variety of PV
products and selling PV modules and systems throughout the world. United Solar
presently has a 1.5 megawatt ("MW") facility in Troy, Michigan, where it
manufactures products for remote power applications, PV powered lighting
systems, building-integrated photovoltaic systems, marine applications and
grid-integrated systems.
In 1996, United Solar upgraded its manufacturing facility and is more
than tripling its production capacity. New machinery and equipment which was
designed and built by the Company under an $8 million order from United Solar
is planned to be operational late in calendar year 1996. This new machinery
and equipment incorporates the world record stabilized conversion efficiency
technology and will have annual production capacity of photovoltaic modules
capable of producing electricity at the rate of 5MW.
In 1990, the Company also formed Sovlux, a joint venture with Kvant,
to manufacture the Company's photovoltaic products in the countries of the
former Soviet Union. Sovlux is owned 50% by the Company. In 1990, Kvant
entered into machine-building contracts with the Company for the construction
of 2MW-capacity photovoltaic manufacturing equipment. The equipment has been
installed in Sovlux's plant in Moscow. Kvant contributed this equipment to the
joint venture in exchange for its ownership interest in Sovlux. In July 1996,
MINATOM agreed to become an equity partner in Sovlux. Under this agreement,
and subject to further definitive agreements, MINATOM has agreed to provide
operating capital to enable Sovlux to commence production of photovoltaic
products as well as provide an initial $6 million for new production equipment
to be built by the Company's Production Technology and Machine Building
Division. The Company's contribution to the venture consists solely of the
technology necessary to support Sovlux's operations. To date, Sovlux has
conducted pre-production activities consisting of further manufacturing plant
preparation and machinery optimization.
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For more than 10 years, the Company has been engaged in research
contracts awarded by the DOE and NREL aimed at further development of
high-efficiency amorphous silicon-based alloy thin-film solar cells,
improvement of photovoltaic manufacturing technologies, and the development and
demonstration of photovoltaic systems to be used in roof-top construction in
lieu of shingles and other roofing materials. The building industry offers a
large opportunity for PV applications. The Company believes that the PV
roofing products represent an important opportunity for large-volume production
and sale to the building industry, both domestically and abroad.
OTHER ENERGY TECHNOLOGIES. The Company is conducting various research
programs sponsored by U.S. Government agencies in the scale-up of the Company's
previously developed thin-film alloys for thermally activated hydrogen storage
and the use of thin-film microwave deposition techniques to develop new alloys
to be used in high-efficiency thermoelectric devices.
INFORMATION TECHNOLOGIES.
The Company has developed a number of key technologies in the fields
of information processing, storage and displays. In the past, products have
been developed by the Company for data input (image scanners); data output
(copier and laser printer drums); data display (active matrix flat panel
displays); and data storage (optical and semiconductor memory devices).
OPTICAL MEMORY. The Company is the originator of phase-change
erasable (PCE) optical memory disk technology. The Company's Ovonic PCE
optical memory stores many times the amount of data as a conventional,
removable rigid magnetic disk of the same size, in a convenient, removable disk
format. The Company has licensed its optical memory technology to Matsushita,
Toshiba, Plasmon, Asahi, Hitachi, Sony, Toray and IBM.
The Company's lead licensee in optical memories, Matsushita, is
working to make the Ovonic PCE optical memory technology the international
standard. Under its Panasonic brand name, Matsushita introduced a phase change
dual ("PD") function disk drive in mid 1995, which uses rewriteable optical
disk media that employ the Ovonic optical phase change technology. The
Matsushita drive can read conventional CD-ROM disks now widely used for
software distribution and multimedia applications as well as read and write to
650 megabyte capacity phase change optical memory disks. Many of the Company's
optical memory technology licensees have announced they will also be making PD
drives and storage media, and several have begun commercial sales. The
products being sold by the Company's licensees have been met with enthusiastic
industry and consumer acceptance.
An even higher capacity data storage removable optical memory product,
the rewriteable DVD disk, is expected to be commercially introduced in the next
several years. The Company's optical memory licensees now producing PD media
are expected to
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become manufacturers of DVD products. Due to its high data storage capacity,
DVD disks will be used for a wide range of applications, including digital
television recording.
The Company is working toward commercialization of its technology for
high storage capacity rewriteable optical memory material produced by low-cost
continuous web-embossing processes. In a related activity, the Company, along
with several industry partners, is participating in a U.S. Department of
Commerce, National Institute of Standards and Technology, multi-year,
multi-million dollar cost-sharing program for the development of tape-based
rapid access affordable mass storage products. The Company's optical memory
materials technology is being utilized in this program due to its high storage
capacity and low-cost manufacturability.
NON-VOLATILE SEMICONDUCTOR MEMORY. The Company, on the basis of its
pioneering technology, developed the first non-volatile semiconductor memory,
the Ovonic EEPROM, for computer data storage in the 1960s. The Company has
advanced and extended that early work and is now developing a proprietary
family of high-performance non-volatile semiconductor memory and information
processing devices. This technology is designed to provide non-volatile
computer data storage with the speed of current, volatile DRAM semiconductor
system memory as well as to decrease the cost of production. The technology
also offers an opportunity to develop new, fast computer architectures that
eliminate the data transfer bottlenecks caused by the current computer memory
hierarchy. The Company believes its Ovonic memory can, in a single layer,
replace the multiple memory layers which are used in today's personal
computers. Another application of the technology is intended for use in the
rapidly growing flash EEPROM market. Flash EEPROMs are used in portable
electronic devices such as laptop computers, pagers, and cellular telephones as
all-solid-state, low-power replacements for magnetic hard disk storage. Still
another application of the Company's non-volatile semiconductor memory
technology can provide a basis for practical, highly complex, three-
dimensional neural network systems for use in advanced artificial intelligence
and speech- and image-pattern recognition.
The Company's non-volatile semiconductor memory technology had been
developed since September 1994 in conjunction with Micron Semiconductor, Inc.
("Micron") and under a cost-sharing subcontract agreement under Micron's
Advanced Research Projects Agency Prime Contract to perform research into
advanced SRAM technology. The foregoing arrangements were concluded early in
fiscal year 1997 and during fiscal year 1996, respectively.
While the Company licensed its previous flat panel display and image
processing technology to its former subsidiary, OIS Optical Imaging Systems,
Inc., the Company intends to continue its activities in this field employing
new technology.
SYNTHETIC MATERIALS.
The Company has developed a new low-cost, transparent vapor barrier
coating for flexible plastic beverage containers and packaging films. The
Company has also
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developed and demonstrated manufacturing technology and processes for
depositing these coatings with cost-effective, roll-to-roll continuous
production. The Company's vapor barrier coating technology is environmentally
friendly and can be used to extend the shelf life of food, beverages,
pharmaceutical and other types of sensitive commercial products. The vapor
barrier coating production process deposits an amorphous film that
significantly improves the barrier properties of commodity polymer films.
The Company also acquired a nonexclusive, royalty-free license from
its former subsidiary, Ovonic Synthetic Materials Company, Inc. ("OSMC"), to
make, use and sell products using clear coating and superconductivity
technologies previously licensed to OSMC.
PRODUCTION TECHNOLOGY AND MACHINE BUILDING DIVISION
AND CENTRAL ANALYTICAL LABORATORY
The Production Technology and Machine Building Division operates as a
profit center for the Company's machine-building and engineering activities.
It has extensive experience in designing and building proprietary automated
production equipment. The Production Technology and Machine Building Division
has designed and built for the Company and its licensees five generations of
photovoltaic production lines, including United Solar's 5MW PV machinery and
equipment, as well as research, development and manufacturing equipment for
batteries, vapor barrier coating and other materials technology.
The Company's Central Analytical Laboratory conducts analysis of
materials produced by the Company and its joint venture partners and licensees
as well as materials produced by other companies. The Company also maintains
an advanced materials technology group that supports the efforts of each of the
Company's business areas.
RESEARCH AND DEVELOPMENT
The nature of the Company's business has required, and will continue
to require, expenditures for research and development to support the commercial
activities of the Company. Increasingly, such funds have been forthcoming from
United States government agencies, the USABC and the Company's licensees. The
materials, production technologies and products being developed and produced by
the Company, Ovonic Battery and the Company's joint venture partners are
technologically sophisticated and are designed for markets characterized by
rapid technological change and competition based, in large part, upon
technological and product performance advantages.
The following is a summary of the Company's consolidated direct
expenditures, excluding the allocation of patents, depreciation and general and
administrative expenses, for product research and development for the five
years ended June 30, 1996. Information for OSMC is included through June 30,
1992. All of the Company's research and development costs are expensed as
incurred.
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Direct Research and Development Expenditures
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Sponsored $6,732,570 $ 9,154,263 $6,927,883 $5,306,030 $2,360,632
by Licensees
and Government
Agencies
Sponsored by
the Company $ 6,214,848 2,808,219 1,357,341 1,958,328 3,689,073
----------- ----------- ---------- ---------- ----------
$12,947,418 $11,962,482 $8,285,224 $7,264,358 $6,049,705
=========== =========== ========== ========== ==========
SOURCES AND AVAILABILITY OF RAW MATERIALS
Materials, parts, supplies and services used in the Company's business
are generally available from a variety of sources. However, interruptions in
production or delivery of these goods and services could have an adverse impact
on the Company's manufacturing operations.
PATENTS AND PROPRIETARY RIGHTS
Since its founding in 1960, the Company's research and development
efforts have focused on amorphous, disordered and related materials. The
Company has established a multi-disciplinary business, scientific and technical
organization ranging from research and development to manufacturing and selling
products as well as designing and building production machinery. The Company
has recognized the need to protect carefully those activities. The Company's
extensive patent portfolio consists of 349 United States patents and 811
foreign counterparts. The Company's patent portfolio includes numerous basic
and fundamental patents applicable to the field of amorphous and related
materials. The Company invents not only materials but also develops low-cost
production technologies and high-performance products. The Company's patents,
therefore, cover not only materials but also the production technology and
products developed by the Company.
The Company believes that worldwide patent protection is important for
it to compete effectively in the marketplace. Certain of the Company's patents
have been the subject of legal actions, two of which have been resolved
favorably to the Company prior to trial. Other patents of the Company have not
been challenged as to validity. See "Item 3: Legal Proceedings" on pages 19-20
of this Report. No assurance can accordingly be given as to either the
validity or scope of the patent protection.
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CONCENTRATION OF REVENUES
See Note B of the Notes to Consolidated Financial Statements on page
44 of this Report.
BACKLOG
The Company has a $13.7 million backlog of orders as of August 31,
1996 in battery packs and electrodes and machine-building contracts. The
backlog at August 31, 1995 was $6.3 million. The Company expects to fill all
of its current backlog within the current fiscal year.
COMPETITION
The principal competitive advantages of the Company include its
products, production technology, extensive patent portfolio, inventions and
research and development activities. In the areas of consumer rechargeable
batteries, EV batteries, photovoltaics and information technologies, the
Company has entered into joint venture or licensing agreements with established
industrial companies that the Company believes possess the financial resources
and manufacturing and marketing capabilities to commercialize products based on
the Company's technologies.
The Company competes with firms, both domestic and foreign, that
manufacture and sell products, as well as firms that perform research and
development. Some of these firms are among the largest industrial companies in
the world and have well-established product lines, extensive resources and
large research and development staffs and facilities.
The Company is currently engaged in manufacturing and selling its
proprietary products through joint ventures and licensing arrangements, as well
as through its own divisions and internal production operations. The ability
of the Company to maintain its competitive leadership in the future will depend
not only on continuing product and technological advances but also on the
strength and ability of the Company's licensees and joint venture partners.
EMPLOYEES
As of August 31, 1996, the Company had a total of 329 employees,
including 171 full-time Ovonic Battery employees. The aforementioned numbers
do not include employees of the Company's joint ventures or licensees. The
Company considers its relations with its employees to be excellent.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
concerning, among other things, the Company's expectations, plans and
strategies for the development and commercialization of products based on its
technologies. These forward-looking statements are generally identified by the
use of such terms as "intends," "expects," "plans," "projects," "estimates,"
"anticipates," "should" and "believes."
All of such forward-looking statements are based on assumptions which
the Company, as of the date of this Annual Report, believes to be reasonable
and appropriate. The Company cautions, however, that the actual facts and
conditions that may exist in the future could vary materially from the assumed
facts and conditions upon which such forward-looking statements are based.
The Company's future business prospects are substantially dependent
upon the ability of the Company, its joint venture partners and licensees to
develop, manufacture and sell products based on the Company's technologies.
Additional development efforts will be required before certain products based
on the Company's technologies can be manufactured and sold commercially. There
can be no assurance that certain products based on the Company's technologies
can be manufactured cost effectively on a commercial scale, that such products
will gain market acceptance or that competing products and technologies will
not render products based on the Company's technologies obsolete or
noncompetitive.
In certain fields, the Company has entered into licensing or joint
venture agreements with established companies. Any revenues or profits which
may be derived by the Company from these arrangements will be substantially
dependent upon the willingness and ability of the Company's licensees and joint
venture partners to devote their financial resources and manufacturing and
marketing capabilities to commercialize products based on the Company's
technologies.
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to protect and maintain the proprietary nature
of its technology. There can be no assurance that the Company's patents or
other proprietary rights will be determined to be valid or enforceable if
challenged in court or administrative proceedings or that the Company patents
or other proprietary rights, even if determined to be valid, will be broad
enough in scope to enable the Company to prevent third parties from producing
products using similar technologies or processes. See "Item 3: Legal
Proceedings." There can also be no assurance that the Company will not become
involved in disputes with respect to the patents or proprietary rights of third
parties.
The foregoing factors, as well as other factors discussed in this
Annual Report and in other documents and reports filed by the Company with the
Securities and Exchange Commission pursuant to the requirements of the federal
securities laws, could cause the
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actual facts and conditions that may exist in the future to vary materially
from the assumed facts and conditions upon which the forward-looking
statements contained herein are based.
GLOSSARY OF TECHNICAL TERMS
Certain technical terms used herein have the following meanings:
Amorphous - having an atomic structure that is not periodic.
Battery Memory Effect - an undesirable phenomenon in Ni-Cd batteries
where repeated shallow discharge cycles adversely affect battery
performance.
Crystalline - having a repeating atomic structure in all three
dimensions.
Cycle Life - the number of times a rechargeable battery can be charged
and discharged.
Disordered - lacking order. Order is defined over some scale of
length such as short range, intermediate range or long-range and may
refer to atomic position (structural order), type of atom
(compositional order), or other physical properties such as magnetic
and electric polarization and others.
DRAM (Dynamic Random Access Memory) - a type of semiconductor memory
device used for the main system memory in most computers.
Electrode (battery) - the chemically active portions of a battery.
Energy Density - the amount of energy stored in a specific volume or
weight.
Flash EEPROM (Electrically Erasable Programmable Read-Only Memory) - a
type of semiconductor memory device that retains stored data even with
the power off and which is electrically reprogrammable.
Hydrides - solid materials that store hydrogen.
Non-Volatile - a property of some types of computer memory which
retain stored data even when power is removed.
Optical Memory - a computer memory technology that uses lasers to
record and play back data stored on a rotating disc.
Ovonic - the term used to describe the Company's proprietary materials,
products and technologies.
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PCE (Phase Change Erasable) - an optical memory technology in which
data is stored or erased on memory media by means of a laser beam that
switches the structural phase of a thin-film material, for example,
changes between a crystalline and an amorphous state.
Photovoltaic (PV) - direct conversion of light into electrical energy.
Power Density - the amount of power a battery can deliver per unit
volume or weight.
Roll-to-Roll Process - a process where a roll of substrate is
continuously converted into a roll of product.
Semiconductor - a class of materials with special electrical
properties used to fabricate solar cells, transistors, integrated
circuits and other electronic devices.
SRAM (Static Random Access Memory) - a type of very fast
semiconductor memory device.
Stabilized Energy Conversion Efficiency - the long-term ratio of
electrical output to light input. .
Thin Film - a very thin layer of material formed on a substrate.
Vapor Permeation Barrier Coating - a coating that prevents the passage
of oxygen and water vapor.
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ITEM 2: PROPERTIES
A summary of the principal facilities of the Company and Ovonic
Battery follows:
No. Of Date
Square Leased Or
Location Feet Acquired
-------- ---- --------
The Company:
1675 West Maple Road, Troy, MI 31,550 October 1965
1050 East Square Lake Road, 11,000 August 1981
Bloomfield Township, MI
1621 Northwood, Troy, MI 24,900 January 1991
Ovonic Battery:
1864 Northwood, Troy, MI 12,480 March 1982
1826 Northwood, Troy, MI 12,480 October 1982
1707 Northwood, Troy, MI 27,400 October 1992
1334 Maplelawn, Troy, MI 28,100 December 1994
-------
TOTAL 147,910
=======
The foregoing properties, which are generally of brick and block
construction, are devoted primarily to the product development, pre-production
and production activities and administrative and other operations of the
Company and Ovonic Battery. The Company's Bloomfield Township facility is
currently leased to a third party on a month-to-month basis as an educational
facility with the Company retaining rights to use this facility. Management
believes that the above facilities are generally adequate for present
operations.
The Company and Ovonic Battery utilize their substantial amount of
testing, analytical, research and development and production equipment in their
operations. During the fiscal year ended June 30, 1996, the Company and Ovonic
Battery purchased approximately $1.9 million of equipment, excluding additional
equipment which was leased from Financing for Science International during the
year ended June 30, 1996. The testing, analytical and research and development
equipment used in the Company's and Ovonic Battery's development programs are
being fully utilized.
ITEM 3: LEGAL PROCEEDINGS
On August 8, 1994, Ovonic Battery filed an action with the United
States International Trade Commission ("ITC") seeking an order halting the
importation into the
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United States of NiMH batteries made by three consumer battery
manufacturers based upon Ovonic Battery's United States Patent #4,623,597
covering Ovonic Battery's proprietary technology for NiMH batteries (the "597
Patent"). In December 1994 and January 1995, the three consumer battery
manufacturers entered into agreements with the Company and Ovonic Battery
amicably settling the differences which led to the ITC action and paving the
road for future cooperation in the further development of NiMH batteries.
In June 1996, the Company and Ovonic Battery and SAFT America, Inc.
("SAFT") settled litigation between the parties regarding Ovonic Battery's '597
Patent. SAFT and certain related companies or entities entered into a
settlement agreement with the Company and Ovonic Battery and the parties have
agreed to dismissal of all claims and counterclaims in the litigation.
The Company is involved in litigation with MBI concerning Ovonic
Battery's U.S. Patent No. 5,348,822 ("'822 Patent") covering advanced
electrodes for NiMH batteries. Prior to the litigation, the Company had been in
discussions with MBI regarding electric vehicle batteries and had informed MBI
that the Company intended to enforce its patents. The litigation also involves
Toyota Motor Sales U.S.A., Inc. and Toyota Motor Corporation (collectively
"Toyota") in view of the use of MBI batteries in Toyota electric vehicles which
have been imported into California for fleet testing.
The Company is charging MBI and Toyota with infringement of the '822
Patent and is seeking injunctive relief and damages. MBI and Toyota are
challenging the validity and enforceability of the '822 patents. Management of
the Company believes that the allegations of MBI are without merit. The
Company and Ovonic Battery intend to vigorously defend against the allegations
of MBI and intend to press for the relief sought in the counterclaims asserted
against MBI and Toyota.
There are no other legal proceedings to which the Company is a party
which management believes to be material.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), trade on the NASDAQ National Market System under the symbol
"ENER." Shares of the Company's Class A Common Stock, par value $.01 per share
("Class A Common Stock"), are not publicly traded. As of September 13, 1996,
there were approximately 2,950 holders of record of Common Stock and four
holders of record of Class A Common Stock.
The following table sets forth the reported high and low bid
quotations for the Company's Common Stock for the following quarters:
For the Fiscal Year Ended June 30
(in Dollars Per Share)
1997 1996 1995
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter $22.75 $15.50 $20.125 $16.25 $12.625 $10.625
through
September 13,
1996
Second Quarter $18.875 $15.625 $12.25 $9.75
Third Quarter $22.875 $16.25 $16.50 $11.625
Fourth Quarter $30.625 $19.50 $20.875 $14.625
The above-listed quotations may include inter-dealer prices which may
not necessarily represent actual transactions. The Company has paid no cash
dividends in the past and no cash dividends are expected to be paid in the near
future.
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ITEM 6: SELECTED FINANCIAL DATA
Set forth below is certain financial information taken from the
Company's audited consolidated financial statements (See Item 1: Description of
Business).
June 30,
------------------------------------------------------------------------------------------
Revenues: 1996 1995* 1994 1993 1992
---- ----- ---- ---- ----
Product sales $14,828,133 $10,298,019 $ 7,366,668 $ 2,731,342 $ 7,038,731
Royalties 1,321,117 1,205,036 228,630 103,224 35,046
Revenues from R&D agreements 7,349,195 11,365,708 9,608,224 6,773,192 4,177,546
Revenues from license and
other agreements 12,524,262 17,931,852** 1,925,000 2,475,000 2,989,414
Other 1,289,667 543,143 228,853 315,620 381,834
----------- ------------ ----------- ------------ ------------
TOTAL REVENUES 37,312,374 41,343,758 19,357,375 12,398,378 14,622,571
----------- ------------ ----------- ------------ ------------
Net Income (Loss) $ 1,054,269 $ 5,605,664 $(3,892,656) $ (5,520,606) $ (2,178,528)
=========== ============ =========== ============ ============
Net Income(Loss) per Common Share
and Common Equivalent Share $ .10 $ .63 $ (.51) $ (.75) $ (.32)
Net Income(Loss) per Common Share
Assuming Full Dilution $ .10 $ .56 $ (.51) $ (.75) $ (.32)
At year end:
Total Assets $57,129,439 $23,331,019 $10,494,363 $ 8,746,932 $ 7,149,103
Long-Term Debt $ 1,853,728 $ 3,012,079 $ 3,484,234 $ 3,183,528 $ 1,267,964
Working Capital (Deficit) $43,524,927 $ 9,310,685 $(2,330,209) $ (3,120,850) $ (1,770,214)
Stockholders' Equity (Deficit) $43,734,040 $ 7,899,667 $(4,930,135) $ (7,500,323) $ (3,292,616)
* Restated.
** Includes $10,500,000 from settlement of International Trade Commission (ITC)
action.
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ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
During the year ended June 30, 1996, the Company had total revenues of
$37,312,000. The Company's business strategy to develop and license new
products and production technology with third parties generated royalties of
$1,321,000 and revenues from R&D agreements of $7,349,000 and revenues from
license and other agreements of $12,524,000. Additionally, product sales were
$14,828,000 and other revenue was $1,290,000.
The Company had net income for the year ended June 30, 1996 of
$1,054,000, primarily due to battery agreements and related revenues thereunder
with APIC for $6,024,000, Sanoh for $3,000,000, a group of battery
manufacturers for $1,500,000, as well as royalties of $1,321,000 and a gain on
the sale of Ovonic Battery common stock of $4,500,000.
As of June 30, 1996, the Company had unrestricted consolidated cash and
cash equivalents and investments, consisting of commercial paper maturing in
four to six months, of $34,101,000, an increase of $27,842,000 from June 30,
1995. As of June 30, 1996, the Company had consolidated working capital of
$43,525,000, compared with a consolidated working capital of $9,311,000 as of
June 30, 1995.
The increases in consolidated cash and cash equivalents, investments and
consolidated working capital as of June 30, 1996 were primarily due to the
receipt by the Company of the net proceeds of $27,781,000 from a registered
public offering of 1,650,000 shares of its Common Stock completed in January
1996. The offering was made to a limited number of major institutional
investors. During the year ended June 30, 1996, the Company also received
$6,940,000 in connection with the exercise of stock options and warrants for
the purchase of its Common Stock.
During the year ended June 30, 1996, $7,708,000 cash was used in
operations. The difference between the net income of $1,054,000 and the net
cash used in operations was principally due to the gain on the sale of Ovonic
Battery common stock, depreciation expense, an increase in inventories and the
timing of collection of certain revenues included in accounts receivable in the
year ended June 30, 1996 from APIC and under other agreements, which payments
will be received at a later date, partially offset by the receipt of $3,500,000
from Walsin (which license fee was recorded at June 30, 1995). In addition,
during this period $1,887,000 of machinery and equipment was purchased or
constructed for the Company's operations.
During the next 12 months, Ovonic Battery is considering the purchase of
up to $6,000,000 of machinery and equipment. The machinery and equipment would
be utilized
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principally for the expansion of Ovonic Battery's manufacturing capacity and
would be financed with a portion of the proceeds from the registered public
offering.
Some business agreements related to research and development agreements
have been entered into by the Company with U.S. government agencies and with
industry to develop the Company's products and production technology. The
technology developed, together with the applicable patents, are generally owned
by the Company. Generally, the agreed-upon fees for these research and
development contracts reimburse the Company for its direct costs associated
with these projects, together with a portion of indirect costs (patents,
operating, general and administrative expenses and depreciation).
The Company has entered into a third-party leasing arrangement with
Financing for Science International ("FSI") which provides lease financing for
certain equipment used by the Company. As of June 30, 1996, the Company had
financed equipment having an acquisition cost of $8,600,000 under this
arrangement. The Company's leases with FSI provide for a term of five years.
The required lease payments over this period equal the acquisition cost of the
leased equipment plus an interest factor. The Company has agreed to purchase
certain equipment leased from FSI upon the expiration of the applicable leases
for 10% of its acquisition cost. For other equipment, the Company has an
option to purchase the equipment for its then market value (but no less than
10% nor more than 20% of its acquisition cost). The Company has an option to
purchase certain other leased equipment upon the expiration of the applicable
leases for its then fair market value.
While certain programs have a limited terms, the equipment being
utilized for these programs has alternative future uses for other programs if,
in fact, the programs are not continued beyond their respective terms.
Management believes that funds generated from operations and existing
cash and investment balances will be adequate to support and finance planned
growth, capital expenditures and company-sponsored research and development
programs.
Results of Operations
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
The Company had net income in the year ended June 30, 1996 of
$1,054,000 compared to net income of $5,606,000 for the year ended June 30,
1995. Net income for the year ended June 30, 1996 was primarily due to battery
agreements and related payments thereunder from APIC for $6,024,000, Sanoh for
$3,000,000, a group of battery manufacturers for $1,500,000 and Furukawa for
$500,000, as well as royalties of $1,321,000 and a gain on the sale of Ovonic
Battery common stock of $4,500,000. Net income for the year ended June 30,
1995 was due principally to $10,500,000 of non-recurring payments received by
the Company under three consumer battery agreements
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25
entered into in 1995 in settlement of the ITC action initiated by the Company,
as well as agreements with other major companies.
Product sales increased 44% from $10,298,000 in the year ended June 30,
1995 to $14,828,000 in the year ended June 30, 1996 due to increased
machine-building revenues for both the Company and Ovonic Battery and increased
sales by Ovonic Battery of negative electrodes and battery packs to GM Ovonic.
Royalties increased from $1,205,000 (which included $390,000 of
royalties reported by a licensee in 1995 relating to prior periods) in the year
ended June 30, 1995 to $1,321,000 in the year ended June 30, 1996, primarily
due to royalties earned for use of the Company's phase change optical memory
technology. The Company has audit rights to verify the amounts of royalties
being reported and paid by its licensees. The Company, based on information
received, plans to enforce these audit rights.
Revenues from R&D agreements decreased 35% to $7,349,000 in the year
ended June 30, 1996 from $11,366,000 in the year ended June 30, 1995 due to
reductions in 1996 revenues recognized under agreements with USABC, NREL and
DOE, partially offset by increased revenues recognized under an agreement with
Micron. (See NOTE B - Notes to Consolidated Financial Statements.) The
reduction in 1996 in revenues under government contracts is due to the
completion of R&D agreements and the U.S. Government's deficit reduction
program.
Revenues from license and other agreements decreased 30% to $12,524,000
in the year ended June 30, 1996 from $17,932,000 in the year ended June 30,
1995 due to non-recurring revenues of $10,500,000 related to agreements with
three consumer battery manufacturers in settlement of the ITC action, and
agreements with Walsin, GP Batteries and Eveready in 1995, partially offset by
license and other agreements in 1996 with APIC, Sanoh, Furukawa and a group of
battery manufacturers. (See NOTE B - Notes to Consolidated Financial
Statements.)
The increase in other revenues was due to increased billings in 1996 for
services performed by the Company's Production Technology and Machine Building
Division, as well as miscellaneous work performed for Ovonic Battery
licensees.
The increase in the cost of product sales from $10,391,000 in the year
ended June 30, 1995 to $15,504,000 in the year ended June 30, 1996 was
principally due to the increased machine-building activities for the Company
and increased sales of Ovonic negative electrodes.
The decrease in cost of revenues from R&D agreements in the year ended
June 30, 1996 compared to the year ended June 30, 1995 was principally due to
decreases in activities in 1996 under the agreements with USABC, NREL and DOE.
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26
The increase in product development and research expenses from
$4,636,000 in the year ended June 30, 1995 to $9,151,000 in the year ended June
30, 1996 was due to the aforementioned reduced funding under the agreements
with USABC and related increased Ovonic Battery product development and
research expenses.
Patent defense costs of $2,625,000 in the year ended June 30, 1995 and
$2,467,000 in the year ended June 30, 1996 was due to payment in 1995 of the
contingent fees paid to the law firm representing the Company in the ITC
action, which led to the three consumer battery agreements in 1995, and
expenses incurred in 1996 in connection with the defense and prosecution of
litigation involving SAFT and certain related companies or entities and MBI
with respect to certain of Ovonic Battery's United States patents covering its
proprietary technology for NiMH batteries. The litigation involving SAFT was
settled in June 1996.
The change from other income (expense) of $190,000 other expense-net in
the year ended June 30, 1995 compared to $5,233,000 of other income-net in the
year ended June 30, 1996 was due principally to the $4,500,000 gain on the sale
of Ovonic Battery common stock in 1996.
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
Certain adjustments for 1995 were recorded consisting of a non-cash
charge to operations related to the extension of certain stock options. The
results for 1995 have been restated to reflect those adjustments. (See Note A
- - Notes to Consolidated Financial Statements.) All period-to-period comparisons
contained herein refer to restated 1995 results.
The Company had net income in the year ended June 30, 1995 of
$5,606,000 compared to a net loss of $3,893,000 for the year ended June 30,
1994. Net income for the year was due principally to the payments received by
the Company during the period under three consumer battery agreements entered
into in the year ended June 30, 1995, as well as agreements with Walsin,
Eveready and Micron, and amended agreements with Hitachi Maxell, Varta and GP
Batteries.
Product sales increased 40% from $7,367,000 in the year ended June 30,
1994 to $10,298,000 in the year ended June 30, 1995 due to increased
machine-building revenues for both the Company and Ovonic Battery and increased
sales by Ovonic Battery of battery packs to GM Ovonic.
Royalties increased 426% from $229,000 in the year ended June 30, 1994
to $1,205,000 in the year ended June 30, 1995, primarily due to royalties
received from the three consumer battery manufacturers and from Varta (which
included $390,000 of royalties reported by a licensee in 1995 relating to prior
periods).
Revenues from R&D agreements increased 18% from $9,608,000 in the year
ended June 30, 1994 to $11,366,000 in the year ended June 30, 1995 due to
increased revenues
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27
recognized under agreements with DOE and USABC. (See NOTE B - Notes to
Consolidated Financial Statements.)
Revenues from license and other agreements increased from $1,925,000 in
the year ended June 30, 1994 to $17,932,000 in the year ended June 30, 1995 due
to the agreements with Micron, Walsin, Hitachi Maxell, Eveready and three
consumer battery manufacturers. (See NOTE B - Notes to Consolidated Financial
Statements.)
The increase in other revenues was due to increased billings in 1995 for
services performed by the Company's Production Technology and Machine Building
Division, as well as miscellaneous work performed for Ovonic Battery
licensees.
The increase in cost of product sales from $6,621,000 in the year ended
June 30, 1994 to $10,391,000 in the year ended June 30, 1995 was principally
due to increased machine-building activities for both the Company and Ovonic
Battery and increased cost of sales by Ovonic Battery of battery packs to GM
Ovonic.
The increase in cost of revenues from R&D agreements in the year ended
June 30, 1995 compared to the year ended June 30, 1994 was principally due to
increased activities in 1995 under the aforementioned agreements with DOE and
USABC.
The increase in product development and research expenses from
$2,671,000 in the year ended June 30, 1994 to $4,636,000 in the year ended June
30, 1995 was due to an increase in work performed in the Company's
microelectronics research program and an allocated $500,000 non-cash charge
related to the extension of stock options previously issued to employees.
Patent defense costs of $2,625,000 in the year ended June 30, 1995 were
due to the payment of the contingent fee made to the law firm representing the
Company in the ITC action.
Patent expenses increased from $173,000 in the year ended June 30, 1994
to $408,000 in the year ended June 30, 1995 as a result of increased patent and
maintenance costs in 1995.
The increase in operating, general and administrative expenses from
$5,250,000 in the year ended June 30, 1994 to $6,474,000 in the year ended June
30, 1995 was caused by a non-cash charge in 1995 related to the extension of
stock options previously issued to employees of $1,100,000, increased legal
expenses in 1995 (some of which were associated with the ITC action), an
accrual in 1995 for the value of non-cash compensation in connection with
Ovonic Battery's option agreement with its Chief Executive Officer, together
with costs associated with the transfer of technology and other work for GM
Ovonic, partially offset by reductions in other operating, general and
administrative expenses.
-27-
28
ITEM 8: CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors
Energy Conversion Devices, Inc.
Troy, Michigan
We have audited the accompanying consolidated balance sheets of Energy
Conversion Devices, Inc. and subsidiary (the "Company") as of June 30, 1996 and
June 30, 1995, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended June 30, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Energy Conversion Devices, Inc.
and subsidiary as of June 30, 1996 and June 30, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Detroit, Michigan
September 28, 1996
-28-
29
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
------------------------------------
1996 1995
------------ -------------
CURRENT ASSETS (NOTE A)
Cash, including cash equivalents of
$23,769,000 as of June 30, 1996 and
$6,254,000 as of June 30, 1995 $ 23,773,742 $ 6,259,451
Investments 10,327,352 --
Accounts receivable (net of allowance for
uncollectible accounts of approximately
$29,000) 9,985,722 7,431,835
Amounts due from related parties 2,901,509 728,374
Inventories 3,275,135 2,054,750
Prepaid expenses and other current assets 362,558 208,160
------------ -------------
TOTAL CURRENT ASSETS 50,626,018 16,682,570
PROPERTY, PLANT AND EQUIPMENT (NOTE E)
Land and land improvements 312,588 312,588
Buildings and improvements 3,595,009 3,432,603
Machinery and other equipment 17,249,435 16,768,046
Capitalized lease equipment 5,802,806 5,731,936
------------ -------------
26,959,838 26,245,173
Less accumulated depreciation
and amortization (21,260,424) (20,482,363)
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 5,699,414 5,762,810
JOINT VENTURES (NOTE D)
United Solar -- --
GM Ovonic -- --
Sovlux -- --
OTHER ASSETS 804,007 885,639
------------ -------------
TOTAL ASSETS $ 57,129,439 $ 23,331,019
============ =============
See notes to consolidated financial statements.
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30
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
----------------------------------------
1996 1995*
-------------- --------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,911,122 $ 3,912,338
Amounts due to related parties -- 106,130
Salaries, wages and amounts withheld
from employees 1,175,102 986,420
Deferred revenues under business
agreements (NOTE A) 711,894 884,151
Current installments on capitalized lease
obligations and short-term debt (NOTE E) 1,302,973 1,482,846
-------------- ---------------
TOTAL CURRENT LIABILITIES 7,101,091 7,371,885
CAPITALIZED LEASE OBLIGATIONS (NOTE E) 1,853,728 3,012,079
DEFERRED GAIN (NOTE E) 686,351 1,149,011
NON-REFUNDABLE ADVANCE ROYALTIES
(NOTE C) 3,754,229 3,898,377
-------------- ---------------
TOTAL LIABILITIES 13,395,399 15,431,352
STOCKHOLDERS' EQUITY
Capital Stock (NOTES F and G)
Class A Convertible Common Stock,
par value $0.01 per share:
Authorized - 500,000 shares
Issued & outstanding - 219,913 shares 2,199 2,199
Common Stock, par value $0.01 per share:
Authorized - 15,000,000 shares
Issued & outstanding - 10,489,591
shares at June 30, 1996 and
8,078,667 shares at June 30, 1995 104,896 80,787
Additional paid-in capital 200,757,697 166,001,702
Accumulated deficit (157,130,752) (158,185,021)
-------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 43,734,040 7,899,667
-------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 57,129,439 $ 23,331,019
============== ===============
* Restated - See Note A.
See notes to consolidated financial statements.
-30-
31
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30,
-------------------------------------------------
1996 1995* 1994
----------- ----------- -----------
REVENUES (NOTES A and B)
Product sales $14,828,133 $10,298,019 $ 7,366,668
Royalties 1,321,117 1,205,036 228,630
Revenues from Research and Development
agreements 7,349,195 11,365,708 9,608,224
Revenues from license and other agreements 12,524,262 17,931,852 1,925,000
Other 1,289,667 543,143 228,853
----------- ----------- -----------
TOTAL REVENUES 37,312,374 41,343,758 19,357,375
EXPENSES
Cost of product sales 15,504,385 10,390,794 6,621,096
Cost of revenues from Research and
Development agreements 7,581,904 11,013,975 8,700,109
Product development and research (NOTE A) 9,151,167 4,636,158 2,670,842
Patent Defense (NOTE A) 2,467,295 2,625,000 --
Patents (NOTE A) 381,186 407,583 173,221
Operating, general and administrative 6,405,162 6,474,064 5,249,861
----------- ----------- -----------
TOTAL EXPENSES 41,491,099 35,547,574 23,415,129
----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (4,178,725) 5,796,184 (4,057,754)
OTHER INCOME (EXPENSE):
Gain on sale of Ovonic Battery Company stock 4,500,000 -- --
Interest expense (445,933) (545,738) (536,059)
Interest income 1,090,952 244,722 61,489
Other nonoperating income - net 87,975 110,496 639,668
----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 5,232,994 (190,520) 165,098
----------- ----------- -----------
NET INCOME (LOSS) $ 1,054,269 $ 5,605,664 $(3,892,656)
=========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (NOTE H) $ .10 $ .63 $ (.51)
=========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE ASSUMING FULL DILUTION
(NOTE H) $ .10 $ .56 $ (.51)
=========== =========== ===========
* Restated - See Note A.
See notes to consolidated financial statements.
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32
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (NOTES F and G)
Three years ended June 30, 1996
Class A Convertible
Common Stock Common Stock
------------------- -------------------
Number Number Additional Total
of of Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity (Deficit)
------- ---------- --------- --------- ------------ -------------- ---------------
Balance at June 30,
1993 219,913 $ 2,199 7,226,536 $ 72,265 $152,323,242 $(159,898,029) $ (7,500,323)
Net loss for year ended
June 30, 1994 (3,892,656) (3,892,656)
Canceled stock (8,484) (84) 84
Issuance of stock to
directors & consultants 31,148 311 195,973 196,284
Private placement of
common stock and warrants 308,500 3,085 6,263,475 6,266,560
Common stock issued in
connection with conversion
of OSMC Preferred Stock
and Convertible Investment
Certificates ("CICs") 5,524 55 (55)
------- ---------- ---------- -------- ------------ ------------- -----------
Balance at June 30, 1994 219,913 2,199 7,563,224 75,632 158,782,719 (163,790,685) (4,930,135)
Net income for year ended
June 30, 1995 5,605,664* 5,605,664*
Issuance of stock to directors
& consultants 3,733 38 87,275 87,313
Private placement of common stock
and warrants 175,000 1,750 2,667,425 2,669,175
Common stock issued in connection with
exercise of stock options 325,799 3,258 4,464,392* 4,467,650
Common stock issued in connection with
conversion of OSMC preferred stock
and CICs 10,911 109 (109)
------- ---------- ---------- -------- ------------ ------------- -----------
Balance at June 30, 1995 219,913 2,199 8,078,667 80,787 166,001,702* (158,185,021)* 7,899,667
Net income for year ended
June 30, 1996 1,054,269 1,054,269
Issuance of stock to directors
& consultants 6,899 69 59,395 59,464
Public Offering of common stock 1,650,000 16,500 27,764,555 27,781,055
Common stock issued in
connection with exercise of
stock options and warrants 753,950 7,539 6,932,046 6,939,585
Common stock issued in connection with
conversion of CICs 75 1 (1)
------- ---------- ---------- -------- ------------ ------------- -----------
Balance at June 30, 1996 219,913 $ 2,199 10,489,591 $104,896 $200,757,697 $(157,130,752) $43,734,040
======= ========== ========== ======== ============ ============= ===========
* Restated - See Note A.
See notes to consolidated financial statements.
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33
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
-----------------------------------------------
1996 1995* 1994
---- ----- ----
OPERATING ACTIVITIES:
Net income (loss) $ 1,054,269 $ 5,605,664 $(3,892,656)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 1,890,484 1,367,870 941,307
Gain on sale of Ovonic Battery stock (4,500,000)
Credit for uncollectible accounts receivable (388,000)
Non-cash revenue (330,000)
Creditable royalties (144,148) (392,430) (70,077)
Warrants issued to employees and consultants
for services rendered and employee stock options 453,000 2,053,000 318,350
Stock issued for services rendered 59,464 193,838 47,804
Loss on sale of equipment 52,429 2,062 1,683
Granting of license under option agreement (1,000,000)
Amortization of deferred gain (462,660) (254,329) (46,660)
Gain on disposition of investment in OIS (536,530)
Changes in working capital:
Accounts receivable and amounts due from
related parties (4,727,022) (5,719,477) (529,666)
Inventories (1,220,385) (1,630,640) (846)
Prepaid expenses and other current assets (72,765) 5,074 (173,361)
Accounts payable and accrued expenses 81,336 (69,049) 1,882,509
Deferred revenues under business agreements (172,257) 266,002 (819,533)
------------ ------------ -----------
NET CASH PROVIDED BY (USED IN) OPERATIONS (7,708,255) 1,097,585 (4,265,676)
------------ ------------ -----------
INVESTING ACTIVITIES:
Purchases of capital equipment (1,887,118) (1,138,972) (247,070)
Purchase of investments (10,327,352)
Proceeds from sale of capital equipment 7,600 1,256 568
Proceeds from disposition of investment in OIS -- -- 548,699
------------ ------------ -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (12,206,870) (1,137,716) 302,197
------------ ------------ -----------
FINANCING ACTIVITIES:
Principal payments under short-term and long-term debt
obligations and capitalized lease obligations (1,505,385) (2,043,340) (1,687,397)
Proceeds from capital lease transactions 167,161 1,250,000 --
Proceeds from sale of stock of subsidiary 4,500,000 -- --
Proceeds from sale of stock and exercise of stock options
and warrants 34,267,640 4,977,300 4,913,835
Proceeds from non-refundable advance royalties 225,000
------------ ------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 37,429,416 4,183,960 3,451,438
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 17,514,291 4,143,829 (512,041)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,259,451 2,115,622 2,627,663
------------ ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,773,742 $ 6,259,451 $ 2,115,622
============ ============ ===========
* Restated - See Note A.
See notes to consolidated financial statements.
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34
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30,
-----------------------------------------------------
1996 1995 1994
---- ---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 445,933 $ 612,094 $ 536,811
The Company's non-cash investing and financing
activities were as follows:
Sale and lease back of capitalized equipment
and deferred gain 1,250,000
Capitalized leased equipment and
capitalized lease obligations 1,646,741
Common stock issued for future services 182,855
Conversion of debt for sale of Ovonic Battery stock 1,000,000
See notes to consolidated financial statements.
-34-
35
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies
Nature of Business
Energy Conversion Devices, Inc. ("ECD") is engaged in the synthesis of
new materials and the development of advanced production technology and
innovative products with an emphasis on alternative energy and advanced
information processing technologies.
Financial Statement Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of ECD and
its 93.5%-owned subsidiary (97% as of June 30, 1995) Ovonic Battery Company,
Inc. ("Ovonic Battery"), a company formed to develop and commercialize ECD's
Ovonic NiMH battery technology (collectively, the "Company"). In the year
ended June 30, 1996, ECD sold approximately 3.3% of its interest in Ovonic
Battery to another entity and realized a gain on this sale. Due to cumulative
losses incurred by Ovonic Battery, no minority interest is recorded in the
consolidated financial statements.
ECD also has three investments accounted for by the equity method:
(i) United Solar Systems Corp. ("United Solar") (49.98%), ECD's photovoltaic
(solar energy) joint venture with Canon Inc. of Japan ("Canon"); (ii) Sovlux
Co. Ltd. ("Sovlux") (50%), ECD's Russian joint venture with State Research and
Production Enterprise Kvant ("Kvant"); and (iii) GM Ovonic L.L.C. ("GM Ovonic")
(40%), Ovonic Battery's joint venture with General Motors Corporation ("General
Motors") to manufacture and sell the Company's proprietary NiMH batteries for
electric vehicle applications worldwide. See Note D for a discussion of these
ventures.
Upon consolidation, all intercompany accounts and transactions are
eliminated.
Certain items for the years ended June 30, 1995 and 1994 have been
reclassified to be consistent with the classification of items in the year
ended June 30, 1996.
In preparing financial statements in conformity with Generally
Accepted Accounting Principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reported period. Actual
results could differ from those estimates. In addition, the Company has
certain concentrations of revenues as described in Note B. The Company is
impacted by other factors such as the continued receipt of contracts from the
U.S. government, its ability to protect and maintain the proprietary nature of
its technology, its
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36
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
continued product and technological advances and the strength and ability of
the Company's licensees and joint venture partners to commercialize the
Company's products and technologies.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets," which requires adoption of the disclosure
provisions no later than fiscal years beginning after December 15, 1995. The
new standard requires the impairment of property and intangibles to be
considered whenever evidence suggests a lack of comparability.
The Company has not yet adopted the new standard and has not
determined what impact, if any, it will have on net income and earnings per
share when it does adopt this new standard. Adoption of the new standard will
have no effect on the Company's cash flows.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which requires adoption of the disclosure provisions
no later than fiscal years beginning December 15, 1995 and adoption of the
recognition and measurement provisions for nonemployee transactions no later
than after December 15, 1995. The new standard defines a fair value method of
accounting for stock options and other equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service period, which is usually
the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" but would be required to disclose in a note to the
financial statements pro forma net income and, if presented, earnings per share
as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption.
The Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share should it elect
-36-
37
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
to make such a change. Adoption of the new standard will have no effect on the
Company's cash flows.
Cash Equivalents
Cash equivalents consist of investments in short-term, highly liquid
securities having a maturity of three months or less from the date of
acquisition.
Investments
Investments consist of commercial paper, classified as available for
sale, maturing in four to six months from date of acquisition and are stated at
cost, which approximates fair market value.
Financial Instruments
The Company considers the carrying value of its financial instruments
to be a reasonable estimate of fair value.
Translation Gains and Losses
Since all of the Company's contracts and transactions are denominated
and settled in U.S. dollars, there are no foreign currency gains or losses.
-37-
38
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Accounts Receivable
The following tabulation shows the component elements of accounts
receivable from long-term contracts and other programs:
June 30,
-------------------------------
1996 1995
----------- -----------
U.S. Government:
Amounts billed $ 743,482 $ 420,126
Unbilled 453,394 778,513
----------- -----------
Total 1,196,876 1,198,639
----------- -----------
Commercial Customers:
Amounts billed 2,768,736* 951,931*
Unbilled
- due per contracts 7,062,239** 5,231,818**
- other 1,222,173 741,612
----------- -----------
Total 11,053,148 6,925,361
----------- -----------
Other 666,412 65,414
Allowance for Uncollectible Accounts (29,205) (29,205)
----------- -----------
TOTAL $12,887,231 $ 8,160,209
=========== ===========
* Includes related-party (United Solar and GM Ovonic) amounts of $1,041,445
and $93,614, respectively.
** Includes related-party (United Solar and GM Ovonic) amounts of $1,860,064
and $634,760, respectively.
Unbilled receivables from commercial customers represent revenues
recognized for the present value of license payments to be received in future
periods. They also include revenues recognized on the percentage-of-completion
method of accounting related to machine-building contracts and amounts earned
under certain contracts, which amounts were billed in subsequent months.
Certain contracts with the U.S. government require a retention that is
paid upon completion of audit of the Company's indirect rates. There are no
material retentions at June 30, 1996 and 1995. Certain U.S. government
contracts remain subject to audit. Management does not believe that
adjustments which may result from an audit would be material to the financial
position or results of operations of the Company.
-38-
39
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Inventories
Inventories of raw materials, work in process and finished goods
for the manufacture of negative electrodes, hydride materials, battery packs
and other products, together with supplies, are valued at the lower of cost
(moving average) or market. Cost elements included in inventory are materials,
direct labor and manufacturing overhead. Cost of sales are removed from
inventory based on actual costs of items shipped to customers.
Inventories (principally those of Ovonic Battery) are as follows:
Years Ended June 30,
---------------------------------
1996 1995
----------- ------------
Finished products $ 263,525 $ 315,276
Work in process 1,902,396 910,582
Raw materials 1,075,401 793,569
Supplies 33,813 35,323
---------- ----------
$3,275,135 $2,054,750
========== ==========
Property, Plant and Equipment
All properties are recorded at cost. Plant and equipment are
depreciated on the straight-line method over the estimated useful lives of the
individual assets. The estimated lives of the principal classes of assets are
as follows:
Years
-----
Buildings and improvements 5 to 20
Machinery and other equipment 3 to 10
Capitalized lease equipment and
leasehold improvements 3 to 5
Capitalized lease equipment and leasehold improvements are amortized
over the shorter of the term of the lease or the life of the equipment or
improvement, usually three to five years. Accumulated amortization on
capitalized lease equipment as of June 30, 1996 and June 30, 1995 was
$2,064,000 and $1,461,000, respectively.
Costs of machinery and other equipment acquired or constructed for a
particular research and development project, which have no alternative future
use (in other research
-39-
40
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
and development projects or otherwise), are charged to product development and
research costs as incurred.
Expenditures for maintenance and repairs are charged to operations.
Expenditures for betterments or major renewals are capitalized and are
depreciated over their estimated useful lives.
Product Development and Research
Total direct product development and research costs, the majority of
which are included in cost of revenues from research and development agreements
("R&D agreements"), were $12,947,000, $11,962,000 and $8,285,000 for the three
years ended June 30, 1996, 1995 and 1994, respectively.
Patents
Patent expenditures are charged directly to expense. Total patent
expenditures, most of which are allocated for financial statement purposes to
cost of revenues from R&D agreements and product development and research, were
$945,000, $933,000 and $1,010,000 for the three years ended June 30, 1996,
1995 and 1994, respectively. Patent defense expenditures, which are incurred
by the Company to protect its patents and to pursue other companies who may be
infringing on the Company's patents, are charged directly to expense and were
$2,467,000 and $2,625,000 for the two years ended June 30, 1996 and 1995,
respectively. There were no patent defense expenditures in fiscal year 1994.
Product Sales
Product sales include battery-related materials (hydride materials and
Ovonic electrodes), contract revenues related to building of battery packs, and
revenues related to machine-building contracts. Revenues related to
machine-building contracts are recognized on the percentage-of-completion
method of accounting using the costs incurred to date as a percentage of the
total expected costs. All other product sales are recognized when the product
is shipped.
-40-
41
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Royalties
Most license agreements provide for the Company to receive royalties
from the sale of products which utilize the licensed technology. Typically,
the royalties are incremental to and distinct from the license fee and are
recognized as revenue upon the sale of the respective licensed product. In
several instances, the Company has received cash payments for non-refundable
advance royalty payments which are creditable against future royalties under
the licenses. Advance royalty payments are deferred and recognized in revenues
as the creditable sales occur, the underlying agreement expires, or when the
Company has demonstrable evidence that no additional royalties will be
creditable and, accordingly, the earnings process is completed.
Business Agreements
A substantial portion of revenues are derived through business
agreements seeking to develop and/or commercialize products based upon the
Company's proprietary technologies. Such agreements are of two types.
The first type of business agreement relates to licensing the
Company's proprietary technology. Licensing activities are tailored to provide
each licensee with the right to use the Company's technology, most of which is
patented, for a specific product application or, in some instances, for further
exploration of new product applications of such technologies. The terms of
such licenses, accordingly, are tailored to address a number of circumstances
relating to the use of such technology which have been negotiated between the
Company and the licensee. Such terms generally address whether the license
will be exclusive or nonexclusive, whether the licensee is limited to very
narrowly defined applications or to broader-based product manufacture or sale
of products using such technologies, whether the license will provide royalties
for products sold which employ such licensed technology and how such royalties
will be measured, as well as other factors specific to each negotiated
arrangement. In some cases, licenses relate directly to research and
development that the Company has undertaken pursuant to R&D agreements; in
other cases, they relate to product development and commercialization efforts
of the licensee and other agreements combine the efforts of the Company with
those of the licensee.
License agreement fees are generally recognized as revenue at the time
the agreements are consummated, which is the completion-of-the-earnings
process. Typically, such fees are non-refundable, do not obligate the Company
to incur any future
-41-
42
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
costs or require future performance by the Company and are not related to
future production or earnings of the licensee. License fees payable in
installments are recorded at the present value of the amounts to be received
taking into account the collectibility of the license fee. In some instances,
a portion of such license fees is contingent upon the commencement of
production or other uncertainties. In these cases, license fee revenues are
not recognized until commencement of production or the resolution of
uncertainties.
In the second type of business agreement, the Company conducts
specified research and development projects related to one of its principal
technology specializations for an agreed-upon fee ("R&D agreements"). Some of
these projects have stipulated performance criteria and deliverables whereas
others require "best efforts" with no specified performance criteria. Revenues
from R&D agreements that contain specific performance criteria are recognized
on a percentage-of-completion basis which matches the contract revenues to the
costs incurred on a project based on the relationship of costs incurred to
estimated total project costs. Revenue from R&D agreements, where there are no
specific performance terms, are recognized in amounts equal to the amounts
expended on the programs. Generally, the agreed-upon fees for R&D agreements
contemplate reimbursing the Company for costs considered associated with
project activities including expenses for direct product development and
research, patents, operating, general and administrative expenses and
depreciation. Accordingly, expenses related to R&D agreements are recorded as
cost of revenues from R&D agreements.
Other Operating Revenues
Other operating revenues consist principally of third-party service
revenue realized by certain of the Company's service departments, including the
Production Technology and Machine Building Division and Central Analytical
Laboratory.
Other Non-operating Income
Other non-operating income-net consists of rental income and gains and
losses on sale of fixed assets.
Restatement
As disclosed in the Form 10-K/A (Amendment No. 1) to the Form 10-K for
the year ended June 30, 1995, certain adjustments for 1995 were recorded
consisting of a non-cash charge to operations related to the extension of
certain stock options. The results for 1995 have been restated to reflect
those adjustments.
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE B - Royalties, Revenues from R&D Agreements and License and Other
Agreements
The Company has business agreements with third parties for which
royalties and revenues are included in the consolidated statements of
operations. A summary of the royalties and revenue from such agreements
follows:
Years Ended June 30,
-------------------------------------------
1996 1995 1994
---- ---- ----
Royalties:
Battery technology $ 1,149,198 $ 1,158,623 $ 158,553
Optical Memory 171,919 46,413 70,077
----------- ----------- ------------
$ 1,321,117 $ 1,205,036 $ 228,630
=========== =========== ============
Revenues from R&D agreements:
Photovoltaics
National Renewable Energy Laboratory ("NREL") $ 302,038 $ 1,550,171 $ 1,801,582
Department Of Energy ("DOE") 1,177,908 2,225,193 298,149
U.S. Trade & Development Agency and Industrial Partnering
Program ("IPP") 391,000 510,000
Battery technology
United States Advanced Battery Consortium ("USABC") 3,481,013 6,082,822 5,324,660
Automobile Manufacturer 342,390 157,610 1,050,000
National Aeronautic Space Admin./Small Business
Innovative Research ("NASA/SBIR") 410,111 209,889
Hitachi-Maxell, Ltd. ("Hitachi Maxell") 140,000
Microelectronics
Micron Technology, Inc./ARPA ("Micron-ARPA") 900,000
Other 181,000
Hydrogen
NREL 76,736 173,264
U.S. Advanced Research Projects Agency ("ARPA") 309,964
U.S. Army Missile Command 293,092 86,239 13,761
Other 151,790 266,826 415,919
----------- ----------- ------------
$ 7,349,195 $11,365,708 $ 9,608,224
=========== =========== ============
License and Other Agreements:
Battery
Asia Pacific Investment Co. ("APIC") $ 6,024,262
Group of battery manufacturers 1,500,000
Furukawa Battery Co., Ltd. ("Furukawa") 500,000
Sanoh Industrial Co., Ltd. Of Japan ("Sanoh") 3,000,000 500,000
Three consumer battery manufacturers 10,500,000
Eveready Battery Co. ("Eveready") 1,000,000
Walsin Technology Corp. ("Walsin") 3,500,000
Varta Batterie AG ("Varta") 250,000
GP Batteries International Ltd. ("GP Batteries") 767,176 1,425,000
Samsung Electronics Co. Ltd. ("Samsung") 209,676
Hitachi Maxell 330,000
Microelectronics
Micron Technology, Inc. ("Micron") 1,500,000 1,375,000
----------- ----------- ------------
$12,524,262 $17,931,852 $ 1,925,000
=========== =========== ============
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE B - Royalties, Revenues from R&D Agreements and License and Other
Agreements - (Continued)
The Company historically has entered into agreements with a relatively
small number of major customers throughout the world. Revenues from
unaffiliated foreign customers represent approximately 41%, 53% and 45% for the
years ended June 30, 1996, 1995 and 1994, respectively. There are two major
consumer battery manufacturers which represent 12% each, GP Batteries which
represents 11% and USABC which represents 15% of total revenue for the year
ended June 30, 1995. There are two major customers which represent a total of
27% (11% for GM Ovonic and 16% for APIC) of total revenue for the year ended
June 30, 1996.
NOTE C - Non-Refundable Advance Royalties
At June 30, 1996 and 1995, the Company deferred recognition of
revenues relating to non-refundable advance royalty payments. Non-refundable
advance royalties consist of the following:
June 30,
--------------------------------
1996 1995
---- ----
Battery:
Matshushita Battery Industrial Co., Ltd. $1,125,000 $1,125,000
Hitachi Maxell 355,189 355,189
Daido Steel Co. Ltd. 224,802 225,000
Optical Memory:
Matsushita Electric Industrial Co., Ltd. 933,818 1,061,862
Hitachi, Ltd. 685,700 685,700
Sony Corporation 360,000 360,000
Polaroid Corporation 50,000 50,000
Plasmon PLC 2,844 18,750
Toshiba Corporation 16,876 16,876
---------- ----------
$3,754,229 $3,898,377
========== ==========
During the years ended June 30, 1996 and 1995, $144,148 and $392,430,
respectively, of creditable royalties earned were recognized as revenue. There
are no obligations in connection with any of the advance royalty agreements
which require the Company to incur any additional costs.
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45
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures
The Company's investments in its joint ventures, United Solar, Sovlux
and GM Ovonic, are recorded at zero. The Company will continue to carry its
investment in each of these joint ventures at zero until the venture becomes
profitable, at which time the Company will start to recognize over a period of
years its share, if any, of the then equity of each of the ventures, and will
recognize its share of each venture's profits or losses on the equity method of
accounting.
Based upon the opinion of legal counsel, the Company believes that it
has no obligation to fund any losses that its joint ventures incur beyond the
Company's original investment. Additionally, the Company has no financial or
other guarantees with respect to liabilities incurred by its joint ventures.
United Solar
In 1990, ECD and Canon entered into a joint venture agreement for the
formation of United Solar. The agreement provided that United Solar would be
owned 49.98% by ECD, 49.98% by Canon, with the balance held by Mrs. Haru
Reischauer, a member of the Board of Directors of ECD. ECD has contributed to
United Solar a license in the field of photovoltaics, certain solar cell
manufacturing and photovoltaic research and development equipment, leasehold
improvements, furniture and fixtures, inventory and supplies. In return for
the contribution of these assets, ECD received 49.98% equity interest in United
Solar. In return for its 49.98% equity interest in United Solar, Canon has
invested $50,000,000.
In 1992, a memorandum of understanding was signed by Canon and ECD
stating that should United Solar require additional funding beyond what Canon
has already agreed to invest, Canon would assist United Solar in finding means
of raising funds to continue the expansion of United Solar's operations to
profitability which would not result in the dilution of ECD's interest in
United Solar.
ECD performed laboratory, shop, patent and research services for the
benefit of United Solar for which ECD received approximately $128,000, $68,000
and $39,000 in the years ended 1996, 1995 and 1994, respectively. ECD also
performed administrative services for the benefit of United Solar for which ECD
received approximately $23,000 and $44,000 in the years ended 1995 and 1994,
respectively. These amounts are included in other revenues. In addition, in
the years ended June 30, 1996 and 1995, United Solar billed ECD for
approximately $289,000 and $404,000, respectively, for work performed in
accordance with the DOE PV Bonus contract.
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
In 1995, ECD received a $7,565,000 order (subsequently amended to
$7,996,000) from United Solar for solar cell manufacturing equipment to provide
production capacity of solar cells capable of producing 5 Megawatts of
electricity on an annual basis. Through June 30, 1996, ECD received payments
of $6,694,500 relative to this order. Through June 30, 1996, the Company
recognized revenue of $7,548,000 and, at June 30, 1996, had a receivable of
$853,500.
The following sets forth certain financial data regarding United Solar
that are derived from United Solar's financial statements.
UNITED SOLAR STATEMENTS OF OPERATIONS
Six Months
Ended June 30, Year Ended December 31,
-------------- ---------------------------------
1996 1995 1994
---- ---- ----
(Unaudited)
Revenues
Product sales $ 2,620,981 $ 5,351,573 $ 4,777,112
Operating Expenses
Cost of sales 4,251,851 7,037,174 4,784,750
Research and development 1,030,162 2,000,611 2,023,619
General and administrative 924,082 1,610,158 2,604,646
Sales and marketing 802,214 1,594,228 1,683,038
------------- ------------- ------------
Total 7,008,309 12,242,171 11,096,053
------------- ------------- ------------
Other Income (Expense) 33,248 247,074 (3,879,541)
------------- ------------- ------------
Net Loss $ (4,354,080) $ (6,643,524) $(10,198,482)
============= ============= ============
UNITED SOLAR BALANCE SHEETS
June 30, December 31,
------------ ------------
1996 1995
---- ----
(Unaudited)
Current Assets:
Cash and Cash Equivalents $ 1,481,480 $ 468,421
Accounts Receivable - Trade 395,551 325,481
Accounts Receivable - NREL 217,810 263,777
Accounts Receivable - Stockholders 70,190 344,235
Inventory 2,257,458 2,348,165
Other Current Assets 332,002 285,918
------------ ------------
Total Current Assets 4,754,491 4,035,997
Property, Plant and Equipment (Net) 11,276,455 8,995,670
Other Assets 216,730 159,692
------------ ------------
Total Assets $ 16,247,676 $ 13,191,359
============ ============
Current Liabilities:
Short-term bank debt $ 14,375,565 $ 7,143,754
Accounts Payable - Trade & Stockholders 1,363,044 993,907
Accrued Expenses and Other 297,186 487,739
------------ ------------
Total Current Liabilities 16,035,795 8,625,400
------------ ------------
Total Stockholders' Equity 211,881 4,565,959
------------ ------------
Total Liabilities and Stockholders' Equity $ 16,247,676 $ 13,191,359
============ ============
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47
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
Sovlux
In 1990, ECD established Sovlux, a joint venture with State Research
and Production Enterprise ("Kvant") in Russia, to manufacture photovoltaic and
battery products and systems in the countries comprising the former U.S.S.R.
and sell them worldwide (except for Japan and India). Sovlux is owned 50% by
ECD and 50% by Kvant. In 1990, Kvant entered into machine-building contracts
with ECD for the construction of photovoltaic manufacturing equipment and
battery equipment. Kvant paid ECD a total of $10,450,000 for these
machine-building contracts. At June 30, 1993, ECD had completed these machines
and shipped them to Kvant.
The joint venture arrangements provide that Kvant contribute such
equipment in an installed and operational condition to the joint venture in
exchange for its 50% interest. ECD's contribution to the venture consists
solely of the technology necessary to support Sovlux's operations. No tangible
assets have been contributed to Sovlux by ECD. Through June 30, 1996, the
activities related to Sovlux have been limited to facility preparation at
certain Kvant facilities from which Sovlux will operate.
There are no financial statements available for Sovlux since the
December 31, 1993 financial statements.
GM Ovonic
In June 1994, Ovonic Battery and General Motors formed a joint venture
for the manufacture and commercialization of Ovonic NiMH batteries for electric
vehicles. General Motors has a 60% interest and Ovonic Battery has a 40%
interest in this joint venture. Ovonic Battery has contributed intellectual
property, licenses, production processes, know-how, personnel and engineering
services pertaining to Ovonic NiMH battery technology to the joint venture.
General Motors' contribution consists of operating capital, plant, equipment
and management personnel necessary for the volume production of batteries.
GM Ovonic is currently manufacturing production-intent batteries and
is conducting production scale-up engineering activities at a manufacturing
plant in Troy, Michigan.
In October 1995, the Company received a $3,700,000 order, as amended,
from GM Ovonic for battery manufacturing equipment. As of June 30, 1996, the
Company
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48
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
received payments of $1,786,000 under this order and recognized revenue of
$2,129,000. A receivable in the amount of $343,000 remains to be paid.
During the years ended June 30, 1996 and 1995, the Company had
revenues, including the aforementioned machine-building revenues, of $4,118,000
and $2,372,000, respectively, related to sales of products to GM Ovonic,
General Motors and related companies and for reimbursement of services
performed for General Motors and related companies.
The following sets forth certain financial data regarding GM Ovonic
derived from GM Ovonic's unaudited financial statements:
GM OVONIC STATEMENTS OF OPERATIONS
(000's)
Years Ended June 30,
-------------------------
1996 1995
---- ----
Revenues:
Sales $ 1,981 $ 610
Operating expenses
Cost of Sales / Experimental testing 4,847 2,133
Outside engineering support 625
General and administrative expenses 1,279 1,074
--------- --------
Total 6,751 3,207
--------- --------
Net Loss $ (4,770) $ (2,597)
========= ========
GM OVONIC BALANCE SHEETS
(000's)
June 30,
-----------------------------
1996 1995
--------- ---------
Current Assets:
Accounts receivable $ 1,500 $ 18
Property, plant and equipment 4,342 862
--------- ---------
TOTAL ASSETS $ 5,842 $ 880
========= =========
Current Liabilities:
Accounts payable $ 2,300 $ 313
--------- ---------
Total Current Liabilities 2,300 313
Notes Payable - Stockholders 12,915 3,536
Stockholders' (Deficit) (9,373) (2,969)
--------- ---------
Total Liabilities and Stockholders' (Deficit) $ 5,842 $ 880
========= =========
The Company has recorded its investment in GM Ovonic at zero, which
represents the net book value of the Company's assets transferred to GM Ovonic.
Additionally, the
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49
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
Company has made no financial or other guarantees with respect to liabilities
incurred by GM Ovonic. The Company will continue to carry its investment at
zero and will recognize over a period of years its share, if any, of the then
equity of GM Ovonic and will recognize its share of the venture's profits or
losses on the equity method of accounting.
NOTE E- Capitalized Lease Obligations
A summary of the Company's short-term borrowings, long-term debt and
capitalized lease agreements is as follows:
June 30,
-------------------------------
1996 1995
----------- -----------
Financing Lease for headquarters building with interest at
8.2% and monthly payments of $19,250 $ 720,383 $ 886,507
Capitalized leases with Financing for Science International
(with interest ranging between 5% and 13%) 2,290,948 3,489,462
Loan from U.S. Trade Development and Program, 0% interest
with entire amount due March 1996 -- 115,000
Other capitalized leases 145,370 3,956
----------- -----------
3,156,701 4,494,925
Less amounts included in current liabilities 1,302,973 1,482,846
----------- -----------
$ 1,853,728 $ 3,012,079
=========== ===========
Financing Lease
In 1990, the Company entered into a 10-year financing lease
transaction relating to certain buildings and land. The terms of the
transaction included an option for the Company to purchase the buildings and
land in the sixth year of the lease for $2,150,000, increasing 5% each year
thereafter. The Company has not exercised the option.
Capitalized Leases
In 1992, the Company entered into a third-party leasing arrangement
with Financing for Science International ("FSI") for the financing of certain
equipment. Ovonic Battery has financed equipment purchases for a total of
$8,600,000 through June 30, 1996. The terms of the agreement require repayment
over five years at an interest rate ranging between 5% and 13%.
The 1992 FSI agreement is secured by a security interest in the
Company's USABC contract and by Ovonic Battery's plant and equipment. In
addition, ECD has guaranteed Ovonic Battery's obligations under this agreement
and has provided a first security interest
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50
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE E - Capitalized Lease Obligations - (Continued)
to FSI in the Company's unencumbered plant and equipment. In connection with
this agreement, Ovonic Battery has assigned all receivables from GP Batteries'
purchase orders as additional collateral.
In 1994, the Company entered into a $1,250,000 sale and lease-back
transaction with FSI for a vapor barrier coating machine, with a net book value
of zero, at an interest rate of approximately 13%. The Company recorded a
deferred gain of $1,250,000 in the year ended June 30, 1995 and is amortizing
this deferred gain over the term of the lease. During the years ended June 30,
1996 and 1995, the Company amortized approximately $417,000 and $208,000,
respectively, of this deferred gain.
The Company has agreed to purchase certain equipment leased from FSI
upon expiration of the lease for 10% of its acquisition cost. For other
equipment, the Company has an option to purchase the equipment for its then
fair market value (but no less than 10% nor more than 20% of its acquisition
cost), plus any applicable sales, excise or other taxes imposed as a result of
such sale.
Other
The Company has operating lease agreements, principally for office and
research facilities and equipment. These leases, in some instances, include
renewal provisions at the option of the Company. Rent expense under such lease
agreements for the years ended June 30, 1996, 1995 and 1994 was approximately
$1,623,000, $941,000 and $431,000, respectively.
Future minimum payments on obligations under capital leases, other
long-term debt and noncancellable operating leases expiring in each of the five
years subsequent to June 30, 1996 are as follows:
Capital Leases Long-Term Debt Operating Leases
-------------- -------------- ----------------
1997 $1,353,622 $ 180,335 $1,666,146
1998 1,154,921 195,647 1,077,748
1999 219,320 212,257 440,584
2000 30,228 132,144 307,696
2001 10,076 -- 95,245
---------- --------- ----------
TOTAL 2,768,167 $ 720,383 $3,587,419
Less interest & taxes included above 331,849 ========= ==========
----------
Present value of minimum payments $2,436,318
==========
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51
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE F - Capital Stock
The voting rights of ECD's two classes of stock are as follows:
Class A Convertible Common Stock - 25 votes per share
Common Stock - one vote per share
The Class A Convertible Common Stock is automatically convertible into
Common Stock on a share-for-share basis on September 14, 1999 and is
convertible at the option of the holder any time prior to that date.
As part of an employment agreement among ECD, Ovonic Battery and Mr.
Ovshinsky, ECD granted Mr. Ovshinsky the right to vote the shares of Ovonic
Battery held by ECD following a change in control of ECD. For purposes of this
agreement, change in control means (1) any sale, lease, exchange or other
transfer of all or substantially all of ECD's assets; (2) the approval by ECD
stockholders of any plan or proposal of liquidation or dissolution of ECD; (3)
the consummation of any consolidation or merger of ECD in which ECD is not the
surviving or continuing corporation; (4) the acquisition by any person of 30%
or more of the combined voting power of the then outstanding securities having
the right to vote for the election of directors; (5) changes in the
constitution of the majority of the Board of Directors; (6) the holders of the
Class A Convertible Common Stock ceasing to be entitled to exercise their
preferential voting rights other than as provided in ECD's charter and (7)
bankruptcy. In the event of mental or physical disability or death of Mr.
Ovshinsky, the foregoing power of attorney and proxy shall be exercised by Mr.
Ovshinsky's wife, Dr. Iris Ovshinsky, a Vice President of ECD. The initial
term of the employment agreement is six years and shall be automatically
renewed every year thereafter unless terminated by the Company.
During the years ended June 30, 1996, 1995 and 1994, ECD issued
restricted shares of 6,899, 3,733 and 31,148 (of which 28,518 shares were
issued for future services), respectively, as compensation to employees,
consultants, contractors and directors. ECD recorded compensation expense for
the years ended June 30, 1996, 1995 and 1994 of $59,000, $48,000 and $48,000,
respectively, relating to these restricted shares of Common Stock.
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52
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock
The Company has Common Stock reserved for issuance as follows:
Number of Shares
------------------------------
June 30, 1996 June 30, 1995
------------- -------------
Conversion of Class A Convertible Common Stock 219,913 219,913
Stock options 3,287,973 3,859,802
1999 Private Placement Warrants 174,966 272,466
Warrants issued in connection with services rendered 239,000 200,000
CICs 6,233 6,308
--------- ---------
TOTAL RESERVED SHARES 3,928,085 4,558,489
========= =========
Stock Option Plans
The Company's 1976 Amended and Restated Stock Option Plan (the
"Amended Plan"), 1987 Stock Option and Incentive Plan ("1987 Stock Option
Plan") and the 1995 Non-Qualified Stock Option Plan ("1995 Stock Option Plan")
authorize the granting of stock options at such exercise prices and to such
employees, consultants and other persons as the Compensation Committee
appointed by the Board of Directors (the "Compensation Committee") shall
determine. All three stock option plans are administered by the Compensation
Committee.
Options under the Amended Plan and the 1987 Stock Option Plan expire
six years from the date of grant (five years in the case of Incentive Stock
Options as defined under Section 422A of the Internal Revenue Code granted to
persons owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company). Options under the 1995 Stock
Option Plan expire no later than 10 years from the date of grant. Stock
options under all three plans may not be exercised during the first six months
of the grant. Thereafter, options may be exercised cumulatively each year,
starting at the end of six months after grant of the option, at a predetermined
rate of the number of shares of the Common Stock subject to the option. The
exercise price of all options granted has been equal to the fair market value
of the Common Stock at the time of grant.
The purchase price and number of shares covered by the options are
subject to adjustment under certain circumstances to protect the option holders
against dilution.
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53
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
A summary of the transactions during the years ended June 30, 1996,
1995 and 1994 with respect to the Company's Amended Plan, 1987 Stock Option
Plan and 1995 Stock Option Plan follows:
1996 1995 1994
----------------------- ------------------------ --------------------
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
---------- ------- --------- ------- --------- -------
Outstanding July 1 2,422,646 $10.42 1,043,311 $ 6.68 1,101,938 $ 8.05
Granted 358,190 17.71 1,646,535 12.23 94,630 7.76
Exercised 650,650 8.46 264,299 6.96 - -
Canceled 330 11.75 2,901 6.31 153,257 17.22
---------- ------ --------- ------ --------- ------
Outstanding June 30 2,129,856 $12.24 2,422,646 $10.42 1,043,311 $ 6.68
========== ====== ========= ====== ========= ======
Exercisable June 30 1,046,438 $10.79 873,458 $ 8.02 669,981 $ 6.38
========== ====== ========= ====== ========= ======
In November 1993, stock options to purchase 94,367 shares of Common
Stock held by Stanford R. Ovshinsky, and stock options to purchase 49,630
shares of Common Stock held by Dr. Iris M. Ovshinsky, issued under the
aforementioned Amended Plan, were canceled and new stock options, covering
150,000 (adjusted to 211,287 as of June 30, 1996) shares of Common Stock in the
case of Mr. Ovshinsky and 100,000 shares (adjusted to 140,519 as of June 30,
1996) of Common Stock in the case of Dr. Ovshinsky, were granted by ECD. The
stock options canceled had an average exercise price of approximately $18.00
per share. The weighted average exercise price of the outstanding stock
options is $10.14 per share. The number of stock options are adjusted pursuant
to the antidilution provisions of the stock option grants. The weighted
average price was arrived at based upon (i) the option price of $7.00 per share
for the original number of shares and any additional shares as adjusted for the
antidilution provisions during the 18-month period following the grant; and
(ii) thereafter, the fair market value of any additional shares as adjusted for
the antidilution provisions, determined quarterly.
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54
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
In February 1995, the Compensation Committee of the Board of Directors
extended the exercise period of certain stock options granted in March 1989.
These options were extended on the same terms and conditions, including
continuation of the exercise price at fair market value. The Committee
extended the options in order to afford the holders of said options the
six-year exercise period which had previously been interrupted for a period of
time due to the Company's inability to issue registered shares upon exercise of
options.
Subsequent to the issuance of the Company's 1995 financial statements,
it was determined that, in accordance with generally accepted accounting
principles, the difference between the aggregate exercise price and the fair
market value of the Company's stock at February 1995, totaling $1,600,000,
should be recorded as a non-cash charge to operations.
Warrants
ECD has outstanding warrants to purchase 174,966 shares of Common
Stock in connection with private placements of Common Stock as well as warrants
to purchase 239,000 shares of Common Stock in connection with services
rendered. The warrants are currently exercisable at a weighted average price
of $10.45 per share. The exercise price of certain of the warrants may be
reduced in the future pursuant to certain antidilution provisions.
The Company recognized expenses and additional paid-in capital of
$318,350 for the year ended June 30, 1994, based on an independent appraisal of
ECD warrants and Ovonic Battery stock options.
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55
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE H - Net Income (Loss) Per Share
The Company uses the treasury stock method to calculate primary and
fully-diluted earnings per share. Common stock equivalents consist of stock
options and warrants. Weighted average number of shares outstanding and primary
earnings per share for the three years ended June 30 are computed as follows:
1996 1995 1994
----------- ---------- -----------
Weighted average number of shares outstanding 9,370,841 8,003,742 7,637,660
Pro Forma weighted average shares for Common
Stock Equivalents 1,515,067 886,020 0
----------- ---------- -----------
AVERAGE NUMBER OF SHARES OUTSTANDING
AND EQUIVALENTS 10,885,908 8,889,762 7,637,660
=========== ========== ===========
Net income (loss) $ 1,054,269 $5,605,664* $(3,892,656)
EARNINGS (LOSS) PER SHARE $ .10 $ .63 $ (.51)
=========== ========== ===========
* Restated
The primary and fully-diluted earnings per share for fiscal year 1996
are the same since the ending market value of ECD Common Stock at June 30, 1996
bof $22.75 per share approximates the average market value per share of ECD
Common Stock of $20.23 during fiscal year 1996. The use of the ending market
value of $22.75 per share results in a slightly higher pro forma weighted
average number of shares for common stock equivalents for purposes of
fully-diluted earnings per share; however, it does not result in a different
earnings per share compared to primary earnings per share.
The difference between the primary earnings per share and the
fully-diluted earnings per share for fiscal 1995 is the result of using the
ending market value of $16.375 per share versus the average market value of
$13.56. This results in pro forma weighted average shares for common stock
equivalents of 1,938,977 and a fully-diluted earnings per share of $.56.
NOTE I - Federal Taxes on Income
At June 30, 1996 and 1995, the Company has approximately $35,639,000
and $34,821,000, respectively, of net deferred tax assets, consisting primarily
of $33,782,000 and $32,772,000, respectively, due to net operating loss
carryforwards, $1,857,000 and $2,049,000, respectively, due to tax credit
carryforwards. However, a valuation reserve
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE I - Federal Taxes on Income - (Continued)
of the same amount is required due to the Company's operating history and
uncertainty regarding the future realizability of the net operating loss
carryforwards.
The Company's valuation reserve was increased by $818,000 in 1996 and
decreased by $505,000 in 1995 for the impact of the 1996 and 1995 net operating
income (losses), temporary differences and the expiration of tax.
At June 30, 1996, the Company's remaining net tax operating loss
carryforwards and tax credit carryforwards expire as follows:
Net Tax Operating Investment Tax R & D Credit
Loss Carryforward Credit Total Carryforward
----------------- -------------- ------------
1997 1,805,000 88,000 69,000
1998 3,360,000 10,000 436,000
1999 5,395,000 40,000 202,000
2000 8,767,000 172,000 813,000
2001 23,828,000 27,000
2002 15,900,000
2003 17,460,000
2004 1,378,000
2005 --
2006 7,075,000
2007 2,854,000
2008 1,802,000
2009 4,304,000
2010 --
2011 5,431,000
----------- -------- -----------
$99,359,000 $337,000 $ 1,520,000
=========== ======== ===========
NOTE J - Related Party Transactions
For the three years ended June 30, 1996, 1995 and 1994, ECD incurred
expenses of $90,514, $36,440 and $135,865, respectively, for services rendered
by its directors (and/or their related companies).
For related party transactions involving United Solar and GM Ovonic
see Note D.
NOTE K - Business Segments
The Company has two business segments, its subsidiary, Ovonic Battery,
and the parent company, ECD. Ovonic Battery is primarily involved in
developing and commercializing battery technology. ECD is primarily involved
in photovoltaics,
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE K - Business Segments - (Continued)
microelectronics and machine building. General corporate expenses, interest
expense and interest income are classified in the ECD business segment.
The Company's operations by business segment were as follows:
Financial Data by Business Segment
(in thousands)
Ovonic Battery ECD Consolidated
-------------- ------- ------------
Revenues
Year ended June 30, 1996 $26,946 $10,366 $37,312
Year ended June 30, 1995 31,945 9,399 41,344
Year ended June 30, 1994 16,185 3,172 19,357
Operating Income(Loss)
Year ended June 30, 1996* $(2,258) $(1,921) $(4,179)
Year ended June 30, 1995** 9,356 (3,560) 5,796
Year ended June 30, 1994 849 (4,907) (4,058)
Depreciation and Amortization Expense
Year ended June 30, 1996 $ 811 $ 1,079 $ 1,890
Year ended June 30, 1995 640 728 1,368
Year ended June 30, 1994 690 251 941
Capital Expenditures
Year ended June 30, 1996 $ 915 $ 972 $ 1,887
Year ended June 30, 1995 859 280 1,139
Year ended June 30, 1994 48 199 247
Identifiable Assets
Year ended June 30, 1996 $17,501 $39,628 $57,129
Year ended June 30, 1995 13,056 10,275 23,331
Year ended June 30, 1994 5,566 4,929 10,495
* Includes intercompany interest of $432 (for the period from April 1, 1996 to
June 30, 1996) charged by ECD to Ovonic Battery in accordance with the
agreements between the parties.
** Restated.
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ITEM 9: CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The composition of the Board of Directors of the Company is as follows:
Director
of the
Company Principal Occupation and
Name Since Office Business Experience
---- --------- ------ -------------------
Stanford R. Ovshinsky 1960 President, Mr. Ovshinsky, 73, the
Chief founder and Chief Executive
Executive Officer of the Company, has
Officer been an executive officer and
and Director of the Company since
Director its inception in 1960.
Mr. Ovshinsky is the primary
inventor of the Company's
technology. Mr. Ovshinsky
also serves as: the Chief
Executive Officer of Ovonic
Battery; a member of the
Board of Managers of GM
Ovonic; a director of United
Solar; and Co-Chairman of the
Board of Directors of Sovlux.
Mr. Ovshinsky is the husband
of Dr. Iris M. Ovshinsky.
Iris M. Ovshinsky 1960 Vice President Dr. Ovshinsky, 69,
and Director co-founder and Vice President
of the Company, has been an
executive officer and Director
of the Company since its
inception in 1960. Dr.
Ovshinsky also serves as a
director of Ovonic Battery.
Dr. Ovshinsky is the wife of
Stanford R. Ovshinsky.
Robert C. Stempel 1995 Chairman of Mr. Stempel, 63, is Chairman
the Board, of the Board and Executive
Executive Director of the Company.
Director Prior to his election as a
and Director Director in December 1995,
Mr. Stempel served as senior
business and technical
advisor to Mr. Ovshinsky.
Mr. Stempel is also the
Chairman of Ovonic Battery
and serves on the Board of
Managers of GM Ovonic. From
1990 until his retirement in
1992, he was the Chairman and
Chief Executive Officer of
General Motors Corporation.
Prior to serving as Chairman,
he had been President since
1987. Mr. Stempel serves on
the Board of Directors of NBD
Bank, N.A. Mr. Stempel
serves on the Company's Audit
Committee.
Nancy M. Bacon 1977 Senior Vice Mrs. Bacon, 50, joined the
President-- Company in 1976 as its Vice
Government President of Finance and
Contracts Treasurer. Mrs. Bacon became
and the Senior Vice President--
International Government Contracts and
Projects International Projects of the
and Company in 1993. Mrs. Bacon
Director also serves on the Boards of
Directors of Sovlux and
United Solar.
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Umberto Colombo 1995 Director Prof. Colombo, 68, is
Chairman of the Scientific
Councils of the ENI Enrico
Mattei Foundation and of the
Instituto Per l'Ambiente in
Italy. He was Chairman of
the Italian National Agency
for New Technology, Energy
and the Environment until
1993 and then served as
Minister of Universities and
Scientific and Technological
Research in the Italian
Government until 1994. Prof.
Colombo is also active as a
consultant in international
science and technology policy
institutions related to
economic growth.
Jack T. Conway 1980 Director Mr. Conway, 78, is President
and Chief Executive Officer
of the Community Housing
Corporation of Sarasota.
From 1985 to 1990, Mr. Conway
was a trustee of the Aspen
Institute. Mr. Conway was
also formerly a management
consultant to the Company.
Mr. Conway serves on the
Audit and Compensation
Committees of the Board.
Hellmut Fritzsche 1969 Vice President Dr. Fritzsche, 69, was a professor
and Director of Physics at the University of
Chicago, from 1957 until his
retirement in 1996. He was also
Chairman of the Department of
Physics, the University of Chicago,
until 1986. Dr. Fritzsche has been
a Vice President of the Company
since 1965, acting on a part-time
basis, chiefly in the Company's
research and product development
activities. Dr. Fritzsche also
serves on the Board of Directors of
United Solar.
Joichi Ito 1995 Director Mr. Ito, 30, is President of
Eccosys, Ltd. and Digital
Garage KK as well as
President and Representative
Director of PSI Japan KK. He
is an expert on new computer
technology and networked
information systems and
writes and lectures
extensively in the United
States, Japan and Europe.
Mr. Ito serves as a director
and consultant to many
companies in the field of
information technology.
Walter J. McCarthy, Jr. 1995 Director Mr. McCarthy, 71, until his
retirement in 1990, was the
Chairman and Chief Executive
Officer of Detroit Edison
Company. Mr. McCarthy has
served as a consultant to the
Company since 1990. Until
1995, Mr. McCarthy also
served on the Boards of
Comerica Bank, Detroit Edison
Company and Federal-Mogul
Corporation. Mr. McCarthy is
a member of the National
Academy of Engineering. He
serves on the Audit and
Compensation Committees of
the Board.
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61
Florence I. Metz 1995 Director Dr. Metz, 67, until her retirement
in 1996, held various executive
positions with Inland Steel
Company: General Manager, New
Ventures, Inland Steel Company
(1989-1991); General Manager, New
Ventures, Inland Steel Industries
(1991-1992) and Advanced Graphite
Technologies (1992-1993); Program
Manager for Business and Strategic
Planning at Inland Steel (1993-
1996). Dr. Metz also serves on the
Board of Directors of Ovonic
Battery and is a member of the
Company's Compensation Committee.
Haru Reischauer 1990 Director Mrs. Reischauer, 81, was initially
appointed as a Director to fill the
unexpired term of Edwin O.
Reischauer (former U.S. Ambassador
to Japan) after his death in
September 1990, and was re-elected
to the Board of Directors in 1992.
Mrs. Reischauer also serves on the
Board of Directors of United
Solar. She is an author and
lecturer.
Nathan J. Robfogel 1990 Director Mr. Robfogel, 61, was, until his
retirement in 1996, a partner with
the law firm of Harter, Secrest &
Emery, which he joined in 1959.
Mr. Robfogel is currently Vice
President for University Relations
of the Rochester Institute of
Technology where he has been a
trustee since 1985. From 1989 to
1995, Mr. Robfogel served as
Chairman of the Board of Directors
of the New York State Facilities
Development Corporation, a public
benefit corporation.
Stanley K. Stynes 1990 Director Dr. Stynes, 64, was Dean of the
College of Engineering at Wayne
State University from 1970 to
August 1985, and a Professor of
Engineering at Wayne State
University from 1985 until his
retirement in 1992. He has been
involved in various administrative,
teaching, research and related
activities. Dr. Stynes serves as
Chairman of the Audit Committee
of the Board of Directors of the
Company.
***
Mr. Ralph F. Leach served as Chairman of the Board of Directors from 1977
to 1995 and was appointed Chairman Emeritus in December 1995. Until his
retirement in December 1977, Mr. Leach was for more than five years Chairman of
the Executive Committee of J.P. Morgan & Co. and Morgan Guaranty Trust Company
of New York, institutional bankers, and is presently a member of that company's
Directors' Advisory Council.
Dr. Robert R. Wilson, served as a director to the Company from 1978 to 1993
and was appointed Director Emeritus in January 1994. Until his retirement in
1978 Wilson was the founder and the director for more than ten years of the
Fermi National Accelerator Laboratory. He was formerly President of the American
Physical Society. Since retirement, Dr. Wilson has been a Professor Emeritus of
physics at Cornell University, Columbia University and the University of
Chicago.
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62
The executive officers of the Company are as follows:
Name Age Office Served As An
---- --- ------ Executive
Officer or
Director Since
--------------
Stanford R. 73 President, Chief 1960(1)
Ovshinsky Executive Officer and
Director
Iris M. 69 Vice President and 1960(1)
Ovshinsky Director
Robert C. 63 Executive Director 1995
Stempel and Director
Nancy M. 50 Senior Vice 1976
Bacon President-Government
Contracts and
International
Projects and Director
Hellmut 69 Vice President and 1969
Fritzsche Director
Subhash K. 45 President and Chief 1986
Dhar Operating Officer of
Ovonic Battery
Kenneth A. 55 Acting Chief 1993
Pullis Financial Officer and
Treasurer
---------------
(1) The predecessor of the Company was originally founded in 1960.
The present corporation was incorporated in 1964 and is the
successor by merger of the predecessor corporation.
See above for information relating to Stanford R. Ovshinsky,
Iris M. Ovshinsky, Robert C. Stempel, Nancy M. Bacon and Hellmut
Fritzsche.
Subhash K. Dhar joined the Company in 1981 and has held various
positions with Ovonic Battery since its inception in October 1982.
Mr. Dhar has served as Chief Operating Officer of Ovonic Battery
since 1986 and President since 1987.
Kenneth A. Pullis joined the Company in 1982 as Controller. Mr.
Pullis was elected Acting Chief Financial Officer and Treasurer of
the Company in August 1993.
ITEM 11: EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by the
Company during its last three fiscal years to its Chief Executive
Officer and each of its other four most highly compensated executive
officers for the fiscal year ended June 30, 1996.
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SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
------------ --------------------------
All
Restricted Options Other
Name and Principal Fiscal Stock (Number Compen-
Position Year(1) Salary(2) Bonus Award Of Shares) sation(3)
- ------------------ ------- --------- ----- ----- --------- ---------
Stanford R. Ovshinsky, 1996 $267,800 $90,741 -- $ 10,017
President and Chief 1995 $256,567 -- 294,957(5) $ 8,798
Executive officer(4) 1994 $229,615 -- 153,369(5) $ 8,122
Iris M. Ovshinsky, 1996 $255,004 -- $ 5,726
Vice President 1995 $153,846 196,888 $ 4,726
1994 $134,712 102,246 $ 3,457
Robert C. Stempel, 1996 $125,008 $50,312 125,000 $ 3,159
Executive Director (6) 1995 -- 179,000 --
1994 -- 35,000 --
Nancy M. Bacon, 1996 $235,472 25,000 $ 5,794
Senior Vice 1995 $225,000 160,200 $ 4,879
President--Government 1994 $156,884 -- $ 3,748
Contracts and International
Projects
Subhash K. Dhar, 1996 $209,503 $15,000 62,040 $ 5,283
President and Chief 1995 $165,769 -- 3,980 $ 4,267
Operating Officer of 1994 $123,461 -- 24,530 $ 420
Ovonic Battery
- ---------------
(1) The Company's fiscal year is July 1 to June 30. The Company's
1996 fiscal year ended June 30, 1996.
(2) Amounts shown include compensation deferred under the Company's
401 (k) Plan. Does not include taxable income resulting from
exercise of stock options.
(3) "All Other Compensation" is comprised of (i) contributions made
by the Company to the accounts of each of the named executive
officers under the Company's 401(k) Plan with respect to each of
the fiscal years ended June 30, 1996, 1995 and 1994,
respectively, as follows: Dr. Ovshinsky $2,500, $1,500 and $231;
Mrs. Bacon $4,500, $4,096 and $2,965; Mr. Dhar $4,500 (1996) and
$3,808 (1995); (ii) the dollar value of any life insurance
premiums paid by the Company in the fiscal years ended June 30,
1996, 1995 and 1994, respectively, with respect to term-life
insurance for the benefit of each of the named executives as
follows: Mr. Ovshinsky $10,017, $8,798 and $8,122; Dr.
Ovshinsky $3,226 for each of the three fiscal years; Mr.
Stempel $3,159 (1996); Mrs. Bacon $1,294 for 1996 and $783 for
each of 1995 and 1994; and Mr. Dhar $783, $459 and $420. Under
the 401 (k) Plan, which is a qualified defined-contribution
plan, the Company makes matching contributions periodically on
behalf of the participants in the amount of 50% of each
such participant's contributions. These
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64
matching contributions are limited to 3% of a participant's
salary, up to $150,000 for 1996. Prior to October 1994, the
matching contributions were limited to 2% of a participant's salary.
(4) In September 1993, Mr. Ovshinsky entered into separate
employment agreements with the Company and Ovonic Battery. See
"Employment Agreements." The amounts indicated include
compensation received by Mr. Ovshinsky pursuant to the
Employment Agreements with the Company and Ovonic Battery.
(5) Does not include option to purchase shares of Ovonic Battery.
See "Employment Agreements."
(6) Mr. Stempel joined the Company in December 1995. The salary
reported is for the six month period January 1996 - June 1996.
Options indicated for 1994 and 1995 were granted to Mr. Stempel
prior to his becoming an executive officer of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the named
executive officers during the fiscal year ended June 30, 1996.
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(1)
----------------------------------------------------------------- -----------------------------
% of Total
Options
Options Granted Exercise
Granted to Employees Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 0% 5% 10%
- ---------------- ------- -------------- ------ ---------- ------------------------------------
Stanford R. - - - - - - -
Ovshinsky
Iris M. Ovshinsky - - - - - - -
Robert C. 50,000 $15.75 12/19/2005 - $495,254 $1,255,072
Stempel 50,000 $20.125 3/12/2006 - $632,825 $1,603,703
25,000 $23.00 6/25/2006 - $361,614 $ 916,401
-------
125,000 35.39%
Nancy M. Bacon 25,000 7.07% $20.125 3/12/2006 - $316,412 $ 801,851
Subhash K. Dhar 62,040 17.56% $16.75 9/1/2005 - $653,528 $1,656,169
- ---------------
(1) The potential realizable value amounts shown illustrate the
values that might be realized upon exercise immediately prior to
the expiration of their term using 5% and 10% appreciation rates
as required to be used in this table by the Securities and
Exchange Commission, compounded annually, and are not intended
to forecast possible future appreciation, if any, of the
Company's stock price. Additionally, these values do not take
into consideration the provisions of the options providing for
nontransferability or termination of the options following
termination of employment.
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65
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 1996 and the number and value
of unexercised options held by the named executive officers at fiscal year end.
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised in-the-Money Options
on Exercise Realized Options at Fiscal Year End at Fiscal Year End
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- -------- -------------------------- -------------------------
Stanford R. Ovshinsky(1) - - 359,270/146,974 $3,200,752/$1,583,720
Iris M. Ovshinsky(2) 15,000 $132,500 219,275/103,132 $1,914,020/$1,110,544
Robert C. Stempel(3) - - 117,100/207,900 $1,229,012/$1,482,612
Nancy M. Bacon (4) 12,000 $168,156 152,380/110,620 $2,072,547/$984,227
Subhash K. Dhar (5) 46,862 $583,046 24,816/44,112 $145,794/$311,299
- ---------------
(1) Mr. Ovshinsky's exercisable and unexercisable options are
exercisable at a weighted average price of $10.83 per share and
$11.85 per share, respectively.
(2) Dr. Ovshinsky's exercisable and unexercisable options are
exercisable at a weighted average price of $10.75 per share and
$11.86 per share, respectively.
(3) Mr. Stempel's exercisable and unexercisable options are
exercisable at a weighted average price of $12.13 and $15.54 per
share, respectively.
(4) Mrs. Bacon's exercisable and unexercisable options are
exercisable at a weighted average price of $9.82 per share and
$13.73 per share, respectively.
(5) Mr. Dhar's exercisable and unexercisable options are exercisable
at a weighted average price of $15.57 per share and $16.75 per
share, respectively.
EMPLOYMENT AGREEMENTS
On September 2, 1993, Stanford R. Ovshinsky entered into
separate employment agreements with each of the Company and Ovonic
Battery in order to define clearly his duties and compensation
arrangements and to provide to each company the benefits of his
management efforts and future inventions. The initial term of each
employment agreement is six years. Mr. Ovshinsky's employment
agreement with the Company provides for an annual salary of not less
than $100,000, while his agreement with Ovonic Battery provides for
an annual salary of not less than $150,000. Both agreements provide
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for annual increases to reflect increases in the cost of living, discretionary
annual increases as determined by the Board of Directors of the Company and an
annual bonus equal to 1% of the net income from operations of the Company
(excluding Ovonic Battery) or Ovonic Battery.
Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
provides for a right to vote the shares of Ovonic Battery held by the Company
following a change in control of the Company. For purposes of the agreement,
change in control means (i) any sale, lease, exchange or other transfer of all
or substantially all of the Company's assets; (ii) the approval by the
Company's stockholders of any plan or proposal of liquidation or dissolution of
the Company; (iii) the consummation of any consolidation or merger of the
Company in which the Company is not the surviving or continuing corporation;
(iv) the acquisition by any person of 30 percent or more of the combined voting
power of the then outstanding securities having the right to vote for the
election of directors; (v) changes in the constitution of the majority of the
Board of Directors; (vi) the holders of the Class A Common Stock ceasing to be
entitled to exercise their preferential voting rights other than as provided in
the Company's charter and (vii) bankruptcy. In the event of mental or physical
disability or death of Mr. Ovshinsky, the foregoing power of attorney and proxy
will be exercised by Dr. Iris M. Ovshinsky.
Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky was
granted stock options, exercisable at a price of $16,216 per share to purchase
185 shares (adjusted from a price of $50,000 per share to purchase 60 shares
pursuant to the anti-dilution provisions of the option agreement) of Ovonic
Battery's common stock, representing approximately 6% of Ovonic Battery's
outstanding common stock. The Ovonic Battery stock options will vest on a
quarterly basis over six years commencing with the quarter beginning October 1,
1993, subject to Mr. Ovshinsky's continued performance of his obligations to
Ovonic Battery under his employment agreement. Vesting of the stock options
will accelerate in the event of Mr. Ovshinsky's death, mental or physical
disability or termination of employment without cause and in the event of a
change in control of the Company.
COMPENSATION OF DIRECTORS
Directors who are neither employees of the Company nor otherwise
compensated by the Company are issued approximately $5,000 per year in the
Company's Common Stock based on the closing bid price of Common Stock on the
first business day of each year. Furthermore, as of April 18, 1996, directors
who are not employees of the Company receive $500 for each Board meeting
attended (in person or via telephone conference call) as well as $500 for each
committee meeting if not coincident with a Board meeting. Directors are
also reimbursed for all expenses incurred for the purpose of attending board of
directors and committee meetings, including airfare, mileage, parking,
transportation and hotel.
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COMPENSATION COMMITTEE REPORT
ORGANIZATION AND COMPENSATION COMMITTEE.
During the fiscal year ended June 30, 1996, the Compensation Committee
was composed of Mr. Conway, Mr. McCarthy and Dr. Metz. None of the Compensation
Committee members are or were during the last fiscal year an officer or
employee of the Company or any of its subsidiaries, or had any business
relationship with the Company or any of its subsidiaries.
The Compensation Committee is responsible for administering the
policies which govern both annual compensation of executive officers and the
Company's stock option plans. The Compensation Committee meets several times
during the year to review recommendations from management regarding stock
options and compensation. Compensation and stock option recommendations are
based upon performance, current compensation, stock option ownership, and years
of service to the Company. The Company does not have a formal bonus program
for executives, although it has awarded bonuses to its executives from time to
time.
BASE SALARY.
The Compensation Committee considers the Company's financial position and
other factors in determining the compensation of its executive officers. These
factors include remaining competitive within the relevant hiring
market--whether scientific, managerial or otherwise--so as to enable the
Company to attract and retain high quality employees, and, where appropriate,
linking a component of compensation to the performance of the Company's Common
Stock--such as by a granting of stock option or similar equity-based
compensation--to instill ownership thinking and align the employees' and
stockholders' objectives.
STOCK OPTIONS.
Stock option grants to Mr. Stempel, Mrs. Bacon and Mr. Dhar were made
by the Compensation Committee in accordance with the Compensation Committee's
evaluation of their contributions to the Company and years of service. See
"Option Grants in Last Fiscal Year." While Mr. Ovshinsky and Mr. Stempel
participate in formulating the recommendation of management regarding the grant
of stock options, neither one participates in the deliberations of the
Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION.
During the Company's fiscal year ended June 30, 1994, several changes
were made in the compensation arrangements between the Company and its Chief
Executive Officer, Stanford R. Ovshinsky. The principal purpose of these
changes was to recognize
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68
Mr. Ovshinsky's significant past and current contributions to the
Company. The Compensation Committee believes these changes were appropriate in
light of Mr. Ovshinsky's primary role in implementing the Company's strategic
plan and the absence of any material increases in Mr. Ovshinsky's cash or other
compensation during the Company's preceding six fiscal years.
In September 1993, Mr. Ovshinsky entered into separate
employment agreements with each of the Company and Ovonic Battery. The
purpose of these agreements, which provide for the payment to Mr. Ovshinsky of
an annual salary of not less than $100,000 by the Company and not less than
$150,000 by Ovonic Battery, was to define clearly Mr. Ovshinsky's duties and
compensation arrangements and to provide to each company the benefits of his
management efforts and future inventions. The bonus award to Mr. Ovshinsky for
the fiscal year ended June 30, 1996 was made in accordance with the formula set
forth in the Employment Agreements. See "Employment Agreements."
COMPENSATION COMMITTEE
Jack T. Conway
Walter J. McCarthy, Jr.
Florence I. Metz
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69
PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder
return on the Company's Common Stock over a five-year period with the
return (i) on the NASDAQ Stock Market - US Index, (ii) the Hambrecht & Quist
Technology Index ("Technology Index") and (iii) the NASDAQ Electronic
Components Index ("Electronic Components Index"). The Company believes that
the companies included in the Electronic Components Index contained in the
Form 10-K for the year ended June 30, 1995 ("1995 10-K") did not represent the
diverse business activities and technologies of the Company. The Company has
determined that it is appropriate to substitute the Technology Index for the
Electronic Components Index because the companies which make up the Technology
Index are broadly defined technology companies. In order to provide the
stockholders with a basis against which to evaluate the Company's results
consistent with that contained in the 1995 10-K, the graph below contains a
comparison of the Company's stockholders' return with, among other indices,
that of the Electronic Components Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ENERGY CONVERSION DEVICES, INC., THE NASDAQ STOCK MARKET-US INDEX,
THE NASDAQ ELECTRONIC COMPONENTS INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
Cumulative Total Return
-------------------------------------------
6/91 6/92 6/93 6/94 6/95 6/96
ENERGY CONVRSN DEVICES INC ENER 100 160 193 218 289 404
NASDAQ STOCK MARKET-US INAS 100 120 151 153 204 261
NASDAQ ELECTRONIC COMPONENTS INAE 100 122 210 231 476 503
H & Q TECHNOLOGY IHQT 100 114 139 141 236 280
* $100 INVESTED ON 06/30/91 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
The total return with respect to NASDAQ Stock Market - US Index,
the Technology Index and NASDAQ Electronic Components Index assumes
that $100 was invested on June 30, 1991, including reinvestment of dividends.
ECD has paid no cash dividends in the past and no cash dividends
are expected to be paid in the near future.
The Report of the Compensation Committee on Executive Compensation and the
Performance Graph are not deemed to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, or Securities
Exchange Act of 1934, as amended, or incorporated by reference in any documents
so filed.
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ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
CLASS A COMMON STOCK
Mr. Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky
(executive officers, Directors and founders of the Company), own of
record 153,420 shares and 65,601 shares, respectively (or approximately 69.8%
and 29.8%, respectively), of the outstanding shares of Class A Common Stock.
Common Stock is entitled to one vote per share and each share of Class A Common
Stock is entitled to 25 votes per share. Class A Common Stock is convertible
into Common Stock on a share-for-share basis at any time and from time to time
at the option of the holders, and will be deemed to be converted into Common
Stock on a share-for-share basis on September 14, 1999. As of September 13,
1996, Mr. Ovshinsky also had the right to vote 126,500 shares of Common Stock
(the "Sanoh Shares") owned by Sanoh Industrial Co., Ltd. ("Sanoh") under the
terms of an agreement dated as of November 3, 1992 between the Company and
Sanoh which, together with the Class A Common Stock and 9,554 shares of Common
Stock Mr. and Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky voting control over
shares representing approximately 35.20% of the combined voting power of the
Company.
The following table sets forth, as of June 30, 1996, information
concerning the beneficial ownership of Class A Common Stock by each
Director and all executive officers and Directors of the Company as a group.
All shares are owned directly except as otherwise indicated. Under the rules of
the Securities and Exchange Commission, Stanford R. Ovshinsky and Iris M.
Ovshinsky may each be considered to beneficially own the shares held by the
other.
Class A
Name of Common Stock
Beneficial Beneficially Total Number of Shares
Owner Owned(1)(2) Beneficially Owned Percentage of Class
- ---------- ------------ ---------------------- -------------------
Stanford R.
Ovshinsky 153,420 153,420 69.8%
Iris M.
Ovshinsky 65,601 65,601 29.8%
All other
executive
officers and
directors as a
group (13
persons) -- -- --
Total 219,021 219,021 99.6%
- ----------------
(1) The balance of the 219,913 shares of Class A Common Stock
outstanding, 892 shares, or approximately 0.4%, are owned by
other members of Mr. and Dr. Ovshinsky's family. Neither Mr.
nor Dr. Ovshinsky has voting or investment power with respect to
such shares.
(2) On November 10, 1995, the Compensation Committee recommended,
and the Board of Directors approved, an amendment to Mr. and Dr.
Ovshinsky's Stock Option Agreements dated November 18, 1993 (the
"Agreements") to permit Mr. and Dr. Ovshinsky to exercise a
portion (126,082 and 84,055 shares, respectively) of their
existing Common Stock option for Class A Common Stock on the
same terms and conditions as provided in the Agreements. The
shares of Class A Common Stock issuable upon exercise of the
options under the Agreements, as amended, are not included in
the number of shares indicated.
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71
COMMON STOCK
DIRECTORS AND EXECUTIVE OFFICERS. The following table sets
forth, as of September 13, 1996, information concerning the beneficial
ownership of Common Stock by each director and executive officer and for all
directors and executive officers of the Company as a group. All shares are
owned directly except as otherwise indicated.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) % of Class (2)
- ------------------------ ------------------------ --------------
Nancy M. Bacon 202,520 (3) 1.9%
Umberto Colombo 4,303 (4) *
Jack T. Conway 25,670 (5) *
Subhash K. Dhar 30,510 (6) *
Hellmut Fritzsche 25,796 (7) *
Joichi Ito 5,000 (8) *
Walter J. McCarthy, Jr. 17,303 (9) *
Florence I. Metz 5,000(10) *
Iris M. Ovshinsky 331,646(11) 3.1%
Stanford R. Ovshinsky 706,027(12) 6.4%
Kenneth A. Pullis 1,200(13) *
Haru Reischauer 46,352(14) *
Nathan J. Robfogel 13,233(15) *
Robert C. Stempel 204,704(16) 1.9%
Stanley K. Stynes 14,000(17) *
All executive officers and
directors as a group (15 persons) 1,633,264 13.8%
- ---------------
* Less than 1%.
(1) Under the rules and regulations of the Securities and Exchange
Commission, a person is deemed to be the beneficial owner of a
security if that person has the right to acquire beneficial
ownership of such security within sixty days, whether through
the exercise of options or warrants or through the conversion
of another security.
(2) Under the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock issuable upon exercise of
options and warrants or upon conversion of securities which are
deemed to be beneficially owned by the holder thereof (see Note
(1) above) are deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class
owned by such person but are not deemed to be outstanding for
the purpose of computing the percentage of the class owned by
any other person.
(3) Includes 189,940 shares represented by options exercisable
within 60 days and 6,000 shares represented by warrants
exercisable within 60 days.
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72
(4) Includes 4,000 shares represented by options exercisable within
60 days.
(5) Includes 7,000 shares represented by options exercisable within
60 days and 4,000 shares represented by warrants exercisable
within 60 days.
(6) Includes 30,510 shares represented by options exercisable
within 60 days.
(7) Includes 15,286 shares represented by options exercisable
within 60 days and 1,980 shares represented by warrants
exercisable within 60 days.
(8) Includes 5,000 shares represented by options exercisable within
60 days.
(9) Includes 12,000 shares represented by options exercisable
within 60 days.
(10) Includes 2,000 shares represented by options exercisable within
60 days.
(11) Includes 263,341 shares (adjusted as of June 30, 1996)
represented by options exercisable within 60 days, 65,601 shares of
Class A Common Stock which are convertible into Common Stock and 750
shares represented by warrants exercisable within 60 days. Under the
rules and regulations of the Securities and Exchange Commission, Dr.
Ovshinsky may be deemed a beneficial owner of the shares of Common Stock
and Class A Common Stock owned by her husband, Stanford R. Ovshinsky.
Such shares are not reflected in Dr. Ovshinsky's share ownership in this
table.
(12) Includes 417,757 shares (adjusted as of June 30, 1996)
represented by options exercisable within 60 days, the 126,500 Sanoh
Shares over which Mr. Ovshinsky has voting power, 153,420 shares of Class
A Common Stock which are convertible into Common Stock, and 750 shares
represented by warrants exercisable within 60 days . Under the rules and
regulations of the Securities and Exchange Commission, Mr. Ovshinsky may
be deemed a beneficial owner of the shares of Common Stock and Class A
Common Stock owned by his wife, Iris M. Ovshinsky. Such shares are not
reflected in Mr. Ovshinsky's share ownership in this table.
(13) Includes 1,200 shares represented by options exercisable within
60 days.
(14) Includes 27,000 shares represented by options exercisable
within 60 days, and 15,885 shares of Common Stock held in a trust of
which Mrs. Reischauer is trustee.
(15) Includes 12,000 shares represented by options exercisable
within 60 days.
(16) Includes 166,300 shares represented by options exercisable
within 60 days and 14,000 shares represented by warrants exercisable
within 60 days.
(17) Includes 3,000 shares represented by options exercisable within
60 days.
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PRINCIPAL SHAREHOLDERS. The following table sets forth, as of
September 13, 1996, to the knowledge of the Company, the beneficial
holders of more than 5% of the Company's Common Stock (see footnotes for
calculation used to determine "percentage of class" category):
Name and Address of Amount and Nature of
Beneficial Holder Beneficial Ownership Percentage of Class(1)
- ------------------- --------------------- ----------------------
Stanford R. and Iris M. Ovshinsky 1,037,673(2) 9.1 %
1675 West Maple Road
Troy, Michigan 48084
- --------------------
(1) Under the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock issuable upon exercise of
options and warrants or upon conversion of securities which are
deemed to be beneficially owned by the holder thereof are deemed
to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person but are
not deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(2) Includes 219,021 shares of Class A Common Stock owned by Mr.
and Dr. Ovshinsky (which shares are convertible at any time into
Common Stock and will be deemed to be converted into Common
Stock on September 14, 1999), 9,554 shares of Common Stock owned
by Mr. and Dr. Ovshinsky, 126,500 shares of Sanoh Shares over
which Mr. Ovshinsky has voting rights, 681,098 shares
represented by options exercisable within 60 days and 1,500
shares represented by warrants exercisable within 60 days held
by Mr. and Dr. Ovshinsky.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CANON/UNITED SOLAR. In June, 1990, the Company formed United Solar, a joint
venture with Canon, in which Canon and the Company each own 49.98% of the
outstanding shares, with the balance held by Mrs. Haru Reischauer, a member of
the Company's Board of Directors. Mrs. Reischauer is also a director of United
Solar. In 1995, United Solar placed an approximately $8,000,000 order with the
Company for new machinery and equipment to upgrade and expand its photovoltaic
production capacity. In the year ended June 30, 1996, the Company performed
various laboratory, shop, patent and research services for United Solar for
which United Solar was charged approximately $128,000. In the year ended June
30, 1996, United Solar billed ECD for approximately $289,000 for work
performed in accordance with the DOE PV Bonus contract.
GM OVONIC. In October 1995, the Company received a $3,700,000
order, as amended, from GM Ovonic for battery manufacturing
equipment. In the year ended June 30, 1996, the Company recorded
revenues of $4,118,000, including the aforementioned machine-building revenue,
from GM Ovonic representing sales of battery packs and machines and other
services performed for GM Ovonic.
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MISCELLANEOUS. Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is
employed by the Company as Director of Technology Production and
Machine Building Division working principally in the design of manufacturing
equipment. He received $115,000 in salary during the year ended June 30, 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Under
Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors and executive officers are required to report their initial ownership
of the Company's Common Stock and any subsequent changes in that ownership to
the Securities and Exchange Commission. Specific due dates for these reports
have been established and the Company is required to disclose any failure to
file by these dates during the fiscal year ended June 30, 1996. During the
1996 fiscal year, all the filing requirements were satisfied except that Jack
T. Conway and Nancy M. Bacon each filed one late report reporting changes in
the ownership of the Company's Common Stock. In making this disclosure, the
Company has relied on the representation of its directors and executive
officers and copies of the reports that they have filed with the Securities and
Exchange Commission.
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PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) 1. Financial statements: Page
----
The following financial statements are included in Part II, Item 8:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 28
Consolidated balance sheets - June 30, 1996 and 1995 . . . . . . . . . . 29
Consolidated statements of operations - years ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 31
Consolidated statements of stockholders' equity (deficit)
years ended June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . 32
Consolidated statements of cash flows - years ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 33
Notes to consolidated financial statements . . . . . . . . . . . . . . . 35
Individual financial statements and schedules of the Company have been
omitted as permitted by the instructions.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this Report.
(c) Exhibits
Page or
Reference
---------
3.1 Restated Certificate of Incorporation filed September 29, 1967 (a)
3.2 Certificate of Amendment to Certificate of Incorporation filed May 22, 1972 (b)
increasing authorized shares of the Company 's Common Stock from 2,000,000
shares to 5,000,000 shares
3.3 Certificate of Amendment to Certificate of Incorporation filed September 15, (c)
1978 increasing and extending voting rights of the Company 's Class A Common
Stock and establishing class voting with respect to other matters
75
76
3.4 Certificate of Amendment to Certificate of Incorporation filed January 7, 1982 (d)
increasing and extending voting rights to the Company's Class A Common Stock
3.5 Certificate of Amendment to Certificate of Incorporation filed July 23, 1982 (e)
increasing authorized shares of the Company's Common Stock from 5,000,000 shares
to 10,000,000 shares
3.6 Bylaws in effect on May 18, 1982 (f)
3.7 Amendment to Article XIII of By-Laws (g)
3.8 Certificate of Amendment to Certificate of Incorporation filed May 9, 1988 (h)
including various amendments, including increasing authorized shares of the
Company's Common Stock from 10,000,000 shares to 15,000,000 shares
3.9 Certificate of Incorporation of United Solar Systems Corp. (i)
3.10 Bylaws of United Solar Systems Corp. (j)
3.11 Certificate of Amendment to Certificate of Incorporation filed September 13, 1993 (k)
extending voting rights of the Company's Class A Common Stock
4.1 Agreement among the Company, Stanford R. Ovshinsky and Iris M. Ovshinsky, relating (l)
to the automatic conversion of Class A Common Stock into the Company's Common
Stock upon the occurrence of certain events, dated September 15, 1964
10.1 Patent License Agreement between the Company and Hitachi, Ltd. dated October 29, (m)
1984
10.2 Patent License Agreement dated September 10, 1985 between the Company and Sony (n)
Corporation relating to optical memory technology
10.3 License Agreement effective as of June 18, 1985 between the Company and Canon (o)
Inc., as restated on September 20, 1985
10.4 Non-Assertion Agreement dated June 16, 1986 between the Company and Canon Inc. (p)
10.5 Amendment to the Patent License Agreement dated December 5, 1986 between the (q)
Company and Matsushita Electric Industrial Co., Ltd.
10.6 Joint Venture Agreement effective as of June 1, 1987 between the Company and Canon (r)
Inc.
10.7 License Agreement dated as of June 29, 1987 between the Company and Ovonic Battery (s)
76
77
10.8 Energy Conversion Devices, Inc. 1987 Stock Option and Incentive Plan (t)
10.9 Agreement dated October 24, 1983 between the Company and Asahi Chemical Industry (u)
Co. Ltd.
10.10 License Agreement and Supplemental Understanding dated February 10, 1989 between (v)
Varta Batterie AG and the Company and Ovonic Battery Company
10.11 Charter of the Soviet-American Joint Venture, SOVLUX, dated January 11, 1990 (w)
10.12 Agreement on the Establishment and Activity of the Soviet-American Joint Venture, (x)
SOVLUX, dated January 11, 1990
10.13 License and Joint R&D Agreement entered into as of February 20, 1990 by and (y)
between Hitachi Maxell, Ltd., the Company and Ovonic Battery Company, Inc.
10.14 Joint Venture Agreement dated as of June 27, 1990 by and between Canon Inc. and (z)
the Company filed confidentially pursuant to Rule 24b-2
10.15 Exclusive License Agreement dated July 6, 1990 made by and between the Company and (aa)
United Solar Systems Corp. filed confidentially pursuant to Rule 24b-2
10.16 Know-How Cross-License Agreement dated July 6, 1990 made by and between Canon (bb)
Inc., the Company and United Solar Systems Corp. filed confidentially pursuant to
Rule 24b-2
10.17 Option License Agreement dated July 6, 1990 made by and between the Company and (cc)
Canon Inc. filed confidentially pursuant to Rule 24b-2
10.18 Option License Agreement dated July 6, 1990 made by and between the Company and (dd)
United Solar Systems Corp. filed confidentially pursuant to Rule 24b-2
10.19 License agreement by and between the Company, Ovonic Battery and Gates Energy (ee)
Products dated October 25, 1990
10.20 Amended Master Agreement made and entered into by and between the Company and (ff)
Matsushita Electric Industrial Co., Ltd. dated January 24, 1991
10.21 Memory Patent License Agreement made and entered into by and between the Company (gg)
and Matsushita Electric Industrial Co., Ltd. dated January 24, 1991
77
78
10.22 Memory Patent License Agreement by and between the Company and Asahi Chemical (hh)
Industry Co., Ltd. dated April 26, 1991
10.23 License Agreement by and between the Company, Ovonic Battery and Samsung (ii)
Electronics Co., Ltd. dated June 10, 1991
10.24 License Agreement between the Company, Ovonic Battery and Sylva Industries Limited (jj)
dated June 14, 1991
10.25 License Agreement by and between the Company and Ovonic Battery and Harding Energy (kk)
Systems, Inc. dated August 28, 1991
10.26 Agreement Supplement entered into as of October 31, 1991 by and between Hitachi (ll)
Maxell, Ltd., the Company and Ovonic Battery
10.27 License Agreement made as of November 20, 1991 by and between the Company, Ovonic (mm)
Battery and Hyundai Motor Company
10.28 Agreement effective as of March 9, 1992 by and between the Company, Ovonic Battery (nn)
and Mitsubishi Materials Corporation
10.29 Memory Patent License Agreement effective as of April 1, 1992 by and between the (oo)
Company and Plasmon Limited
10.30 Development Agreement between United States Advanced Battery Consortium, the (pp)
Company and Ovonic Battery dated May 4, 1992 filed confidentially pursuant to
Rule 24b-2
10.31 Option License Agreement effective as of September 8, 1992 by and between the (qq)
Company, Ovonic Battery and Sylva Industries Limited
10.32 Master Equipment Lease Agreement dated as of September 28, 1992 between Financing (rr)
for Science and Industry, Inc. and Ovonic Battery Company, Inc.
10.33 Memorandum Agreement dated as of April 22, 1993 between the Company and Sanoh (ss)
Industrial Co., Ltd. filed confidentially pursuant to Rule 24b-2
10.34 Memory Patent License Agreement dated as of February 3, 1993 between the Company (tt)
and Toshiba Corporation
10.35 Master Equipment Lease Agreement dated as of March 31, 1993 between Ovonic Battery (uu)
Company, Inc. and the Company
10.36 Joint Business Agreement dated as of May 20, 1993 among the Company, Ovonic (vv)
Synthetic Materials Company and Sanoh Industrial Co., Ltd.
78
79
10.37 Investment Agreement dated as of July 9, 1993 among the Company, United Solar (ww)
Systems Corp. and Canon, Inc.
10.38 Amendment to Exclusive License Agreement dated as of July 22, 1993 between the (xx)
Company and United Solar Systems Corp. filed confidentially pursuant to Rule 24b-2
10.39 License Agreement dated as of July 22, 1993 between the Company and United Solar (yy)
System Corp. filed confidentially pursuant to Rule 24b-2
10.40 Amendment to Option License Agreement dated as of July 22, 1993 between the (zz)
Company and United Solar Systems Corp.
10.41 License Agreement between the Company and a Japanese Battery Manufacturer filed (aaa)
confidentially pursuant to Rule 24b-2
10.42 Intercompany Services Agreement dated as of September 2, 1993 between the Company (bbb)
and Ovonic Battery Company, Inc.
10.43 Amended and Restated License Agreement and Assignment dated as of September 2, (ccc)
1993 between the Company and Ovonic Battery Company, Inc.
10.44 Intercompany Agreement Concerning Battery License dated as of September 2, 1993 (ddd)
between the Company and Ovonic Battery Company, Inc.
10.45 Executive Employment Agreement dated as of September 2, 1993 between the Company, (eee)
Ovonic Battery Company, Inc. and Stanford R. Ovshinsky
10.46 Executive Employment Agreement dated as of September 2, 1993 between the Company (fff)
and Stanford R. Ovshinsky
10.47 Stock Option Agreement by and between Ovonic Battery Company, Inc. and Stanford R. (ggg)
Ovshinsky dated as of November 18, 1993
10.48 Stock Option Agreement by and between the Company and Stanford R. Ovshinsky dated (hhh)
as of November 18, 1993
10.49 Stock Option Agreement by and between the Company and Iris M. Ovshinsky dated as (iii)
of November 18, 1993
10.50 Stock Purchase Agreement by and between Sanoh Industrial Co., Ltd., the Company (jjj)
and Ovonic Battery dated December 31, 1993
79
80
10.51 Stakeholder Agreement between Ovonic Battery Company, Inc. and General Motors (kkk)
Corporation for the organization of GM Ovonic L.L.C. dated June 14, 1994 filed
confidentially pursuant to Rule 24b-2
10.52 Letter Agreement dated June 20, 1994 between Sanoh Industrial Co., Ltd. and the (lll)
Company
10.53 Amendment No. 1 to Development Agreement between United Stated Advanced Battery (mmm)
Consortium, the Company and Ovonic Battery Company, Inc. dated June 24, 1994 filed
confidentially pursuant to Rule 24b-2
10.54 Amendment AOO2 to United States Department of Energy Cooperative Agreement No. (nnn)
DE-FC36-93CH10571, Rooftop PV System, dated July 5, 1994
10.55 Subcontract No. ZAN-4-13318-11 under Prime Contract No. DE-AC36-83CH10093 between (ooo)
Midwest Research Institute/National Renewable Energy Laboratory Division and the
Company dated July 19, 1994
10.56 Consumer Battery License Agreement effective as of December 15, 1994 by and (ppp)
between the Company, Ovonic Battery Company, Inc. and Sanyo Electric Co., Ltd.,
filed confidentially pursuant to Rule 24b-2.
10.57 Consumer Battery License Agreement effective as of December 20, 1994 by and (qqq)
between the Company, Ovonic Battery Company, Inc. and Toshiba Battery Co., Ltd.,
filed confidentially pursuant to Rule 24b-2.
10.58 Second Amendment to Sylva/ECD/OBC License Agreement effective as of January 1, (rrr)
1995 by and between the Company, Ovonic Battery Company, Inc. and Sylva
Industries, Ltd., portions of which have been filed confidentially pursuant to
Rule 24b-2.
10.59 Consumer battery agreement effective as of January 10, 1995 by and between the (sss)
Company, Ovonic Battery Company, Inc. and a consumer battery manufacturer,
portions of which have been filed confidentially pursuant to Rule 24b-2.
10.60 Contracts dated February 8, 1995 by and between the Company and United Solar (ttt)
Systems Corp. for purchase and sale of 5MW a-Si Alloy Processor and Back-Reflector
Machine, portions of which have been filed confidentially pursuant to Rule 24b-2.
80
81
10.61 Battery License Agreement dated March 28, 1995 by and between Ovonic Battery (uuu)
Company, Inc. and Walsin Technology Corp., portions of which have been filed
confidentially pursuant to Rule 24b-2.
10.62 Amendment to License and Joint R&D Agreement effective as of March 31, 1995 by and (vvv)
between Hitachi Maxell, Ltd., the Company and Ovonic Battery Company, Inc.,
portions of which have been filed confidentially pursuant to Rule 24b-2.
10.63 Energy Conversion Devices, Inc. 1995 Non-Qualified Stock Option Plan (www)
10.64 Memory Patent License Agreement by and between Toray Industries, Inc. and the (xxx)
Company effective as of April 1, 1995
10.65 Amendment Agreement by and between Varta Batterie A.G., the Company and Ovonic (yyy)
Battery effective as of June 8, 1995, portions of which have been filed
confidentially pursuant to Rule 24b-2
10.66 Amendment to License Agreement by and between Samsung Display Devices Co., Ltd., (zzz)
the Company and Ovonic Battery effective as of June 23, 1995, portions of which
have been filed confidentially pursuant to Rule 24b-2
10.67 Amendment Agreement by and between Eveready Battery Company, Inc., the Company and (aaaa)
Ovonic Battery effective as of June 23, 1995, portions of which have been filed
confidentially pursuant to Rule 24b-2
10.68 License Agreement effective as of September 30, 1995 by and between Ovonic Battery (bbbb)
Company, Inc. and Sanoh Industrial Co., Ltd., portions of which have been filed
confidentially pursuant to Rule 24b-2
10.69 Technology Transfer Agreement effective as of July 1, 1995 by and between Ovonic (cccc)
Battery Company, Inc. and Sanoh Industrial Co., Ltd.
10.70 Consumer Battery Agreement effective as of September 29, 1995 by and between (dddd)
Ovonic Battery Company, Inc. and Furukawa Battery Co., Ltd., portions of which
have been filed confidentially pursuant to Rule 24b-2
10.71 Battery License Agreement by and between Ovonic Battery Company, Inc. and Asia (eeee)
Pacific Investment Co. dated January 4, 1996, filed confidentially pursuant to
Rule 24b-2
81
82
10.72 Amendment No. 2 to Development Agreement between United States Advanced Battery 92
Consortium, the Company and Ovonic Battery Company, Inc. effective March 8, 1996,
portions of which have been filed confidentially pursuant to Rule 24b-2
10.73 Stock Purchase Agreement executed May 14, 1996, by and among Honda Motor Co., 95
Ltd., the Company and Ovonic Battery Company, Inc.
10.74 Settlement Agreement effective as of March 28, 1996, by and among the Company, 109
Ovonic Battery Company, Inc., Saft America, Inc. ("Saft") and certain entities
affiliated with Saft, portions of which have been filed confidentially pursuant to
Rule 24b-2
11.1 Computation of Earnings Per Share Attributable to Common Stock 124
22.1 List of all direct and indirect subsidiaries of the Company (ffff)
23.1 Consent of Independent Auditors 125
27.1 Financial Data Schedule 126
28.1 Decision and Order dated May 25, 1993 (gggg)
28.2 Order dated August 18, 1993 (hhhh)
Notes to Exhibit List
(a) Filed as Exhibit 2-A to the Company's Form 8-A and incorporated herein by reference.
(b) Filed as Exhibit 3-A-1 to Amendment No. 3 of the Company's Registration Statement on
Form S-1 (Registration No. 2-40597) and incorporated herein by reference.
(c) Filed as Exhibit 3-A-2 to Post-Effective Amendment No. 1 to the Company's Registration
Statement on Form S-1 (Registration No. 2-61551) and incorporated herein by reference.
(d) Filed as Exhibit 1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1981 and incorporated herein by reference.
(e) Filed as Exhibit 6 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1982 and incorporated herein by reference.
(f) Filed as Exhibit 3.7 to the Company's original Annual Report on Form 10-K for the fiscal
year ended June 30, 1984 and incorporated herein by reference.
82
83
(g) Filed as Exhibit 5 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1982 and incorporated herein by reference.
(h) Filed as Exhibit 3.8 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1988 and incorporated herein by reference.
(i) Filed as Exhibit 3.9 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, as amended, and incorporated herein by reference.
(j) Filed as Exhibit 3.10 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, as amended, and incorporated herein by reference.
(k) Filed as Exhibit 3.11 to the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 and incorporated herein by reference.
(l) Filed as Exhibit 13-D to the Company's Registration Statement on Form S-1 (Registration
No. 2-26772) and incorporated herein by reference.
(m) Filed as Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1984 and incorporated herein by reference.
(n) Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year
June 30, 1985 and incorporated herein by reference.
(o) Filed as Exhibit 10.46 to the Company's Annual Report on Form 10-K for the fiscal June 30, 1986
and incorporated herein by reference.
(p) Filed as Exhibit 10.6 to the Company's Current Report on Form 8-K dated June 13, 1986 and
incorporated herein by reference.
(q) Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
1986 and incorporated herein by reference.
(r) Filed as Exhibit 10.7 to the Company's Form 8 Amendment No. 2 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1987 and incorporated herein by reference.
(s) Filed as Exhibit 10.60 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1990, as amended, and incorporated herein by reference.
(t) Filed as Exhibit 10.110 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1988 and incorporated herein by reference.
83
84
(u) Filed as Exhibit 10.112 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1988
and incorporated herein by reference.
(v) Filed as Exhibit 10.71 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1989,
as amended, and incorporated herein by reference.
(w) Filed as Exhibit 10.82 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(x) Filed as Exhibit 10.83 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(y) Filed as Exhibit 10.92 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(z) Filed as Exhibit 10.94 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(aa) Filed as Exhibit 10.96 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(bb) Filed as Exhibit 10.97 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(cc) Filed as Exhibit 10.98 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(dd) Filed as Exhibit 10.99 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990,
as amended, and incorporated herein by reference.
(ee) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K dated October 25, 1990 and incorporated
herein by reference.
(ff) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K dated February 6, 1991 and incorporated
herein by reference.
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85
(gg) Filed as Exhibit 28.2 to the Company's Current Report on Form 8-K dated February 6, 1991 and incorporated
herein by reference.
(hh) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1991
and incorporated herein by reference.
(ii) Filed as Exhibit 10.114 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991,
as amended, and incorporated herein by reference.
(jj) Filed as Exhibit 10.115 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991,
as amended, and incorporated herein by reference.
(kk) Filed as Exhibit 10.116 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1991,
as amended, and incorporated herein by reference.
(ll) Filed as Exhibit 10.71 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992,
as amended, and incorporated herein by reference.
(mm) Filed as Exhibit 10.72 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992,
as amended, and incorporated herein by reference.
(nn) Filed as Exhibit 10.73 to the Company's Annual Report on Form 10-K for the quarter ended June 30, 1992, as
amended, and incorporated herein by reference.
(oo) Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992,
as amended, and incorporated herein by reference.
(pp) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992,
as amended, and incorporated herein by reference.
(qq) Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1992,
as amended, and incorporated herein by reference.
(rr) Filed as Exhibit 10.84 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
85
86
(ss) Filed as Exhibit 10.86 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(tt) Filed as Exhibit 10.87 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(uu) Filed as Exhibit 10.88 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(vv) Filed as Exhibit 10.89 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(ww) Filed as Exhibit 10.90 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(xx) Filed as Exhibit 10.91 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(yy) Filed as Exhibit 10.92 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(zz) Filed as Exhibit 10.93 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(aaa) Filed as Exhibit 10.94 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(bbb) Filed as Exhibit 10.96 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(ccc) Filed as Exhibit 10.97 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(ddd) Filed as Exhibit 10.98 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(eee) Filed as Exhibit 10.100 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(fff) Filed as Exhibit 10.101 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993
and incorporated herein by reference.
(ggg) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993
and incorporated herein by reference.
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87
(hhh) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993
and incorporated herein by reference.
(iii) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993
and incorporated herein by reference.
(jjj) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1993
and incorporated herein by reference.
(kkk) Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994
and incorporated herein by reference.
(lll) Filed as Exhibit 10.76 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994
and incorporated herein by reference.
(mmm) Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994
and incorporated herein by reference.
(nnn) Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994
and incorporated herein by reference.
(ooo) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994
and incorporated herein by reference.
(ppp) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994
and incorporated herein by reference.
(qqq) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1994
and incorporated herein by reference.
(rrr) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995
and incorporated herein by reference.
(sss) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference.
(ttt) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference.
(uuu) Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference.
(vvv) Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference.
87
88
(www) Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995
and incorporated herein by reference.
(xxx) Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.
(yyy) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.
(zzz) Filed as Exhibit 10.80 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.
(aaaa) Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995 and
incorporated herein by reference.
(bbbb) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference.
(cccc) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference.
(dddd) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference.
(eeee) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K dated January 4, 1996 and incorporated herein
by reference.
(ffff) Filed as Exhibit 22.1 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and
incorporated herein by reference.
(gggg) Filed as Exhibit 28.3 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and
incorporated herein by reference.
(hhhh) Filed as Exhibit 28.4 to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 and
incorporated herein by reference.
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89
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.
ENERGY CONVERSION DEVICES, INC.
By: /s/ Stanford R. Ovshinsky
------------------------------
Stanford R. Ovshinsky,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: October 3, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Nancy M. Bacon
- ---------------------------
Nancy M. Bacon Director October 3, 1996
---------------
/s/ Umberto Colombo
- ---------------------------
Umberto Colombo Director October 3, 1996
---------------
/s/ Jack T. Conway
- ---------------------------
Jack T. Conway Director October 3, 1996
---------------
/s/ Hellmut Fritzsche
- ---------------------------
Hellmut Fritzsche Director October 3, 1996
---------------
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90
/s/ Joichi Ito
- ---------------------------
Joichi Ito Director October 3, 1996
---------
/s/ Walter J. McCarthy, Jr.
- ---------------------------
Walter J. McCarthy, Jr. Director October 3, 1996
---------------
/s/ Florence I. Metz
- ---------------------------
Florence I. Metz Director October 3, 1996
---------------
/s/ Iris M. Ovshinsky
- ---------------------------
Iris M. Ovshinsky Director October 3, 1996
---------------
/s/ Stanford R. Ovshinsky
- ---------------------------
Stanford R. Ovshinsky President, Chief Executive October 3, 1996
Officer and Director ---------------
(Principal Executive Officer)
/s/ Kenneth A. Pullis
- ---------------------------
Kenneth A. Pullis Acting Chief Financial October 3, 1996
Officer (Principal Financial ---------------
Officer)
/s/ Haru Reischauer
- ---------------------------
Haru Reischauer Director October 3, 1996
---------------
/s/ Nathan J. Robfogel
- ---------------------------
Nathan J. Robfogel Director October 3, 1996
---------------
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91
/s/ Robert C. Stempel
- ---------------------
Robert C. Stempel Director October 3, 1996
---------------
/s/ Stanley K. Stynes
- ---------------------
Stanley K. Stynes Director October 3, 1996
---------------
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.72 Amendment No. 2 to USABC and Energy Conversion
Devices, Inc./Ovonic Battery Company, Inc.
Development Agreement Under Prime Cooperative
Agreement No. DE-FC02-91CE50336 portions of
which have been filed confidentially pursuant
to Rule 24b-2
10.73 Stock Purchase Agreement
10.74 Settlement Agreement between Saft and
ECD/Ovonic Battery portions of which have been
filed confidentially pursuant to Rule 24b-2
11.1 Computation of Earnings (Losses)
per share
23.1 Independent Auditors' Report
27 Financial Data Schedule