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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACTOF 1934
For the fiscal year ended December 31, 2001
Commission file number 000-31973
Beacon Power Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-3372365
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
234 Ballardvale Street
Wilmington, Massachusetts 01887-1032
(Address of principal executive offices) (Zip code)
(978) 694-9121 Phone
(978) 694-9127 Fax
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, par value $.01 per share
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ______
As of March 22, 2002, the market value of the voting stock of the
Registrant held by non-affiliates of the Registrant was $28,656,474.
The number of shares of the Registrant's common stock, par value $.01 per
share, outstanding as of March 22, 2002 was 42,770,856
DOCUMENTS INCORPORATED BY REFERENCE
Pertinent extracts from the Registrant's Proxy Statement for the 2002 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
are incorporated by reference into Part III of this Form 10-K. Such information
incorporated by reference shall not be deemed to specifically incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
Table of Contents
Page
PART I
Item 1. Business 2
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 4A. Executive Officers of the Company 8
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosure about Market Risk 23
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 46
PART III
Item 10. Directors and Executive Officers 47
Item 11. Executive Compensation 47
Item 12. Security Ownership of Certain Beneficial Owners
and Management 47
Item 13. Certain Relationships and Related Transactions 47
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 48
Signatures 51
Note Regarding Forward Looking Statements:
This Annual Report on Form 10-K contains forward-looking statements concerning,
among other things, the Company's expected future revenues, operations and
expenditures and estimates of the potential markets for the Company's products.
Such statements made by the Company fall within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All such forward-looking statements are
necessarily only estimates of future results and the actual results achieved by
the Company may differ materially from these projections due to a number of
factors as discussed in the section entitled "Quantitative and Qualitative
Disclosure about Market Risk - Certain Factors Affecting Future Operating
Results" of this Form 10-K.
PART I
Item 1. Business
Overview
We design, develop and offer for sale, flywheel-based power systems providing
highly reliable, cost-competitive, environmentally friendly, uninterruptible
electric power for commercial facilities, communications, cable, computer
networks, the internet and industrial manufacturing plants. We currently sell
two high-energy flywheel-based products and soon will be offering high-power
uninterruptible power supply (or UPS) flywheel-based products. Our current,
high-energy products deliver a low amount of power over a long period of time
(typically measured in hours), and the UPS products will be designed to deliver
high amounts of power over a short period of time (typically measured in
seconds). We expect to be able to deliver the first of our proposed high-power
UPS products late in 2002.
Users of electricity can experience significant losses in their operations if
their electricity supply is partially or wholly interrupted, such as by voltage
sags and surges or power outages. When grid-supplied electricity is interrupted,
these users must employ some means to replace it. Even if the utility industry
were to undertake substantial upgrades and other investments to improve overall
utility grid reliability, the grid's exposure to severe weather, accidents and
other external events means that the absolute level of power quality required
for today's sophisticated electronic and industrial applications remains
difficult to achieve without local uninterrupted power protection close to the
place of use.
Lead-acid batteries are the most commonly used devices for providing replacement
electric power and ensuring power quality, either alone or as a temporary
measure until generators or other power sources can be activated. Our
flywheel-based systems are among the energy storage technologies that can
perform the same function as batteries. Flywheel systems draw electrical energy
from a primary power source while that source is operational, store that energy,
and then convert that energy to provide immediate, peak-power, voltage support
and uninterruptible electric power when the primary power source fails or is
disrupted.
We believe that our current and anticipated flywheel-based products offer cost
and significant performance advantages over conventional, battery-based back-up
power and UPS systems. These advantages include improved certainty of
operations, more reliable monitoring, higher reliability, significantly longer
life, improved recharging capability, significantly reduced scheduled
maintenance, more reliable monitoring, and greater environmental friendliness.
We expect the initial cost to users of our UPS products to be generally
competitive with those of battery driven UPS systems and we expect the
life-cycle costs to be significantly less than competing systems. Life-cycle
comparisons consider the costs over the life of the product and include initial
costs, expense of maintaining, monitoring, replacement and disposing of
competing products. We also anticipate that our systems will provide customers
significantly better reliability over conventional back-up power and UPS
systems.
From our inception through December 31, 2001 we have incurred losses of
approximately $94.1 million. We do not expect to become profitable before 2004.
Also, our losses may fluctuate from quarter to quarter as our costs fluctuate.
Markets for our Products
High-power UPS Market. In the UPS market, power quality systems consist of three
interconnected devices; (a) solid-state switches and control electronics, (b)
batteries or flywheels to supply short-term power and (c) engine generators
to supply longer-term power. A short-term energy storage device (having a
duration of seconds to minutes) with control electronics is referred to as an
uninterruptible power supply, or UPS. A UPS coupled with a generator to protect
against longer-term outages (minutes to hours or days) is referred to as a
continuous power system, or CPS.
A UPS protects sensitive systems from sags, surges and other temporary
interruptions or variations in utility-supplied power. If the UPS electronics
determines that the power being supplied from the grid is unacceptable or that
insufficient power is being supplied, it will draw power from the back-up power
source to ensure uninterrupted, quality power.
A CPS provides back-up power for a lengthy period, thus if the power disturbance
lasts for more than a few seconds, the CPS generator is activated and begins to
provide longer-term back-up power. Internet service providers, data processing
centers, semiconductor plants and cellular phone sites all use CPS to keep
critical business equipment operating when electric utility grid power falters.
We believe that our flywheel systems provide significant advantages to potential
customers due to the numerous problems associated with lead acid batteries,
including:
o Reliability. Batteries are not only prone to heat buildup and acid
leaks that lead to battery failure, but when they are repeatedly used
at close to their maximum power output, their power output capacity can
rapidly decrease, reducing the batteries' effectiveness over time.
Also, the amount of power available in battery systems may not readily
be monitored and, therefore, the amount of energy cannot be assured.
o Cost. The use of batteries poses both direct and indirect costs. In
addition to bearing the initial purchase costs of the batteries, a user
must allocate significant space to large battery arrays (space that
could otherwise be allocated to revenue generating equipment), must
inspect and test them on site every few months (as their power output
degrades over time), must cool them with costly air conditioning (if
the user wishes to avoid the rapid degradation in performance and life
that results with temperature variations), and must replace them every
two to six years (depending on type of use, environment and other
factors).
o Life. In applications where discharges use all or most of the battery's
available reserve, the life of batteries is significantly reduced.
o Environmental. Batteries contain toxic materials such as lead and
sulfuric acid and are considered hazardous waste and their disposal
encounters rigorous and costly governmental environmental regulations.
Facilities with spent batteries must make arrangements with hazardous
waste handlers for disposal. Both the costs associated with disposal
and the complexity of compliance for proper handling, permitting and
regulatory requirements continue to increase and may accelerate sharply
as pressure increases to curb such hazardous wastes.
The UPS market wattage needs range from 200 watts to two megawatts. The
percentage of this market that is expected to be flywheel based is not known due
to the short history of such flywheel-based products. However, we expect the
percentage to increase as more market participants sell flywheel-based products
and their advantages become better known.
High-Energy Market. The needs and dynamics of the back-up power market are
different than the market for our anticipated high-power UPS products. These
products supply low power for a longer time (as contrasted to the UPS products,
which supply higher power for a shorter period), and have been designed to
address specifically the back-up power needs of the telecommunications industry
(for example, telephony, broadband, cable and wireless (cellular) networks) in
decentralized locations in suburban and rural areas.
The telecommunications industry, however, experienced a significant overall
slowdown that began in 2000 and is continuing, and there can be no assurance of
when it will recover. Significant reductions in both maintenance budgets and
capital build-out budgets at telecommunications companies made these potential
customers more conservative with their spending and expenditure analysis and
less willing to try new technology solutions, such as our products. These
conditions have also discouraged potential customers from comparing our
products' life-cycle cost to that of batteries because the savings produced by
our products accrue in the future, whereas the additional cost is realized
immediately. Because of these factors we have elected to shift our development
effort from high energy to high power in 2002.
Customers that might be receptive to our products are those for which the
advantages of our products outweigh their greater initial cost. Some potential
customers might have particular needs for 100% reliability, such as critical use
facilities, hospitals, data centers and call centers; or a power source might be
very expensive to replace or maintain due to its location or for any other
reason (making life-cycle analysis more attractive); or a power source or site
might be located where there are dramatic swings in temperature or where
temperatures were very high (making batteries impractical due to severe
degradation of performance).
Our Products
Late in 2002, we expect to be able to deliver the first of our proposed
high-power UPS products: our Smart Power(TM) 250 kWh flywheel UPS (which
consists of a flywheel system coupled with control electronics). As mentioned
earlier, this new product would bridge the supply of power for a short period of
time (measured in seconds) from interruption of electricity until the customer's
longer-term source (such as generator or fuel cell) begins to operate. Because
our UPS product will use a composite flywheel, we anticipate that it will be
able to supply power for approximately twice as long as devices using steel
flywheels. Our UPS product can be configured to achieve higher power (depending
on customer needs) by connecting units in parallel. It is designed to be
compatible with industry standards for standby generators, enabling its use in
CPS. We intend to expand the power output of our UPS product up to 500kWh.
We believe that this UPS product will be superior to battery-based UPS systems -
in life-cycle cost to the customer, in function, and in environmental benefits
described earlier. We also expect this product to be superior to other flywheel
based products with which it will compete. We anticipate that it will also
require significantly less maintenance and will provide superior quality
performance.
The flywheel and control electronics components of our UPS product have
previously been marketed outside the United States by their respective
manufacturers.. We signed a distribution agreement with our flywheel supplier
early in 2001 for these systems, and we are also purchasing the associated
control electronics. The only needed adaptation of these components for the US
market is the conversion of the control electronics component to US voltages,
which is being undertaken by the supplier. In the future, we may design and
produce components for our UPS product to replace those we are currently
purchasing from third-party suppliers.
Our existing high-energy products -- the 2kWh and 6kWh flywheel Smart Energy(TM)
systems-- have surpassed 100,000 hours of field trials without failure of our
mechanical system, which we believe verifies our ability to deliver greater
reliability than battery technologies. At Verizon Communications, Century
Communications, now part of Adelphia Communications, Rogers Cable, and WinDBreak
Cable, we have successfully maintained power with no degradation of service in
planned and unplanned losses of utility power. Also, our systems can be adapted
to deliver the amount of power and back-up time required to meet customer needs
by paralleling flywheels. This has been successfully demonstrated at Verizon
Communications sites.
We have obtained Underwriters Laboratory approval for our high-energy products
and plan to pursue the same for our UPS product. In addition, we have passed
Federal Communications Commission (FCC) Class B emissions testing. We intend to
obtain FCC certification for our high-power products this year. We designed and
certified our high-energy product in accordance to Telcordia standards, which
represent the safety standards established by the telecommunications industry.
Our high-power products have been designed and will be tested for concurrence
with the Institute of Electrical and Electronics Engineers (IEEE) 587 standard,
which is the standard for all UPS systems.
Our Technology
Since our formation, we have been developing flywheel energy storage products to
offer customers superior reliability and performance at competitive costs. Our
composite flywheel is a rotating wheel on hybrid, magnetic bearings that
operates in a near frictionless vacuum environment. Energy is stored as kinetic
energy in the rotating flywheel rim. The flywheel is powered up to its
operational speed, like a motor, using electricity from an external power
source. The flywheel is able to spin for extended periods with great efficiency,
because friction and drag are virtually eliminated by employing magnetic
bearings and a vacuum in the container. Because it has very low friction, little
power is required to maintain the flywheel's operating speed. When the external
power source is eliminated, the spinning flywheel drives a generator and its
bi-directional inverter converts the kinetic energy into electrical energy,
providing it to an end-user as back up or UPS power.
Although flywheels have been used since the industrial revolution, recent
attempts at commercializing flywheel systems have been based on technology first
developed for aerospace and nuclear processing applications and have resulted in
compact high-energy flywheels that can be commercially cost competitive. The
products we offer employ new enabling materials and products such as
high-strength fiber, efficient electric drives, and low-loss, long-life bearings
to create new generations of flywheel products. Our composite flywheels are
fabricated from high-strength, lightweight fiber composites, such as graphite
and fiberglass combined with resins, which allow our flywheel to rotate at high
speeds and store large amounts of energy relative to similar size and weight
machines made from metals. For example, a 600-pound steel flywheel running at
8,000 revolutions per minute (RPM) will store approximately 900 watt-hours of
energy. In contrast, our 150-pound, composite flywheel running at 22,500 RPM
stores 2,700 watt-hours of energy and delivers 2,000 watt-hours of energy to the
load. On a per pound basis, our flywheel technology is much more efficient than
steel flywheels.
Our proprietary technology enables the design of maintenance-free flywheel
products, in that our products can employ a proprietary internal rather than
external vacuum system and our bearing systems have been designed and developed
to have a long life with no scheduled replacement or maintenance required.
Competing flywheel products rely on bearings and separate vacuum systems that
require periodic maintenance and replacement. Our proprietary technologies are
used in our high-energy products, but have not yet been employed in our
anticipated high-power UPS products.
Research and Development
We believe that our research and development efforts are essential to our
ability to successfully design and deliver our products to our targeted
customers, as well as to modify and improve them to reflect the evolution of
markets and customers. Our research and development team has worked closely with
potential communications customers to define product features and performance to
address specific needs. Our research and development expenses, including
engineering expenses, were approximately $17,628,000 in 2001, $12,715,000 in
2000 and $3,506,000 in 1999. We anticipate maintaining significant levels of
research and development expenditures in the future. At December 31, 2001, we
employed 53 engineers and technicians who were engaged in research and
development. By March 22, 2002, that number had been reduced to 32.
Manufacturing
Historically, our manufacturing has consisted of the welding and assembly of our
products. We have previously contracted-out the manufacture of our high-energy
back-up power flywheel components, using our design drawings and processes to
facilitate more rapid growth by taking advantage of third parties' installed
manufacturing capacity. For a limited number of non-proprietary components, we
generate performance specifications and obtain either standard or custom
components. We then perform the final assembly and testing.
Our shift in emphasis from high-energy back-up power products to high-power UPS
products does not fundamentally alter our previous plans to limit the amount of
manufacturing we actually do. Although we recently moved into a new facility
that has expanded capacity, we expect to continue to rely on contract
manufacturing and outside suppliers. The supplier of the flywheel unit for our
new high-power UPS product and the supplier of the control electronics for that
product are both single source suppliers, and the loss or interruption of supply
from either of these suppliers would adversely affect our ability to market our
high-power UPS product, and thus, our financial results. We are maintaining a
limited manufacturing staff, many of whom have been trained in and are skilled
in six-sigma quality control techniques. Six-sigma is a strategic implementation
of total quality management principles. We expect to apply these skills to our
contract manufacturers when appropriate and also to our state-of-the-art
composite flywheel-manufacturing laboratory. To manage cost and supplier risk,
we plan to have the ability to manufacture composite rims (the most expensive
portion of flywheel units), if we determine that it is in our best interest to
do so. We have personnel skilled in management, design, and the manufacturing of
composites. These people, using our composite laboratory and suppliers, evaluate
manufacturing processes and develop both the equipment and personnel skills
required to manage our suppliers' manufacturing processes.
Sales and Marketing
Initially, we intend to sell our new UPS product (expected to be deliverable in
the third quarter of 2002) directly to customers, and to build market interest
through power quality manufacturer's representatives and through lead generation
via advertising, trade press articles, participation in industry conferences and
limited direct mail to specific power quality customers. We expect that this
will evolve into an alliance and channel strategy, involving relationships with
power quality manufacturer's representatives, OEMs, architects, engineers,
system integrators, electrical contractors and power quality personnel in
electric utilities.
With respect to our existing high-energy back-up power products, our marketing
strategy has been to identify key prospects and to work with those companies to
formulate our product plan, pricing, initial installation and service
strategies. We have installed on-site and working demonstration units at
Verizon, Cox Communications, WinDBreak Cable and Rogers Cable. We also have
sites identified and installations scheduled at Verizon Wireless and AT&T
Broadband. We will continue to perform market analysis to identify opportunities
for installations that fit the unique characteristics of those products and to
emphasize the value proposition of our high-energy products. Potential customers
for these products include businesses with heightened needs for 100%
reliability, such as critical use facilities such as hospitals, data centers and
call centers. We believe that our high-energy products will also be attractive
to customers with power sources that are very expensive to replace or maintain
due to their location or other reason, or power sources located where there are
high or low prevailing temperatures or dramatic changes in temperature.
Backlog
At December 31, 2001, our backlog of orders was approximately $90,000 consisting
of six units. We expect to ship these units during 2002.
Customer Service
We intend to provide maintenance and support for our UPS product and high-energy
products, although we expect to contract out such functions at an appropriate
time. All our products are designed to have maintenance-free lives of at least
20 years.
Competition
Substantially all of the UPS market today consists of sales of battery-based
products, rather than battery-free technologies. The power quality and power
reliability markets are intensely competitive, with the principal bases for
competition being system reliability and quality, brand recognition and price,
including the initial cost of the system to the customer and the total cost of
ownership. Various energy technology companies compete in the UPS market. We
will compete with:
o Manufacturers and developers of battery technologies; and
o Other companies developing flywheel technology.
Examples of other technologies that are potentially competitive include ultra
capacitors, fuel cells and super-conducting magnetic energy storage. Although
our anticipated UPS product will be new to the market, we believe that its
anticipated higher reliability, lower maintenance and long life technologies
will allow us to compete successfully. While we have not yet sold any units, our
market research indicates that we should be able to demonstrate a competitive
value proposition. There are other companies selling diesel generators and micro
turbines that are competitors in the broadest sense, although we believe that in
most cases, our flywheels will be complementary to their equipment.
As for our high-energy back-up power products, competition is on the basis of
cost and value to the customer, and we plan to continue to emphasis the value
proposition of our high-energy products based upon dependability, environmental
benefits, and long maintenance-free life of our products.
Intellectual Property
Our success depends upon our ability to develop and maintain the proprietary
aspects of our technologies and to operate without infringing on the proprietary
rights of others. To some extent, our success also depends upon the same
abilities on the part of our suppliers. The intellectual property rights of our
initial UPS product are owned or controlled by the suppliers of the two main
elements of that product. We are developing technologies that we expect will
result in a combination of UPS patents and trade secrets in the future. We rely
on a combination of patent, trademark, trade secret and copyright law and
contract restrictions to protect the proprietary aspects of our technology. We
seek to limit disclosure of our intellectual property by requiring employees,
consultants, and any third parties with access to our proprietary information to
execute confidentiality agreements and by restricting access to that
information. These protections, however, may afford only limited protection for
our technology.
We hold a perpetual, exclusive, royalty-free, worldwide right and license to use
SatCon Technology Corporation's flywheel technologies and patents for stationary
terrestrial flywheel applications. Those rights include eight issued U.S.
patents and 13 U.S. and foreign patent applications that expire on various dates
between 2012 and 2018. This license covers SatCon's technologies and patents and
all improvements made by SatCon through the date of our initial public offering.
We are not entitled to any future improvements to its flywheel technology that
SatCon develops. We own all technology improvements we develop that are based on
the technology licensed by us to SatCon. We have a patent on our vacuum system.
We also have one pending US patent application, and 10 other applications being
prepared for filing. Our patent and trade secret rights are of material
importance to us and to our future prospects. We are actively pursuing both
national and foreign patent protection.
Government Regulation
We do not believe that we will be subject to existing federal and state
regulatory commissions governing electric utilities and other regulated
entities. We do believe that our products and their installation will be subject
to oversight and regulation at the local level in accordance with state and
local ordinances relating to building codes, safety, pipeline connections and
related matters. We intend to encourage the standardization of industry codes to
avoid having to comply with differing regulations on a state-by-state or
locality-by-locality basis. We have obtained FCC approval of our high-energy
products, and plan to pursue the same for our UPS product.
Employees
At December 31, 2001, we had a total staff of 92 full-time employees and 12
independent contractors, of which approximately 21 were involved in
manufacturing and assembly of our products, 53 were engineers and technicians
involved in research and development, ten were in sales, marketing and customer
service. The remaining 20 people were involved in administrative tasks. As a
first step in the implementation of our strategy discussed in Item 1 of this
document, we reduced staffing at all levels of the company in an effort to
preserve our cash position. As of March 22, 2002, we had a total staff of 56
full-time employees and six independent contractors, of which four were involved
in manufacturing and assembly of our products, 32 were engineers and technicians
involved in research and development, three were in sales and marketing and
three in customer service. The remaining 20 people were involved in
administrative tasks. None of our employees are represented by a union. We
consider our relations with our employees to be excellent.
Item 2. Properties
Our principal executive offices, laboratory and manufacturing facilities are
located at a single location in Wilmington, Massachusetts. This 51,650 square
foot facility operates under a lease that expires on September 30, 2007.
Item 3. Legal Proceedings
We are not involved in any legal proceedings. However, we may from time to time
be involved in legal proceedings in the ordinary course of our business.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 4A. Executive Officers of the Company
Our executive officers, their positions and their ages as of March 22, 2002, are
as follows:
Name Age Position
William F. Capp 53 President and Chief Executive Officer,
Director
Robert D. French 62 Vice President of Manufacturing
Matthew L. Lazarewicz 51 Vice President of Engineering
Stephen A. Spanos 38 Corporate Controller
James M. Spiezio 53 Vice President of Finance and Chief
Financial Officer
William F. Capp. Mr. Capp has served as our President and Chief Executive
Officer since December 1, 2001when he joined Beacon Power. Prior to joining
Beacon Power, Mr. Capp was the President of Bracknell Corporation, a company
that provided infrastructure for the telecommunications industry with annual
sales of $350 million and 30 regional offices in the US and Canada. From
1997-2000, Mr. Capp served as the President of York International where he
increased aftermarket sales by over 50% from 1997 to 1999, which were the two
most profitable years in that division's history. From 1978-1997, Mr. Capp held
numerous positions at Ingersoll Rand. From 1992-1997, he served as Vice
President and General Manager of the Compressor Division were he was responsible
for an operation with over 700 employees. He managed a complex supply chain
including over $100 million in purchases from a variety of companies. From
1989-1992, Mr. Capp was the Vice President of Technology for The Torrington
Company, which is a $900 million manufacturer of bearings and precision
components to the automotive and other industries worldwide. Mr. Capp assisted
in the development of new products, new manufacturing technologies and project
management. He also held numerous other engineering positions within Ingersoll
Rand. Prior to joining Ingersoll Rand in 1978, he worked for Ford's Truck
Division in such positions as project engineering, supervisor, and product
planning. Mr. Capp received his Bachelor of Science in Aeronautical Engineering
from Purdue University and his Master of Business Administration and Master's
Degrees in Mechanical Engineering from the University of Michigan. He also has
his Black Belt Training Program from the American Society for Quality.
Robert D. French. Mr. French joined us in April 2000 as Vice President of
Manufacturing and is responsible for all phases of production. Prior to joining
us, Mr. French worked for the General Electric Company in various capacities.
His last position there was with the Aircraft Engine Group, where from 1995 to
2000, he worked on moving the U.S. Navy's newest fighter engine, the F414, from
development to full production. Prior to this, Mr. French was involved in
building and operating an automated factory for jet engine components and held
positions as Manager of Engine Assembly and Flight Support and as Manufacturing
Program Manager for several engine product lines. His professional career began
with the U.S. Army Materials and Mechanics Research Center, where he progressed
from Metallurgist to Director of the Metals and Ceramics Laboratory. Dr. French
received his Bachelor's and Master's Degrees in Mechanical Engineering from
Northeastern University and his Ph.D. in Engineering, with a major in Materials
Science, from Brown University.
Matthew L. Lazarewicz. Mr. Lazarewicz has served as our Vice President of
Engineering since February 1999. Prior to joining us, Mr. Lazarewicz worked for
General Electric Company in various capacities. He started his 25-year career
with the General Electric Company in the gas turbine division as a design
engineer. After a transfer to GE Aircraft Engines, he progressed through a
variety of positions in design, manufacturing, quality, marketing, and product
support in both military and commercial applications. Most recently he served as
a manager of program independent analysis from 1996 to 1999, and he was the
mechanical design manager for the F414 engine used in the Navy front line F/A18
fighter from 1991 to 1996. This included the development through production
phases. He was recognized as the GE Aircraft Engines "Engineer of the Year" and
received the Department of Defense "Excellence in Acquisition" Award for his
leadership of this project. Mr. Lazarewicz is a Registered Professional Engineer
in the Commonwealth of Massachusetts and received both Bachelor's and Master's
Degrees in Mechanical Engineering from the Massachusetts Institute of
Technology. Mr. Lazarewicz also completed his Master's Degree in Management at
the Massachusetts Institute of Technology Sloan School of Management.
Stephen A. Spanos. Mr. Spanos joined us in January 2001 as our Corporate
Controller. He has over fifteen years of financial accounting experience,
including eight years of public accounting and seven years in financial
management. Prior to joining Beacon Power, Mr. Spanos was with Waste Systems
International, a publicly traded solid-waste management company, from October
1998 to January 2001 where he last served as Corporate Controller. From 1996
until October 1998, Mr. Spanos held financial management positions with
Picturetel, a manufacturer of videoconferencing products and Zoom Telephonics, a
manufacturer of modems and other telephony products. Mr. Spanos holds both a
Bachelor of Science in Business Administration and a Master's of Business
Administration from Boston University. Mr. Spanos is also a Certified Public
Accountant.
James M. Spiezio. Mr. Spiezio joined us in May 2000. He has served as our Vice
President of Finance and Chief Financial Officer since July 2000 and our
Corporate Controller from May 2000 to July 2000. He worked as a financial
consultant from November 1999 to May 2000. He has over twenty-five years of
diversified manufacturing and financial management experience. Prior to acting
as an independent financial consultant, Mr. Spiezio was the Chief Financial
Officer at Starmet Corporation, a diversified metallurgical manufacturing
company, from January 1993 to November 1999. While at Starmet he also served as
President of a wholly owned manufacturing facility for five years and held
additional financial management positions including Corporate Controller and
Manager Planning and Analysis. Prior to joining Starmet, Mr. Spiezio held
financial management positions with United Technologies Corporation, Pratt &
Whitney Aircraft Group in accounting, cost and business analysis. Prior to Pratt
& Whitney, Mr. Spiezio held financial management positions with General Electric
Company in both the Power Systems and Apparatus Services business groups. Mr.
Spiezio is a graduate of the Indiana University School of Business.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is quoted on the NASDAQ National Market under the
symbol "BCON". The following table sets forth the high and low sales price of
the common stock for the period indicated.
High Low
Fourth quarter 2001 $ 1.85 $0.75
Third quarter 2001 $ 6.06 $1.30
Second quarter 2001 $ 8.20 $3.65
First quarter 2001 $10.75 $4.81
Fourth quarter (November 17, 2000*
through December 31, 2000) $10.13 $6.13
- --------------
* November 17, 2000 was the first day of trading for our common stock.
On March 19, 2002, the last reported sale price of the common stock on the
NASDAQ National Market was $0.75 per share, and there were 257 holders of record
of common stock.
We have never declared or paid cash dividends on shares of our common stock. We
expect to retain any future earnings to finance the expansion of our business,
and therefore we do not expect to pay cash dividends in the foreseeable future.
Payment of future cash dividends, if any, will be at the discretion of our board
of directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for
expansion.
Recent Sales of Unregistered Securities
During 2001, we issued no unregistered securities.
Use of Proceeds of Initial Public Offering
On November 16, 2000, the Securities and Exchange Commission declared our
Registration Statement on Form S-1 (File No. 333-43386) effective. In our
initial public offering during the fourth quarter of 2000, we sold 9,200,000
shares of our common stock, inclusive of the underwriters' over allotment, at an
initial public offering price of $6.00 per share. We received net proceeds from
our initial public offering of approximately $49.3 million, reflecting gross
proceeds of $55.2 million net of underwriter commissions of approximately $3.9
million and other offering costs payable to persons, other than directors or
officers, of approximately $2.0 million.
From November 16, 2000 to December 31, 2001, we spent approximately $9.0 million
for inventory and materials used in research and development and $6.7 million
for property and equipment, including the build-out of our facility at 234
Ballardvale Street in Wilmington, MA. In addition, we spent approximately $1.2
million to pay dividends on our preferred stock that accrued through the date of
our initial public offering. We have spent approximately $15.5 million for other
working capital needs. In addition to the above, we advanced funds totaling
approximately $785,000 to three officers of the Company. Approximately $152,000
of these advances was repaid by the officers during 2001. The advances are
expected to be repaid in full by the officers and are secured by the officers'
holdings of Beacon Power Corporation common stock. Through March 22 of 2002, an
additional $125,000 has been repaid on these advances, including one officer who
has paid in full. The remainder of the net offering proceeds has been invested
in short-term, income producing bank deposits pending their use for the purchase
of property and equipment and working capital needs. Other than as disclosed
above, none of these amounts were direct or indirect payments to directors or
officers of the issuer or their associates or to persons owning 10% or more of
our common stock or to any of our affiliates.
Item 6. Selected Consolidated Financial Data
The following selected financial data should be read together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements, including the related notes, found elsewhere in this
Form 10-K.
The following tables present selected historical financial data for the years
ended December 31, 2001, 2000, 1999, 1998 and for the period from May 8, 1997,
the date of our inception, through December 31, 2001.
Period from Date Period from Date
of Inception of Inception
Year ended December 31, (May 8, 1997) to (May 8, 1997) to
December 31, December 31,
2001 2000 1999 1998 1997 2001
--------------------------------------------------------------------------------------
(In Thousands, except Per Share Data)
Statement of Operations Data:
Revenues $ - $ 50 $ 269 $ - $ 232 $ 551
Operating expenses:
Selling, general and administrative 8,940 4,631 1,559 1,188 1,168 17,486
Research and development 17,628 12,715 3,506 3,524 2,292 39,664
Loss on sales commitments - 51 325 - - 376
Depreciation and amortization 1,324 401 219 78 - 2,022
--------------------------------------------------------------------------------------
Total operating expenses 27,892 17,798 5,609 4,790 3,460 59,548
--------------------------------------------------------------------------------------
Loss from operations (27,892) (17,748) (5,340) (4,790) (3,228) (58,997)
Interest and other income (expense), net 1,746 330 (331) (3) 117 1,857
--------------------------------------------------------------------------------------
Net loss (26,146) (17,418) (5,671) (4,793) (3,111) (57,140)
Preferred stock dividends - (35,797) (917) (112) - (36,826)
Accretion of redeemable convertible
preferred stock - (64) (42) (7) - (113)
--------------------------------------------------------------------------------------
Loss to common shareholders $(26,146) $ (53,279) (6,630) (4,912) (3,111) (94,079)
======================================================================================
Net loss per share, basic and diluted $ (0.61) $ (10.77) $(393.52) $(291.58) $ (184.67)
=====================================================================
Shares used in computing net loss per
share, basic and diluted 42,551 4,946 17 17 17
=====================================================================
As of December 31,
2001 2000 1999 1998 1997
-----------------------------------------------------------
(In thousands)
Balance Sheet Data:
Cash and cash equivalents $34,602 $62,497 $ 234 $ 2,491 $ 30
Working capital 32,788 59,224 (878) 1,481 (29)
Total assets 42,131 67,738 974 2,992 112
Redeemable convertible preferred stock - - 4,535 4,493 -
Total stockholders' equity (deficiency) $38,981 $63,308 $ (8,591) $(2,720) $ (1)
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements, the notes to those
financial statements and other financial information appearing elsewhere in this
document. In addition to historical information, the following discussion and
other parts of this document contain forward-looking statements that reflect our
plans, estimates, intentions, expectations and beliefs. Our actual results could
differ materially from those discussed in the forward-looking statements. See
"Note Regarding Forward-Looking Statements." Factors that could cause or
contribute to such differences include, but are not limited to, those set forth
in the "Certain Factors Affecting Future Operating Results" section and
contained elsewhere in this Form 10-K.
Overview
We design, develop and offer for sale battery-free, flywheel-based power systems
to provide highly reliable, cost-competitive, environmentally-friendly,
uninterruptible electric power for industrial manufacturing plants, commercial
facilities, communications and computer networks, the Internet. Although we have
been a producer of high-energy flywheel-based products, we will soon be
offering, high-power uninterruptible power supply (or UPS) flywheel-based
products. We expect to be able to deliver the first of these proposed high-power
UPS products during the third quarter of 2002.
From our inception through December 31, 2001 we have incurred losses of
approximately $94.1 million. We expect to continue to incur losses as we expand
our product development and commercialization program and prepare for the
commencement of full manufacturing operations. We expect that losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial.
Revenues. During the fourth quarter of 2000 and throughout 2001, we shipped our
first units. While we have orders to ship six additional commercial units in
2002, we are seeking other markets for our current products and other future
products. Prior to the fourth quarter of 2000, our revenues were the result of
development contracts with government entities focused on the design of flywheel
technologies. We have placed several development prototypes with potential
customers and shipped pre-production units. These products were provided to
potential customers without charge or on a demonstration basis to allow us
access to field test information and to demonstrate the application of our
technologies.
Selling, General and Administrative Expenses. Our sales and marketing expenses
consist primarily of compensation and benefits for our sales and marketing
personnel and related business development expenses. During 2001, we increased
our sales and marketing effort by hiring five sales persons and initiating
several marketing research efforts to help us find markets for our current and
future products. Prior to 2001, our historical sales and marketing expenses have
not been material. We continue to rely on engineering personnel to provide
technical specifications and product overviews to our potential customer base.
We expect sales and marketing expenses to continue to increase as we expand our
marketing efforts to seek new markets for our products. Our general and
administrative expenses consist primarily of compensation and benefits related
to our corporate staff, professional fees, insurance and travel. During October
2001 and again in March 2002, we reduced our headcount in sales and marketing
and in administration functions. As a result of these reductions, we expect our
selling, general and administrative expenses to be reduced during 2002 as
compared to 2001.
Research and Development. Our cost of research and development consists
primarily of the cost of compensation and benefits for research and development,
manufacturing and support staff, as well as materials and supplies used in the
engineering design process. These costs increased significantly during 2001 as
we completed the designs of our 2kWh unit and our 6kWh units as well as the
related electronics. While we do not expect to incur any significant additional
costs for the 2kWh or 6kWh units, we do expect to incur significant costs for
the design and development of our high-powered products. These costs began in
the first quarter of 2002 and are expected to continue throughout the remainder
of 2002 and into 2003. As a part of the new strategy for moving into the
high-powered market, we have reduced the number of our development teams from
two to one. The one team will focus solely on the high-powered design. As a
result of this, we reduced our headcount with respect to development engineers
significantly in March 2002. Therefore, while we will continue to develop the
new high-powered products, we expect our cost of research and development in
2002 to be reduced compared to 2001.
Loss on Sales Commitments. We will establish reserves for anticipated losses on
sales commitments when our cost estimates indicate a loss will be incurred. We
accrued such losses during the year based on our estimated costs to complete
delivery commitments during 2000 and 2001. We have adjusted our delivery
schedule and reversed projected losses contemplated earlier in 2000 and 2001. We
expect to decrease our cost per unit through engineering design changes,
operating efficiencies, and volume purchasing discounts.
Depreciation and Amortization. Our depreciation and amortization is primarily
related to depreciation on capital expenditures and the amortization of lease
and leasehold costs related to our facilities. We do have intellectual property
in the form of a patent on our vacuum system that we will begin to amortize in
2002. We also expect to obtain other patents during 2002 and beyond.
Interest and Other Income/Expense, net. Our non-operating income and expenses
are primarily attributable to interest income attributable to cash on hand from
our private financings and initial public offering and interest expense
associated with our capital.
Preferred Stock Dividends. Prior to our initial public offering of our common
stock, we had various classes of preferred stock outstanding each of which was
entitled to receive dividends. We accrued dividend expense monthly according to
the requirements of each class of preferred stock. In addition, we issued
warrants to purchase common stock in conjunction with the issuance of certain
classes of the preferred stock. Any value assigned to these warrants is charged
to dividend expense. As a result of our initial public stock offering during the
fourth quarter of 2000, we no longer have any preferred stock outstanding. All
outstanding dividends were paid in full during 2001.
Results of operations:
Comparison of Year ended December 31, 2001 and 2000
Revenue. During 2001 we shipped 20 flywheel units. These units were primarily
demonstration and test units. As such, any proceeds from the sale of these units
were applied as a reduction against research and development expense. We
recorded $50,000 of revenue during the year ended December 31, 2000. This
revenue was derived from a milestone related shipment of our first two units. No
revenue was recognized for five other units that we shipped in the fourth
quarter of 2000. Proceeds from these sales totaling $69,000 were applied as a
reduction against research and development expense in 2001.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 2001 totaled approximately $8,940,000 compared to
approximately $4,631,000 during the year ended December 31, 2000. This increase
of $4,309,000 is primarily the result of increased compensation and benefit
costs due to the increased staffing required for infrastructure development and
expansion of our sales and marketing effort. During October 2001 and again in
March 2002, we reduced our headcount in sales and marketing and in
administration functions. As a result of these reductions, we expect our
selling, general and administrative expenses to be reduced during 2002 as
compared to 2001.
Research and Development Expenses. Research and development expenses for 2001
were approximately $17,628,000, compared to approximately $12,715,000 during
2000. This increase of $4,913,000 is primarily the result of increased
compensation and benefit costs related to an increase in the number of
engineering and manufacturing personnel and materials used for product
development. These costs increased significantly during 2001 as we completed the
designs of our 2kWh unit and our 6kWh units as well as the related electronics.
While we do not expect to incur any significant additional costs for the 2kWh or
6kWh units, we do expect to incur significant costs for the design and
development of our high-powered products. These costs began in the first quarter
of 2002 and are expected to continue throughout the remainder of 2002 and into
2003. As a part of the new strategy for moving into the high-powered market, we
have reduced the number of our development teams from two to one. The one team
will focus solely on the high-powered design. As a result of this, we reduced
our headcount with respect to development engineers significantly in March 2002.
Therefore, while we will continue to develop the new high-powered products, we
expect our cost of research and development in 2002 to be reduced compared to
2001.
Loss on Sales Commitments. Loss on sales commitments for 2000 was approximately
$51,000. No loss on sales commitments was recorded during 2001. We accrued these
losses during 2000 based on our estimated costs to complete delivery commitments
during 2000 and 2001. We have adjusted our delivery schedule and reversed
projected losses contemplated earlier in 2000. As a result, at both December 31,
2001 and 2000 there was no cumulative accrual.
Depreciation and Amortization. Depreciation and amortization for 2001 were
approximately $1,324,000 compared to approximately $401,000 during 2000. This
increase of $923,000 is attributable to amortization of leasehold improvements
at the new facility in Wilmington MA as well as amortization on additional
machinery and equipment and other capital assets acquired in 2001.
Interest and Other Income/(Expense), net. Our net non-operating income for 2001
was approximately $1,746,000 compared to approximately $330,000 in 2000. The
increase is attributable to interest income associated with the higher cash
balances resulting from our stock offering during the fourth quarter of 2000.
Preferred Stock Dividends. During 2000, we accrued preferred stock dividends on
redeemable convertible preferred stock of approximately $35,797,000. Of this
amount $33,000,000 was a non-cash charge from the issuance of warrants in
connection with the issuance of our Class F redeemable convertible preferred
stock. In addition, we recorded a $1,300,000 non-cash charge from the issuance
in warrants to purchase common stock in conjunction with the issuance of our
Class D redeemable convertible preferred stock. As a result of our initial
public stock offering during the fourth quarter of 2000, we no longer have any
preferred stock outstanding. All outstanding dividends were paid in full during
2001.
Comparison of Year ended December 31, 2000 and 1999
Revenue. We recorded $50,000 of revenue during the year ended December 31, 2000.
This revenue was derived from a milestone related shipment of our first two
units. No revenue was recognized for five other units that we shipped in the
fourth quarter. Proceeds from these sales totaling $90,000 were applied as a
reduction against research and development expense in 2001. During 1999 our
revenue was approximately $269,000, which resulted from work performed on
contracts to demonstrate applications of our technologies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled approximately $4,631,000 during the year ended
December 31, 2000, compared to approximately $1,559,000 during 1999. This
increase of $3,072,000 is primarily the result of increased compensation and
benefit costs due to the increased staffing required for infrastructure
development and expansion of our sales and marketing effort. We expect to
continue to increase and strengthen our sales and marketing effort throughout
2001.
Research and Development Expenses. Research and development expenses for 2000
were approximately $12,715,000, compared to approximately $3,506,000 during
1999. This increase of $9,209,000 is primarily the result of increased
compensation and benefit costs related to an increase in the number of
engineering and manufacturing personnel and materials used for product
development. During the fourth quarter of 2000, we completed the development
process of our first commercial product and are actively developing our family
of products. During 2001, we expect this research and development effort to
continue at about the same level as during 2000.
Loss on Sales Commitments. Loss on sales commitments for 2000 was approximately
$51,000 compared to $325,000 during 1999. We accrued these losses during the
year based on our estimated costs to complete delivery commitments during 2000
and 2001. We have adjusted our delivery schedule and do not expect to incur the
losses contemplated earlier in the year. As a result, at December 31, 2000 the
cumulative accrual was $0.
Depreciation and Amortization. Depreciation and amortization for 2000 were
approximately $401,000 compared to approximately $219,000 during 1999. This
increase of $182,000 is attributable to increases in capital lease costs and
capital equipment expenditures.
Interest and Other Income/(Expense), net. Our net non-operating income for 2000
was approximately $330,000, compared to net non-operating expense of
approximately ($331,000) for 1999. The increase is attributable to interest
income associated with the higher cash balances resulting from our various
financings early in 2000 and the proceeds of our stock offering during the
fourth quarter of 2000.
Preferred Stock Dividends. During 2000, we accrued preferred stock dividends on
redeemable convertible preferred stock of approximately $35,797,000. Of this
amount $33,000,000 was a non-cash charge from the issuance of warrants in
connection with the issuance of our Class F redeemable convertible preferred
stock. In addition, we recorded a $1,300,000 non-cash charge from the issuance
in warrants to purchase common stock in conjunction with the issuance of our
Class D redeemable convertible preferred stock.
Liquidity and Capital Resources
Our cash requirements depend on many factors, including our research and
development activities, continued efforts to commercialize our products and
additional market development. We expect to make significant expenditures to
fund our working capital, develop our technologies and explore opportunities to
find and develop other markets to sell our products. From our inception to date,
our primary cash requirements have been to fund research and development,
establish production capabilities including capital expenditures and for working
capital including various infrastructure costs.
Net cash used in operating activities was approximately ($24,220,000),
($12,458,000) and ($4,840,000) for 2001, 2000, and 1999, respectively. The
primary component to the negative cash flow from operations is from the net
losses. For the year 2001, we had a net loss of approximately ($26,146,000).
This was offset by approximately $1,324,000 for depreciation and amortization;
$347,000 for a non-cash expense from the change in stock option terms for
certain terminated employees; other non-cash consulting expenses of $340,000;
$303,000 for a non-cash charge in connection with the settlement of a lawsuit
and approximately $109,000 from the sale or disposal of certain fixed assets and
tooling. Changes in operating assets and liabilities used approximately $497,000
of cash during 2001. The primary components were decreased accounts payable and
accrued expenses of approximately $857,000 and decreased inventory of
approximately $208,000. These were offset by decreased prepaid expenses and
other current assets of approximately $274,000 and an increase in our accrual
for accrued compensation and benefits of $444,000. For the year 2000 we had a
net loss of approximately ($17,418,000) offset by non-cash expenses of
approximately 3,799,000. Changes in operating assets and liabilities generated
cash of approximately $1,161,000 during 2000. For the year 1999 we had a net
loss of approximately ($5,671,000) offset by non-cash expenses of approximately
$1,014,000. Changes in operating assets and liabilities used approximately
($183,000) of cash during 1999.
Net cash used in investing activities was approximately ($3,655,000),
($3,702,000) and ($461,000) for 2001, 2000 and 1999, respectively. The principal
uses of cash were related to the purchase of equipment including the leasehold
improvements to the new operating facility and the payment of security deposits
pursuant to obtaining the new facility lease.
Net cash used from financing activities was approximately $21,000 during 2001.
This compares to net cash generated of approximately $78,423,000 and $3,045,000
for 2000 and 1999, respectively. During 2001, the principal sources of cash were
approximately $829,000 from the exercise of employee stock options and shares of
common stock issued under out Employee Stock Purchase Plan. In addition we
refinanced certain fixed assets under capital leases that generated
approximately $496,000. These proceeds were offset by the payment of dividends
accrued in 2000 related to various classes of preferred stock of approximately
$1,159,000 and the repayment of capital leases of $186,000. During 2000, the
principal source of cash was our initial public stock offering which raised
approximately $49,341,000 net of $5,858,000 of expenses associated with the
offering. Additionally, we raised approximately $28,352,000 during 2000 through
our sale of Class F Preferred stock. During 1999, we received cash proceeds of
$3,150,000 from the issuance of notes payable to investors. Remaining proceeds
from our initial public stock offering of approximately $34.6 million at
December 31, 2001 were held in short-term, interest-bearing investment grade
securities to provide liquidity for operations.
Based upon our operating plan and our recent reduction in headcount, we believe
that our cash and cash equivalents and future cash flow from operations will
satisfy the Company's working capital needs for the next 24 months. Inasmuch as
we do not expect to become profitable during this period, our ability to
continue as a going concern thereafter will depend on our being able to raise
additional capital. We may not be able to raise this capital at all, or if we
are able to do so, it may be on terms that are extremely dilutive to our
shareholders.
Impact of Recently Issued Accounting Standards Not Yet Implemented
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 will apply to all
business combinations that the Company enters into after June 30, 2001, and
eliminates the pooling-of-interests method of accounting. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. Under the new
Statements, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. We do not expect adoption of this statement
to have a material impact on its financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supercedes SFAS No. 121. SFAS No. 144
further refines the requirements of SFAS No. 121 that companies (1) recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable based on its undiscounted future cash flows and (2) measure an
impairment loss as the difference between the carrying amount and fair value of
the asset. In addition, SFAS No. 144 provides guidance on accounting and
disclosure issues surrounding long-lived assets to be disposed of by sale. We do
not expect adoption of this statement to have a material impact on its financial
position or results of operations.
Inflation
We do not believe our operations have been materially affected by inflation.
Certain Factors Affecting Future Operating Results
The Value Proposition of our High-Energy Products may not be Recognized
There can be no assurance that we will be able to compete successfully against
batteries in the high-energy market unless we successfully establish the value
proposition of our products based upon dependability, environmental benefits,
and long maintenance-free life of our products.
We Will Need Additional Financing Which May not Be Available to Us on Acceptable
Terms or At All.
We will need to secure additional financing in the future to carry out our
business plan. We believe our cash balances will fund our operations for
approximately 24 months. We may also need additional financing for a variety of
reasons including:
o expanding research and development;
o expanding manufacturing equipment and facilities faster than planned;
o funding additional working capital; or
o acquiring complementary products, businesses or technologies.
We cannot be certain that we will be able to raise additional funds on terms
acceptable to us, or at all. Any future financing may result in dilution to our
shareholders. If future financing is not available or is not available on
acceptable terms, our business, results of operations and financial condition
would be materially adversely affected. See "Selected Historical Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our Stockholders may Suffer Substantial Dilution if we Issue Additional Equity
to Obtain Financing.
If we raise additional funds by issuing additional equity securities, our
existing stockholders will likely experience substantial dilution. Furthermore,
the newly issued securities could have rights superior to the rights of the
common stock outstanding.
Our Stock May be Disqualified from the National Market System of Nasdaq
By letter dated March 13, 2002, the Nasdaq notified us that because our stock
has been trading for less than one dollar for 30 consecutive trading days, on
June 11, 2002 our stock will be removed from the National Market System unless
it trades for more than one dollar for ten trading days before that date. If our
stock is so removed, we plan to apply to have our stock quoted on the SmallCap
Market, but there is no assurance that this application will be granted. If it
is not granted, our stock will be quoted on the OTCBB.
We Face Intensified Competition from Batteries Due to Their Declining Prices and
improved life. As a Consequence Our Customers are Less Likely to Realize the
Value Proposition of Our Products.
The performance of batteries has improved while battery prices have declined due
to lower volume demand from the communications markets and others and increased
competition resulting from an increase in the number of battery manufacturers.
These changes in battery pricing and performance make it more difficult for us
to establish a value proposition of our high-energy products.
Our Initial Target Market, the Communications Industry, Has Experienced a Sharp
Decline, Which may Adversely Affect Our Financial Performance and Stock Price.
We initially targeted the communications markets for the sale of our high-energy
products. However, this industry, which had previously sustained high rates of
infrastructure build-out, has experienced a sharp decline in build-out as well
as maintenance spending. Significant reductions in both maintenance budgets and
capital build-out budgets at telecommunications companies made these potential
customers more conservative with their spending and expenditure analysis and
less willing to try new technology solutions, such as our products.
It Is Difficult to Evaluate Us and to Predict Our Future Performance, Because We
Have a Short Operating History and Are a Development Stage Company. Therefore,
Our Future Financial Performance May Disappoint Investors and Result in a
Decline in Our Stock Price.
We have a limited operating history. We were formed in May 1997 to commercialize
electrical power systems based on flywheel energy storage. We are a development
stage company making the transition to the manufacturing of new products in a
new and developing sector. Unless we can achieve significant market acceptance
of our products at volumes and with margins that allow us to cover our costs of
operations, we may never advance beyond our start-up phase. In light of the
foregoing, it is difficult or impossible for us to predict future results and
investors should not be assured that we will have future revenue growth. See
"Business," "Selected Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
We Have Incurred Losses Since Our Inception and Anticipate Continued Losses
Through at Least 2003.
We have incurred net losses to common shareholders and negative cash flows since
our inception in May 1997. We had net losses to common shareholders of
approximately ($26,146,000) in 2001, ($53,279,000) in 2000 and ($6,630,000) in
1999. Since our inception in May 1997, we have had net losses to common
shareholders totaling ($94,078,000). We expect to continue to incur net losses
through at least 2003. Although we are looking for ways to economize and reduce
costs, our efforts may prove even more expensive than we currently anticipate.
Our revenue must grow substantially if we are to offset these higher expenses
and become profitable. Even if we do achieve profitability, we may be unable to
sustain or increase our profitability in the future. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
We Have Very Limited Experience Manufacturing Flywheel Energy Storage Systems on
a Commercial Basis, and We May Be Unable to Achieve Profitability.
We may not achieve profitability if we cannot develop or obtain efficient,
low-cost manufacturing capability, processes and suppliers that will enable us
to meet the quality, price, engineering, design and production standards or
production volumes required to meet our product commercialization schedule, if
any, or to satisfy the requirements of our customers or the market generally. To
date, we have focused primarily on research and development and have no
experience manufacturing flywheel energy storage systems on a commercial basis.
See "Business."
We Might Fail to Develop a Successful High- Power UPS Product .
The successful development of our high-power UPS products will involve
significant technological challenges including:
o reducing manufacturing costs for the flywheel's shaft, hub and rim,
bearings and related electronics in order to make them profitable;
o ensuring minimal warranty expenses through design and quality control;
o extending the product to new applications.
Because We Depend on Third-Party Suppliers for the Development and Supply of Key
Components for Our Products, and Because We Do Not Have Contracts with These
Suppliers, We Could Experience Disruptions in Supply that Could Delay or
Decrease Our Revenues.
Our business, prospects, results of operations, or financial condition could be
harmed if we are unable to maintain satisfactory relationships with suppliers.
To accelerate development time and reduce capital investment, we rely on
third-party suppliers for several of our key components. We do not have any
contracts with these suppliers. If these suppliers should fail to timely deliver
components that meet our quality, quantity, or cost standards, then we could
experience production delays or cost increases and our financial performance
could be adversely affected. Because the components with limited sources are key
components that are complex, difficult to manufacture and require long lead
times, we may have difficulty finding alternative suppliers on a timely or cost
effective basis. As a result, we could experience shortages in supply or be
unable to be cost competitive in the markets we are pursuing. The supplier of
the flywheel unit for our new high-power UPS product and the supplier of the
control electronics for that product are both single source suppliers, and the
loss or interruption of supply from either of these suppliers would adversely
affect our ability to market our high-power UPS product, and thus, our financial
results. See "Business."
In the Event of SignificantSales Growth, We Will Need to Develop or Obtain
Manufacturing Capacity for Our Products. There Can be No Assurance That We Will
be Able to Accomplish TheseTasks.
If we have an opportunity to produce significant volumes of products to satisfy
customer demands, we will need to develop or obtain manufacturing capacity to
meet quality, profitability and delivery schedules. We may need to establish
additional manufacturing facilities or expand our current facilities. We have no
experience in the volume manufacture of flywheel systems and there can be no
assurance that we will be able to accomplish these tasks, if necessary, on a
timely basis to meet customer demand or at all.
We Face Intense Competition and We May Be Unable to Compete Successfully.
The markets for highly reliable, uninterruptible electric power are intensely
competitive. There are a number of companies located in the United States,
Canada, and abroad that are developing flywheel energy storage technology. We
also compete with companies that are developing applications using other types
of alternative energy storage. In addition, if large, established companies
decide to focus on the development of flywheel energy storage systems for sale
to our potential customers they may have the manufacturing, marketing, and sales
capabilities to complete research, development and commercialization of
commercially viable alternative energy storage systems that could be more
competitive than our systems and could be brought to market more quickly than
ours. To the extent they already have name recognition, their products may enjoy
greater initial market acceptance among our potential customers. These
competitors may also be better able than us to adapt quickly to customers'
changing demands and to changes in technology. See "Business."
Technological advances in alternative energy products or other alternative
energy technologies may render our systems obsolete. We do not presently have
any products or technologies other than flywheel systems under development. Our
system is, however, only one of a number of alternative energy products being
developed by potential competitors that have potential commercial applications,
including super capacitors, fuel cells, advanced batteries, and other types of
alternative energy technologies. See "Business."
The performance of batteries has improved while battery prices have declined due
to lower volume demand from the communications markets and others and increased
competition resulting from an expansion of the number of battery manufacturers.
These changes in battery pricing and performance coupled with the lack of
recognition of the value proposition of our high-energy products have precluded
the general acceptance of our high-energy products.
Government Regulation May Impair Our Ability to Market Our Product.
Government regulation of our product, whether at the federal, state or local
level, including any regulations relating to installation and servicing of our
products, may increase our costs and the price of our systems, and may have a
negative impact on our revenue and profitability. We cannot assure you that our
products will not be subject to existing or future federal and state regulations
governing traditional electric utilities and other regulated entities. We expect
that our products and their installation will be subject to oversight and
regulation at the local level in accordance with state and local ordinances
relating to building codes, safety, pipeline connections and related matters. We
do not know the extent to which any existing or new regulations may impact our
ability to distribute, install and service our products. Once our products reach
the commercialization stage and we begin distributing our systems to our early
target markets, federal, state or local government entities or competitors may
seek to impose regulations.
Product Liability Claims Against Us Could Result in Substantial Expenses and
Negative Publicity Which Could Impair Successful Marketing of Our Products.
Our business exposes us to potential product liability claims that are inherent
in the manufacturing, marketing and sale of electro-mechanical products, and as
such, we may face substantial liability for damages resulting from the faulty
design or manufacture of products or improper use of products by end users. We
cannot assure you that our product liability insurance will provide sufficient
coverage in the event of a claim. Also, we cannot predict whether we will be
able to maintain such coverage on acceptable terms, if at all, or that a product
liability claim would not materially adversely affect our business, financial
condition or the price of our common stock. In addition, negative publicity in
connection with the faulty design or manufacture of our products would adversely
affect our ability to market and sell our products.
Safety Failures by Our Products or Those of Our Competitors Could Reduce Market
Demand or Acceptance for Flywheels in General.
A serious accident involving either our flywheels or our competitors' flywheels
could be a significant deterrent to customer acceptance and adversely affect our
financial performance. With any form of energy storage, including machinery,
chemicals, fuel or other means of energy storage, there is the possibility of
accident. If a flywheel fails and the energy stored is released, the flywheel
could break apart and the pieces could be ejected at a high rate of speed.
However, we have designed our flywheels so that if they fail, the flywheel is
expected to shut down rather than to disintegrate. To date, our testing
validates this design conclusion. Also, we believe that one of the advantages of
composite flywheels over metal flywheels is that in the event of a flywheel
failure, the flywheel tends to delaminate rather than (as in the case of metal)
to break into a small number of large fragments which have greater possibility
of penetrating a containment vessel. A consortium of government, academic, and
industry representatives has been formed to address containment flywheel
safety.in the event of this kind of flywheel failure. At this early stage of
commercialization, there are differing approaches to containment safety.with
disagreement in the community on the most effective means.
Our Financial Performance Could Be Adversely Affected by Our Need to Hire and
Retain Key Executive Officers and Skilled Technical Personnel.
Because our future success depends to a large degree on the success of our
technology, our competitiveness will depend significantly on whether we can
attract and retain skilled technical personnel, especially engineers, and can
retain members of our executive team. We have employment agreements only with
Messrs. Capp, Spiezio, Lazarewicz and French. Mr. Capp's employment is in effect
until December 1, 2004, but the other employment agreements will expire on
October 26, 2002.
In the fourth quarter of 2001 and the first quarter of 2002, we substantially
reduced our workforce. Competition for skilled personnel is intense, and as we
seek to determine the right size for our workforce, we may not be successful in
attracting and retaining the personnel or executive talent necessary to develop
our products and operate profitably. Because we must have a certain number of
skilled technical personnel, there is a limit to the amount by which we can
reduce expenses while maintaining development programs.
There May Be Only a Modest Number of Potential Customers for Our High-Power UPS
Products. To the Extent We Obtain Customers, We May Have To Rely On A Limited
Number Of Such Customers, And Our Business May Be Adversely Affected By The Loss
Of, Or Reduced Purchases By, Any One Of Those Customers.
There may only be a limited number of potential customers for our high-power UPS
product, in which case we will be subject to the risk that the loss of or
reduced purchases by any single customer could adversely affect our business.
If We Are Unable to Successfully Market, Distribute and Service Our Products
Internationally We May Experience a Shortfall in Expected Revenues and
Profitability Which Could Lead to a Reduction in Our Stock Price.
In addition to the risks we face when operating within the US, additional risks
are present when we operate internationally. A part of our business strategy may
be to expand our customer base by marketing, distributing and servicing our
products internationally through distributors. We have limited experience
developing and manufacturing our products to comply with the commercial and
legal requirements of international markets. Our ability to properly service our
products internationally will depend on third party service providers. There is
no assurance that we will be able to locate service providers in every region or
that these providers will effectively service our products. Also, our success in
those markets will depend, in part, on our ability to secure foreign customers
and our ability to manufacture products that meet foreign regulatory and
commercial requirements. In addition, our planned international operations are
subject to other inherent risks, including potential difficulties in
establishing satisfactory distributorship relationships and enforcing
contractual obligations and intellectual property rights in foreign countries,
fluctuations in currency exchange rates. If we are unable to successfully
market, distribute or service our products internationally, we may never
experience profitability and our stock price may decline.
Any Failure to Protect Our Intellectual Property Could Seriously Impair Our
Competitive Position.
We cannot assure you that we have or will be able to maintain a significant
proprietary position on the basic technologies used in our flywheel systems. Our
ability to compete effectively against alternative technologies will be affected
by our ability to protect our proprietary technology, systems designs and
manufacturing processes. We do not know whether any of our pending or future
patent applications under which we have rights will issue or, in the case of
patents issued or to be issued, that the claims allowed are or will be
sufficiently broad to protect our technology or processes, or will protect us
from competitors. Even if all our patent applications are issued and are
sufficiently broad, they may be challenged or invalidated. We could incur
substantial costs in prosecuting or defending patent infringement suits, and
such suits would divert funds and resources that could be used in our business.
We do not know whether we have been or will be completely successful in
safeguarding and maintaining our proprietary rights.
Further, our competitors or others may independently develop or patent
technologies or processes that are substantially equivalent or superior to ours.
If we are found to be infringing on third party patents, we do not know whether
we will be able to obtain licenses to use such patents on acceptable terms, if
at all. Failure to obtain needed licenses could delay or prevent the
development, manufacture or sale of our systems.
We rely, in part, on contractual provisions to protect our trade secrets and
proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also be known without
breach of such agreements or may be independently developed by competitors or
others. Our inability to maintain the proprietary nature of our technology and
processes could allow our competitors or others to limit or eliminate any
competitive advantages we may have, thereby harming our business prospects. See
"Business."
Our Majority Stockholders Will Control All Matters Requiring a Stockholder Vote,
Which will Limit Other Investors' Ability to Influence the Outcome of Matters
Requiring Stockholder Approval.
Stockholders who owned our company prior to our initial public offering own
approximately 59.0% of our outstanding stock as of December 31, 2001. If a
sufficient number of these stockholders were to vote together as a group, they
would have the ability to control our board of directors and its policies. For
instance, these stockholders would be able to control the outcome of all
stockholder votes, including votes concerning director elections, charter and
by-law amendments and possible mergers, corporate control contests and other
significant corporate transactions. These stockholders may use their influence
to approve actions that are adverse to the interest of other investors, which
could depress our stock price.
The Share Prices of Companies in Our Sector have been Highly Volatile and Our
Share Price Could Be Subject to Extreme Price Fluctuations.
The markets for equity securities of high technology companies, including
companies in the power reliability and power quality markets, have been highly
volatile recently and the market price of our common stock has been and may
continue to be subject to significant fluctuations. This could be in response to
operating results, announcements of technological innovations or new products by
us, or our competitors, patent or proprietary rights developments and market
conditions for high technology stocks in general. In addition, stock markets, in
particular the Nasdaq National Market, in recent years have experienced extreme
price and volume fluctuations that often have been unrelated or disproportionate
to the operating performance of individual companies. These market fluctuations,
as well as general economic conditions, may adversely affect the market price of
our common stock, which could affect our ability to attract additional capital
to fund our operations.
Provisions of Delaware Law and of Our Charter and By-laws May Inhibit a Takeover
that Stockholders Consider Favorable.
Provisions in our certificate of incorporation and by-laws and in the Delaware
corporate law may make it difficult and expensive for a third party to pursue a
tender offer, change in control or takeover attempt that is opposed by our
management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so.
Beginning with our annual stockholder meeting in 2001, we implemented a
staggered board of directors that will make it difficult for stockholders to
change the composition of the board of directors in any one year. Additionally,
our board of directors may authorize issuances of "blank check" preferred stock
that could be used to increase the number of outstanding shares and discourage a
takeover attempt. These anti-takeover provisions could substantially impede the
ability of public stockholders to benefit from a change in control or change our
management and board of directors.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Our cash equivalents and investments, all of which have maturities of less than
one year, may expose us to interest rate risk. At December 31, 2001, we had
approximately $60,000 of cash equivalents which were held in a non-interest
bearing checking account. Also at December 31, 2001, we had approximately
$5,664,000 invested in interest-bearing money market accounts; approximately
$1,996,000 in high-grade commercial paper and approximately $26,882,000 in
high-grade bonds. The fair value of these investments approximates their cost. A
10% change in interest rates would change the investment income realized on an
annual basis by approximately $150,000, which we do not feel is material.
Item 8. Financial Statements and Supplementary Data
BEACON POWER CORPORATION
(A Development Stage Company)
Index to Consolidated Financial Statements
Page
Independent Auditors' Report 25
Consolidated Balance Sheets at December 31, 2001 and 2000 26
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999 and for the period
May 8, 1997 (date of inception) to December 31, 2001. 27
Consolidated Statements of Stockholders' Equity
(Deficiency) for the years ended December 31, 2001,
2000 and 1999 and for the period May 8, 1997 (date
of inception) to December 31, 2001. 28
Consolidated Statements of Cash Flows for the years
ended December 31, 2001, 2000 and 1999 and for the
period May 8, 1997 (date of inception) to December
31, 2001. 32
Notes to Consolidated Financial Statements 34
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Beacon Power Corporation:
We have audited the accompanying consolidated balance sheets of Beacon Power
Corporation and subsidiary (the "Company") (a development stage company) as of
December 31, 2001 and 2000, and the related consolidated statements of
operations, stockholders' equity (deficiency) and cash flows for each of the
three years in the period ended December 31, 2001 and for the period from May 8,
1997 (date of inception) through December 31, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Beacon Power
Corporation and subsidiary as of December 31, 2001 and 2000 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001 and the period from May 8, 1997 (date of inception)
through December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
March 8, 2002
BEACON POWER CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
December 31,
2001 2000
--------------------------
Assets
Current assets:
Cash and cash equivalents $ 34,601,585 $62,497,102
Inventory - 207,613
Prepaid expenses and other current assets 1,131,065 857,137
--------------------------
Total current assets 35,732,650 63,561,852
Property and equipment, net (Note 3) 6,188,507 3,417,884
Deposits 8,292 673,278
Other assets 201,504 84,992
---------------------------
Total assets $ 42,130,953 $67,738,006
===========================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 911,465 $1,728,330
Accrued compensation and benefits 721,130 277,086
Due to related party (Note 13) 35,532 52,725
Dividends payable (Note 8) - 1,159,373
Other accrued expenses 941,100 981,671
Current portion of capital lease
obligations (Note 4) 335,145 138,648
--------------------------
Total current liabilities 2,944,372 4,337,833
Capital lease obligations, net of
current portion (Note 4) 205,352 92,245
Commitments (Note 5)
Stockholders' equity:
Preferred stock(Note 6)
Common stock, $.01 par value;
110,000,000 shares authorized;
42,770,856 and 42,033,314 shares
issued and outstanding in 2001 and
2000, respectively 427,709 420,333
Deferred stock compensation (211,564) (2,070,659)
Additional paid-in capital 132,911,256 132,958,758
Deficit accumulated during
the development stage (94,146,172) (68,000,504)
--------------------------
Total stockholders' equity 38,981,229 63,307,928
--------------------------
Total liabilities and stockholders' equity $ 42,130,953 $ 67,738,006
==========================
See notes to consolidated financial statements.
BEACON POWER CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
Cumulative from
May 8, 1997
(Date of
Inception,)
Year ended Year ended Year ended through
December 31 December 31 December 31 December 31
2001 2000 1999 2001
----------------------------------------------------------------
Revenue $ - $ 50,000 $ 268,868 $ 551,184
Operating expenses:
Selling, general and administrative 8,939,589 4,630,915 1,558,985 17,486,125
Research and development 17,627,714 12,714,823 3,506,031 39,664,014
Loss on sales commitments - 50,974 325,000 375,974
Depreciation and amortization 1,323,958 401,013 218,594 2,021,773
----------------------------------------------------------------
Total operating expenses 27,891,261 17,797,725 5,608,610 59,547,886
----------------------------------------------------------------
Loss from operations (27,891,261) (17,747,725) (5,339,742) (58,996,702)
Other income (expense):
Interest income 2,157,724 747,202 25,118 3,057,969
Interest expense (303,160) (370,299) (356,869) (1,045,058)
Other expense (108,971) (47,216) - (156,187)
----------------------------------------------------------------
Total other income (expense), net 1,745,593 329,687 (331,751) 1,856,724
----------------------------------------------------------------
Net loss (26,145,668) 17,418,038) (5,671,493) (57,139,978)
Preferred stock dividends (Note 8) - (35,796,675) (916,852) (36,825,680)
Accretion of redeemable convertible
preferred stock - (64,435) (41,671) (113,014)
----------------------------------------------------------------
Loss to common shareholders $(26,145,668) $ (53,279,148) $ (6,630,016) $ (94,078,672)
================================================================
Loss per share - basic and diluted $ (0.61) $ (10.77) $ (393.52)
================================================
Weighted-average common shares outstanding 42,550,502 4,946,411 16,848
================================================
See notes to consolidated financial statements.
BEACON POWER CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficiency)
Class A Class C
Preferred Stock Preferred Stock Common Stock
Shares Amount Shares Amount Shares Amount
-----------------------------------------------------------------------------------
Balance at May 8, 1997 (Date of Inception) - $ - - $ - - $ -
Issuance of founder's shares - - - - 6,750,000 67,500
Issuance of Class A preferred stock 1,125,000 5,000,000 - - - -
Recapitalization 3,373,313 67,466 - - (6,746,626) (67,466)
Rounding for fractional shares - - - - (2) -
Issuance of Class C preferred and
common stock - - 6 29,866 13,476 134
Accrual of consulting expense - - - - - -
Repayment of subscription receivable - - - - - -
Net loss - - - - - -
---------------------------------------------------------------------------------------
Balance, December 31, 1997 4,498,313 5,067,466 6 29,866 16,848 168
Issuance of Class A preferred stock
for services 120,000 300,000 - - - -
Issuance of Class A preferred stock
for services and interest on loans 4,594 11,485 - - - -
Dividend on Class D redeemable
convertible preferred stock - - - - - -
Repayment of subscription receivable - - - - - -
Amortization of deferred consulting
expense, net - - - - - -
Accretion of redeemable preferred stock
to redemption value - - - - - -
Net loss - - - - - -
----------------------------------------------------------------------------------------
Balance, December 31, 1998 4,622,907 5,378,951 6 29,866 16,848 168
Issuance of Class A preferred stock
for services 145,000 362,500 - - - -
Dividend on Class D redeemable
convertible preferred stock - - - - - -
Deferred stock compensation - - - - - -
Amortization of deferred stock
compensation - - - - - -
Amortization of deferred consulting
expense, net
Issuance of warrants to holders of Class
D redeemable convertible preferred stock - - - - - -
Issuance of warrants for bridge loans - - - - - -
Accretion of redeemable preferred stock
to redemption value - - - - - -
Net loss - - - - - -
----------------------------------------------------------------------------------------
Balance, December 31, 1999 4,767,907 5,741,451 6 29,866 16,848 168
Dividends on redeemable convertible
preferred stock - - - - - -
Issuance of warrants - - - - - -
Deferred stock compensation - - - - - -
Amortization of deferred stock
compensation - - - - - -
Accretion of redeemable preferred stock
to redemption value - - - - - -
Proceeds from stock offering - - - - 9,200,000 92,000
Conversion of Class A preferred stock (4,767,907) (5,741,451) - - 9,535,814 95,358
Conversion of Class C preferred stock - - (6) (29,866) 12 -
Conversion of redeemable convertible
preferred stock - - - - 19,823,704 198,237
Deferred consulting - - - - - -
Common stock issuance for consulting - - - - 134,464 1,345
Payment of accrued dividend - - - - 859,330 8,593
Cashless warrant exercise - - - - 1,982,876 19,829
Exercise of stock options - - - - 480,266 4,803
Net loss - - - - - -
---------------------------------------------------------------------------------------
Balance, December 31, 2000 - $ - - $ - 42,033,314 $ 420,333
Issuance of stock options - - - - - -
Deferred stock compensation - - - - - -
Amortization of deferred stock
compensation - - - - - -
Common stock issued through Employee
Stock Purchase Plan - - - - 54,956 550
Common stock issuance for consulting
Change in option terms for severed
employees - - - - - -
Exercise of stock options - - - - 682,586 6,826
Net loss - - - - - -
---------------------------------------------------------------------------------------
Balance, December 31, 2001 - $ - - $ - 42,770,856 $ 427,709
=======================================================================================
See notes to consolidated financial statements.
Total
Deferred Deferred Additional Stock Stockholders'
Consulting Stock Paid-in Subscription Accumulated (Deficiency)
Expense Compensation Capital Receivable Deficit Equity
------------------------------------------------------------------------------------
Balance at May 8, 1997 (Date of inception) $ - $ - $ - $ - $ - $ -
Issuance of founder's shares - - - - (67,500) -
Issuance of Class A preferred stock for
services - - - (5,000,000) - -
Recapitalization - - - - - -
Rounding for fractional shares - - - - - -
Issuance of Class C preferred and common
stock - - - - - 30,000
Accrual of consulting expense 87,500 - - - - 87,500
Repayment of subscription receivable - - - 2,992,492 - 2,992,492
Net loss - - - - (3,111,381) (3,111,381)
-----------------------------------------------------------------------------------------
Balance, December 31, 1997 87,500 - - (2,007,508) (3,178,881) (1,389)
Issuance of Class A preferred stock for
services (150,000) - - - - 150,000
Issuance of Class A preferred stock for
services and interest on loans - - - - - 11,485
Dividend on Class D redeemable
convertible preferred stock - - - - (112,153) (112,153)
Repayment of subscription receivable - - - 2,007,508 - 2,007,508
Amortization of deferred consulting
expense, net 25,000 - - - - 25,000
Accretion of redeemable preferred stock
to redemption value - - - - (6,908) (6,908)
Net loss - - - - (4,793,398) (4,793,398)
-----------------------------------------------------------------------------------------
Balance, December 31, 1998 (37,500) - - - (8,091,340) (2,719,855)
Issuance of Class A preferred stock (125,000) - - - - 237,500
Dividend on Class D redeemable
convertible preferred stock - - - - (636,852) (636,852)
Deferred stock compensation (65,318) 65,318 - - -
Amortization of deferred stock
compensation 8,670 - - - 8,670
Amortization of deferred consulting
expense, net 62,500 - - - - 62,500
Issuance of warrants to holders of Class
D redeemable convertible preferred stock - - 280,000 - (280,000) -
Issuance of warrants for bridge loans - - 170,000 - - 170,000
Accretion of redeemable preferred stock
to redemption value - - - - (41,671) (41,671)
Net loss - - - - (5,671,493) (5,671,493)
-----------------------------------------------------------------------------------------
Balance, December 31, 1999 (100,000) (56,648) 515,318 - (14,721,356) (8,591,201)
Dividends on redeemable convertible
preferred stock - - - - (1,496,675) (1,496,675)
Issuance of warrants - - 36,070,366 - (34,300,000) 1,770,366
Deferred stock compensation - (2,944,649) 2,944,649 - - -
Amortization of deferred stock
compensation - 930,638 - - - 930,638
Accretion of redeemable preferred stock
to redemption value - - - - (64,435) (64,435)
Proceeds from stock offering, net of
expenses - - 49,249,537 - - 49,341,537
Conversion of Class A preferred stock - - 5,646,093 - - -
Conversion of Class C preferred stock - - 29,866 - - -
Conversion of redeemable convertible
preferred stock - - 36,496,431 - - 36,694,668
Deferred consulting 598,284 - - - - 598,284
Common stock issuance for consulting (498,284) - 496,939 - - -
Payment of accrued dividend - - 1,077,714 - - 1,086,307
Cashless warrant exercise - - (19,829) - - -
Exercise of stock options - - 451,674 - - 456,477
Net loss - - - - (17,418,038) (17,418,038)
-----------------------------------------------------------------------------------------
Balance, December 31, 2000 - (2,070,659) 132,958,758 - (68,000,504) 63,307,928
Issuance of stock options - - 303,160 - - 303,160
Deferred stock compensation - 1,566,906 (1,566,906) - - -
Amortization of deferred stock
compensation - 340,081 - - - 340,081
Common stock issued through Employee
Stock Purchase Plan - - 109,394 - - 109,944
Common stock issuance for consulting - (47,892) 47,892 - - -
Change in option terms for severed
employees - - 346,591 - - 346,591
Exercise of stock options - - 712,367 - - 719,193
Net loss - - - - (26,145,668) (26,145,668)
-----------------------------------------------------------------------------------------
Balance, December 31, 2001 $ - $ (211,564) $132,911,256 $ - $(94,146,172) $38,981,229
========================================================================================
BEACON POWER CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
Cumulative from
May 8, 1997
(Date of
Inception)
Year ended Year ended Year ended through
December 31 December 31 December 31 December 31
2001 2000 1999 2001
-------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (26,145,668) $(17,418,038) $(5,671,493) $(57,139,978)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,323,958 401,013 218,594 2,021,773
Loss on sale of fixed assets 108,971 47,416 - 156,387
Interest expense relating to issuance of warrants - 201,000 170,000 371,000
Non-cash charge for change in option terms 346,591 - - 346,591
Non-cash charge for option issue 303,160 - - 303,160
Amortization of deferred consulting expense, net - 598,284 300,000 1,160,784
Amortization of deferred stock compensation 340,081 930,638 - 1,270,719
Warrants issued for consulting services - 1,569,366 - 1,569,366
Accrued loss on sales commitments - 50,974 325,000 375,974
Services and interest expense paid in preferred
stock - - - 11,485
Changes in operating assets and liabilities:
Inventory 207,613 (207,613) - -
Prepaid expenses and other current assets (273,928) (841,150) 4,320 (1,131,065)
Accounts payable (816,865) 1,315,184 (409,577) 911,465
Accrued compensation and benefits 444,044 167,880 41,023 721,130
Accrued interest - 111,420 164,140 275,560
Due to related party (17,193) 52,725 (18,611) 35,532
Accrued loss on sales commitments - (375,974) - (375,974)
Other accrued expenses and current liabilities (40,570) 938,449 36,270 949,770
-------------------------------------------------------------
Net cash used in operating activities (24,219,807) (12,458,426) (4,840,334) (48,166,321)
Cash flows from investing activities:
(Increase)/decrease in other assets 664,986 (683,054) (110,180) (175,218)
Purchases of property and equipment (4,320,064) (3,019,266) (350,881) (7,947,634)
-------------------------------------------------------------
Net cash used in investing activities (3,655,078) (3,702,320) (461,061) (8,122,852)
Cash flows from financing activities:
Initial public stock offering, net of expenses - 49,341,537 - 49,341,537
Payment of dividends (1,159,373) - - (1,159,373)
Shares issued under Employee Stock Purchase Plan 109,944 - - 109,944
Exercise of employee stock options 719,193 456,477 - 1,175,670
Issuance of preferred stock - 28,351,791 - 32,868,028
Repayment of subscription receivable - - - 5,000,000
Payment on capital leases (186,247) (126,307) (105,406) (490,899)
Proceeds from capital lease refinancing 495,851 - - 495,851
Proceeds from notes payable issued to investors - 400,000 3,150,000 3,550,000
-------------------------------------------------------------
Net cash provided (used) by financing activities (20,632) 78,423,498 3,044,594 90,890,758
Increase (decrease) in cash and cash equivalents (27,895,517) 62,262,752 (2,256,801) 34,601,585
Cash and cash equivalents, beginning of period 62,497,102 234,350 2,491,151 -
-------------------------------------------------------------
Cash and cash equivalents, end of period $ 34,601,585 $62,497,102 $ 234,350 $ 34,601,585
=============================================================
See notes to consolidated financial statements.
BEACON POWER CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. Nature of Business and Operations
Nature of Business. Beacon Power Corporation (the "Company" or "Beacon") (a
development stage company) was incorporated on May 8, 1997 as a wholly owned
subsidiary of SatCon Technology Corporation ("SatCon"). Since its inception,
Beacon has been engaged in the development of flywheel devices for storing and
transmitting kinetic energy. During the fourth quarter of 2000, the Company
shipped its first seven units. Because the Company has not yet generated a
significant amount of revenue from its principal operations, it is continuing to
be accounted for as a development stage company under Statement of Financial
Accounting Standards No. 7. The Company has a single operating segment,
manufacturing alternative power sources. The Company's organizational structure
has no divisions or subsidiaries dictated by product lines, geography or
customer type.
Operations. The Company has experienced net losses since its inception and, as
of December 31, 2001, had an accumulated deficit of approximately $94.1 million.
The Company is currently facing the challenge of ongoing development and
refinement of its commercial product. This ongoing research and development is
expected to require significant outlays of capital. As discussed in Note 7,
during the fourth quarter of 2000, the Company completed an initial public
offering of its common stock and raised approximately $49.3 million net of
offering expenses. Management believes that this funding is sufficient to
continue its operations as a going concern through at least December 31, 2002.
During March 2002, in an effort to reduce is monthly cash burn rate, the Company
reduced it headcount by 37%. This action combined with other cost cutting
measures taken earlier will insure the Company has enough cash for the next 24
months.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Accounting Principles. The accompanying consolidated financial statements have
been prepared using accounting principles generally accepted in the United
States of America.
Consolidation. The accompanying consolidated financial statements include the
accounts of the Company and its subsidiary Beacon Power Securities Corporation.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Recapitalization. The accompanying financial statements reflect a
recapitalization of the Company in 1997 when one shareholder exchanged shares of
common stock for Class A preferred stock.
Stock Split. The accompanying financial statements reflect a 2-for-1 split of
the Company's common stock, which occurred immediately prior to the
effectiveness of the Company's initial public stock offering. All share and per
share information herein has been retroactively restated to reflect this split.
Summary of Significant Accounting Policies
Use of Estimates. The preparation of consolidated financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents. Cash and cash equivalents include demand deposits and
highly liquid investments with maturity of three months or less when acquired.
Cash equivalents are stated at cost, which approximates market value.
Inventory. At December 31, 2001, the Company wrote all of its inventory off to
research and development expense as management determined that any inventory on
hand at December 31, 2001 would only be used for development of future products.
At December 31, 2000, inventory consists of raw materials and is carried at the
lower of cost or market utilizing the first-in first-out ("FIFO") method.
Employee Advances. During 2001, the Company advanced approximately $785,000 to
three officers of the Company. The officers repaid approximately $152,000 of
these advances during 2001. The advances are expected to be repaid in full by
the officers and are secured by the officers' holdings of Beacon Power
Corporation common stock. The balance is included in prepaid and other assets in
the accompanying consolidated balance sheet. During March 2002, one officer
repaid her balance of $120,000 in full.
Property and Equipment. Property and equipment, including leasehold
improvements, are stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets.
Other Assets. Other assets consist of unamortized legal expenses related to
patents and various deposits on long-term assets and on the Company's operating
facility.
Loss on Sales Commitments. When the Company has sales commitments that are firm,
have fixed-prices and the direct costs to manufacture products covered by the
Company's firm sales commitments are in excess of the fixed selling prices,
revenue and cost of revenue on such sales commitments are recorded as deliveries
are made.. Direct costs consist of materials and direct labor costs. These
excess costs have been estimated and accrued as losses on sales commitments in
the period in which the sales commitment is made. Estimates of costs to
manufacture products are reviewed and revised periodically and changes in
estimated losses from such revisions are recorded in the accounting period in
which the revisions are made. At December 31, 2001, no estimated losses on sales
commitments are anticipated.
Long-Lived Assets. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121 long-lived assets to be held and used by the Company
are reviewed to determine whether any events or changes in circumstances
indicate that the carrying value of the asset may not be recoverable. The
conditions considered include whether or not the asset is in service, has become
obsolete, or whether external market circumstances indicate that the carrying
amount may not be recoverable. The Company recognizes a loss for the difference
between the estimated fair value of the asset and the carrying amount. The fair
value of the asset is measured using either available market prices or estimated
discounted cash flows. The Company's analyses indicate that there has been no
impairment of long-lived assets.
Revenue Recognition. Revenue relates to work performed under research and
development contracts and delivery of units. Revenue is recognized as services
are performed or when products are shipped and all related costs are estimable.
Stock-Based Compensation. Compensation expense associated with awards of stock
or options to employees is measured using the intrinsic-value method. Deferred
compensation expense associated with awards to non-employees is measured using
the fair-value method and is amortized over the vesting period of three years
using a calculation under FASB Interpretation No. 28, "Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans."
Income Taxes. Deferred income tax assets and liabilities are determined based on
the differences between the financial reporting and tax bases of assets and
liabilities and tax loss and credit carryforwards using the currently enacted
tax rates and laws. A valuation allowance is provided to the extent realization
of deferred tax assets is not considered more likely than not.
Research and Development. Research and development costs are expensed as
incurred.
Financial Instruments. The carrying amount of cash and cash equivalents,
accounts payable, accrued expenses, notes payable to investors and capital lease
obligations approximate their fair values.
Concentration of Credit Risk. Financial instruments that potentially subject the
Company to significant concentration of credit risk consist primarily of cash
and cash equivalents. Substantially all of the Company's cash and cash
equivalents are managed by one financial institution. At December 31, 2001 and
2000, the Company had cash balances at a financial institution in excess of
federally insured limits. However, the Company does not believe that it is
subject to unusual credit risk beyond the normal credit risk associated with
commercial banking relationships.
Comprehensive Loss. Comprehensive loss is the same as net loss for all periods
presented.
Recently Issued Accounting Pronouncements.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 will apply to all
business combinations that the Company enters into after June 30, 2001, and
eliminates the pooling-of-interests method of accounting. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. Under the new
Statements, goodwill and intangible assets deemed to have indefinite lives will
no longer be amortized but will be subject to annual impairment tests in
accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives. The Company does not expect adoption of this
statement to have a material impact on its financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supercedes SFAS No. 121. SFAS No. 144
further refines the requirements of SFAS No. 121 that companies (1) recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable based on its undiscounted future cash flows and (2) measure an
impairment loss as the difference between the carrying amount and fair value of
the asset. In addition, SFAS No. 144 provides guidance on accounting and
disclosure issues surrounding long-lived assets to be disposed of by sale. The
Company does not expect adoption of this statement to have a material impact on
its financial position or results of operations.
Loss Per Share - Basic and Diluted. Basic loss per share has been computed using
the weighted-average number of shares of common stock outstanding during each
period. Diluted loss per share was computed in the same manner. At December 31,
2001, the impact of the Company's outstanding potential common shares, including
options and warrants (computed using the treasury stock method) totaling 671,504
shares, were excluded from the calculation because such items were antidilutive.
3. Property and Equipment
Property and equipment consisted of the following at December 31:
Estimated
Useful
Lives 2001 2000
-------------------------------------------
Machinery and equipment 5 years $ 1,996,711 $ 694,486
Furniture and fixtures 7 years 733,018 54,433
Service vehicles 5 years 63,792 -
Office equipment 3 years 2,030,653 1,217,263
Leasehold improvements Lease term 2,072,577 1,489,569
Equipment under capital lease obligations Lease term 1,081,726 535,450
--------------------------
Total 7,978,477 3,991,201
Less accumulated depreciation and amortization (1,789,970) (573,317)
--------------------------
Property and equipment, net $6,188,507 $3,417, 884
==========================
4. Capital Lease Obligations
The Company leases equipment under capital lease agreements expiring through
January 2003. Future obligations under such capital leases as of December 31,
2001 are as follows:
2002 $367,696
2003 217,761
---------------
585,457
Less amount representing interest (44,960)
---------------
540,497
Less current portion of capital lease obligations (335,145)
---------------
Capital lease obligations, excluding current portion $205,352
===============
5. Commitments
The Company leases office and light manufacturing space under an operating lease
through September 30, 2007 and has an operating lease for certain office
equipment which expired October 2001. At December 31, 2001, the Company has
provided the lessor with an irrevocable letter of credit in the amount of
$400,454. This letter of credit is secured by a cash deposit.
Future minimum annual lease payments under non-cancelable operating leases as of
December 31, 2001 are as follows:
2002 $461,622
2003 490,675
2004 490,675
2005 500,359
2006 529,413
Thereafter $397,059
Total rent expense was $567,239, $473,576 and $199,405, during 2001, 2000 and
1999, respectively.
6. Preferred Stock
As a result of the initial public offering of the Company's common stock and the
conversion of all outstanding shares of all classes of the preferred stock, the
Company amended its charter and cancelled all its classes of preferred stock.
The Company then added a new class of preferred stock that can be issued in the
future by filing a Certificate of Designations with the specific terms as set by
its Board of Directors. At December 31, 2001 and 2000, there are 10 million
shares of preferred stock authorized with none outstanding.
7. Common Stock
Initial Public Offering. During the fourth quarter of 2000, the Company sold
9,200,000 shares of its common stock, inclusive of the underwriters' over
allotment, at an initial public offering price of $6 per share. Net proceeds to
the Company as a result of the stock offering totaled approximately $49.3
million reflecting gross proceeds of $55.2 million net of underwriter
commissions of approximately $3.9 million and other estimated offering costs of
approximately $2.0 million.
Reserved Shares. At December 31, 2001, 13,839,129 shares of common stock were
reserved for issuance under the Company's stock option plan and outstanding
warrants.
8. Redeemable Convertible Preferred Stock and Stock Warrants
Class D Redeemable Convertible Preferred Stock and Class D Stock Warrants. Prior
to its initial public offering, the Company's capital structure included Class D
redeemable convertible preferred stock ("Class D Stock"). All outstanding shares
of the Class D Stock plus accrued dividends were either converted into shares of
common stock during the initial public offering or were paid in cash in February
2001. After the initial public offering, the Company amended its charter and
cancelled all its Class D Stock.
Under the conditions of the Class D Stock offering, the Company issued warrants
in October 1999 to three investors to purchase 772,500 shares of common stock at
$1.67, 772,500 shares of common stock at $2.25, and 772,500 shares of common
stock at $3.00 (the "October 1999 warrants"). The estimated fair value of the
warrants at the date of their issuance was $280,000. Upon issuance of the
warrants, this amount was recorded as a dividend to the holders of the Class D
Stock and credited to additional paid-in-capital. These warrants expire December
31, 2004.
Additional warrants were issued under the Class D Stock agreement during April
2000 to three investors to purchase 712,500 shares of common stock at $1.67 per
share, 712,500 shares of common stock at $2.25 per share, and 712,500 shares of
common stock at $3.00 per share. Upon issuance of these warrants, the Company
recorded a dividend of approximately $1,300,000 for the fair market value of
these warrants based on the Black-Scholes option pricing model. These warrants
expire December 31, 2004.
In December 2000, an investor exercised a portion of its warrants, in a cashless
transaction, to purchase 300,000 shares of the Company's common stock at $1.67,
300,000 shares of the Company's common stock at $2.25 and 300,000 shares of the
Company's common stock at $3.00 per share. Net shares issued totaled 608,843.
Class E Redeemable Convertible Preferred Stock and Class E Stock Warrants. Prior
to its initial public offering, the Company's capital structure included Class E
redeemable convertible preferred stock ("Class E Stock"). All outstanding shares
of the Class E Stock plus accrued dividends were either converted into shares of
common stock during the initial public offering or were paid in cash in February
2001. After the initial public offering, the Company amended its charter and
cancelled all its Class E Stock.
In conjunction with the issuance of the Senior Notes in August 1999, the Company
issued warrants to four investors to purchase 315,000 shares of Class E Stock at
an exercise price of $2.50 per share (the "August 1999 warrants"). The estimated
fair value of these warrants at the date of grant was $170,000. This amount was
recorded as a discount on the Senior Notes and was charged to interest expense
in 1999, as the Senior Notes were demand notes. These warrants were to expire on
August 2, 2004.
In conjunction with the Class E Stock conversion, warrants to purchase 315,000
shares, issued in conjunction with the issuance of the Senior Notes in August
1999, were cancelled. In exchange, warrants to purchase 306,535 shares of Class
E Stock at $2.50 per share were issued. These warrants expire April 7, 2005. The
estimated fair market value of these warrants was approximately $344,000. Since
these warrants replaced the August 2, 1999 warrants, the amount allocated to the
August 1999 warrants have been reallocated to Class E Stock Warrants and the
remaining $174,000 was charged to interest expense in the year ended December
31, 2000. As a result of the initial public stock offering by the Company in the
fourth quarter of 2000, the holders of the warrants are now entitled to purchase
613,070 shares of the Company's common stock instead of the Class E Stock.
In December 2000, an investor exercised its 102,398 of its warrants, in a
cashless transaction, to purchase 84,433 shares of the Company's common stock.
Class F Redeemable Convertible Preferred Stock and Class F Stock Warrants. Prior
to its initial public offering, the Company's capital structure included Class F
redeemable convertible preferred stock ("Class F Stock"). All outstanding shares
of the Class F Stock plus accrued dividends were either converted into shares of
common stock during the initial public offering or were paid in cash in February
2001. After the initial public offering, the Company amended its charter and
cancelled all its Class F Stock.
In conjunction with the issuance of the Class F Stock, the Company issued
warrants to seven investors to purchase 6,333,333 shares of its common stock at
an exercise price of $2.25. The estimated fair value of the warrants at the date
of their issuance was $33,000,000. This amount was recorded as a dividend to the
holders of the Class F Stock and credited to additional paid-in-capital during
2000. These warrants expire on May 23, 2005. During December 2000, two investors
exercised 1,884,800 of their warrants, in a cashless transaction, to purchase
1,289,600 shares of the Company's common stock.
Consultant Warrants. The Company issued warrants to two consultants that are
exercisable for an aggregate of 70,000 shares of its common stock at an exercise
price of $6.00 per share. The holder of one of these warrants to purchase 50,000
shares of common stock may exercise its warrant at any time prior to January 31,
2002. None of these warrants were exercised prior to January 31, 2002 and the
warrants have expired. The holder of the other warrant to purchase 20,000 shares
of common stock may exercise its warrant at any time prior to August 2, 2005.
These warrants were fully vested upon the issuance and the Company recorded a
charge to consulting expense of $213,861.
On October 24, 2000, the Company issued 240,000 warrants to an investor at an
exercise price of $2.10 per share in conjunction with an agreement by an
affiliate of that investor to provide the Company with technical expertise. One
half of the warrants vest immediately, the remainder vest as services are
utilized. During the fourth quarter of 2000, the company recorded a charge to
consulting expense for $1,355,505 to recognize the fair market value of the
vested warrants. The Company has deferred the remaining warrants and will
revalue the amount and record additional expense as necessary in future quarters
as the remaining services are provided. Deferred compensation relating to these
warrants was approximately $150,000 and $1,100,000 at December 31, 2001 and
2000. The agreement terminates and any unvested options are forfeited on
November 1, 2003.
All warrants were valued on the date of grant using the Black-Scholes (common
stock) or the Binary Option Pricing Model (preferred stock). The assumptions
used to value these warrants were as follows:
April August October
2000 2000 1999 1999 1997
Warrants Warrants Warrants Warrants Warrants
------------------------------------------------------------
Risk-free interest rate 6.15% 6.5% 5.62% 5.86% 6.25%
Expected life of warrant 12 months Various 30 months 27 months 24 months
Expected dividend payment rate, as a percentage
of the stock price on the date of grant 0% 0% 0% 0% 0%
Assumed volatility 73% 100% 60% 60% 48%
9. Stock Options
The Company's option plans provide for the granting of stock options to purchase
up to 9,000,000 shares of the Company's common stock. Options may be granted to
employees, officers, directors and consultants of the Company with terms of up
to 10 years. Under the terms of the option plans, incentive stock options
("ISOs") are to be granted at fair market value of the Company's stock at the
date of grant, and nonqualified stock options ("NSOs") are to be granted at a
price determined by the Board of Directors. ISOs and NSOs generally vest ratably
over 36 months from the grant date and have contractual lives of up to 10 years.
Stock option activity since inception is as follows:
Weighted- Weighted-
Average Average
Number of Exercise Fair
Shares Price Value
----------------------------------------
Outstanding at inception -
Granted 647,874 $ 0.89 $0.35
----------------------------------------
Outstanding, December 31, 1997 647,874 0.89
Granted 199,126 0.89 0.38
Canceled, forfeited or expired (10,000) 0.89
----------------------------------------
Outstanding, December 31, 1998 837,000 0.89
Granted 1,467,000 0.89 0.40
Canceled, forfeited or expired (295,688) 0.89
----------------------------------------
Outstanding, December 31, 1999 2,008,312 0.89
Granted 3,443,688 3.15 1.78
Exercised (480,266) 0.89
Canceled, forfeited or expired (238,694) 2.37
----------------------------------------
Outstanding, December 31, 2000 4,733,040 2.50
Granted 2,361,007 2.94 1.93
Exercised (682,586) 1.05
Canceled, forfeited or expired (1,561,560) 4.07
----------------------------------------
Outstanding, December 31, 2001 4,849,901 $ 2.37
========================================
The following table summarizes information about stock options outstanding at
December 31, 2001:
Vested
Weighted- ________ _________
Average Weighted- Weighted-
Number Remaining Average Number Average
of Options Contractual Exercise of Exercise
Exercise Price Outstanding Life Price Options Price
- --------------------------------------------------------------------------------
$0.89 2,082,696 8.92 $0.89 856,363 $0.89
$1.78 - $2.50 1,320,396 8.70 $2.23 571,945 $2.33
$3.10 - $4.10 774,000 9.37 $3.49 654,001 $3.31
$5.10 - $5.27 327,674 9.05 $5.64 71,009 $5.11
$6.00 - $7.22 271,635 9.05 $6.34 105,476 $6.27
$9.25 - $9.31 73,500 9.10 $9.26 8,333 $9.31
Included in the above schedules are grants of 160,000 and 162,000 options made
to non-employee consultants in 2000 and 1999, respectively.
As described in Note 2, the Company uses the intrinsic-value method to measure
compensation expense associated with grants of stock options to employees. If
the Company had used the fair value method to measure compensation, reported net
loss would have been as follows:
Year ended Year ended Year ended
December 31 December 31 December 31
2001 2000 1999
----------------------------------------------
Net loss to common
shareholders as reported $ (26,145,668) $ (53,279,148) $ (6,630,016)
Net loss--pro forma (28,753,668) (54,175,173) (7,154,362)
Loss per share--as reported $ (0.61) $ (10.77) $ (393.52)
Loss per share--pro forma $ (0.68) $ (10.95) $ (424.64)
The fair value of the options on their grant date was measured using the
Black-Scholes option-pricing model. Key assumptions used to apply this
option-pricing model are as follows:
2001 2000 1999
--------------------------------------
Risk-free interest rate 3.0% - 6.25% 6.25% and 6.5% 6.0%
Expected life of option 1-3 years 3 years 3 years
Expected dividend payment rate,
as a percentage of the stock
price on the date of grant 0% 0% 0%
Assumed volatility 100% - 135% 100% 60%
The option-pricing model used was designed to value readily tradable stock
options with relatively short lives. However, management believes that the
assumptions used to value the options and the model applied yield a
reasonable estimate of the fair value of the grants made under the
circumstances (see also Note 13).
10. Employee Stock Purchase Plan
On October 15, 2000 the Company adopted an Employee Stock Purchase Plan
(the "Plan") under which eligible employees are able to purchase shares of
the Company's Common Stock at 85% of the market value at the date of the
start of each six month option period or the end of such period, whichever
is lower. Under the provisions of the Plan up to 1,000,000 shares are
authorized. Shares purchased under the Plan in 2001 totaled 54,956 and the
weighted average grant date fair value of the shares purchased was $2.00.
No shares were issued under this Plan during the year ended December 31,
2000. There are 945,044 shares available under the Plan at December 31,
2001.
11. Income Taxes
The components of the provision (benefit) for income taxes consisted of the
following:
Cumulative from
May 8, 1997
(Date of
Year ended Year ended Year ended Inception) to
December 31, December 31, December 31, December 31,
2001 2000 1999 2001
-------------------------------------------------------------------
State - current 17,156 17,156
Federal--deferred $ (9,919,839) $ (5,115,236) $ (1,995,158) $(19,663,058)
State--deferred (1,679,472) (993,055) (352,087) (3,489,230)
Increase in valuation allowance 11,599,311 6,108,291 2,347,245 23,152,288
-------------------------------------------------------------------
Provision (benefit) for income taxes $ 17,156 $ - $ - $ 17,156
===================================================================
A reconciliation of the statutory federal rate to the effective rate for all
periods is as follows:
Statutory federal rate benefit (34)%
State, net of federal effect (6)
Valuation allowance provided 40
-------
Effective rate -- %
=======
The components of the Company's deferred tax assets and liabilities consisted
of the following at December 31:
2001 2000
------------------------------
Long-term assets:
Net operating loss carryforwards $20,279,512 $10,403,206
Research and development credits 2,208,080 1,017,264
Loss on sales commitments - -
Other 664,696 132,507
------------------------------
Net deferred tax assets before
valuation allowance 23,152,288 11,552,977
Less valuation allowance (23,152,288) (11,552,977)
------------------------------
Net deferred tax assets $ - $ -
==============================
The valuation allowance increased by $11,599,311 in 2001 and $6,108,291 in 2000,
primarily due to the generation of net operating loss carryforwards and credits
for which realization is not reasonably assured.
The Company has available for future periods federal and state tax net operating
loss carryforwards for federal and state purposes of approximately $50,652,000
and $51,024,000, respectively, as of December 31, 2001. In addition, the Company
has business credits of approximately $1,378,000 and $830,000 for federal and
state purposes, respectively as of December 31, 2001. The net operating loss
carryforwards expire beginning in 2012 and 2002 for federal and state tax
purposes, respectively. The federal research and development credits begin to
expire in 2012. The Company did not pay any income taxes from inception to
December 31, 2001.
Under the provisions of the Internal Revenue Code, certain substantial changes
in the Company's ownership may have limited, or may limit in the future, the
amount of net operating loss carryforwards which could be utilized annually to
offset future taxable income and income tax liabilities. The amount of any
annual limitation is determined based upon the Company's value prior to an
ownership change.
12. Benefit Plan
In 1998, the Company created a 401(k) Profit Sharing Plan (the "Plan") for its
full-time employees. Each participant in the Plan may elect to contribute a
percentage of his or her annual compensation to the Plan on a pre-tax basis up
to the annual limit established by the Internal Revenue Service. The Company
matches employee contributions at a rate of 50% up to the first 6% of the
employee's contributions. The Company may also elect to make a profit-sharing
contribution at the discretion of the Board of Directors. Employee contributions
are fully vested. Company matching and profit sharing contributions vest 20%
after two years of service consisting of at least 1,000 hours per calendar year
and 20% annually thereafter. Company contributions were $189,883, $102,085 and
$41,963 during 2001, 2000 and 1999, respectively.
13. Related Party Transactions
Consulting Agreements. The Company entered into consulting agreements with three
investors. The contracts were seven-year agreements, renewable annually
thereafter, for consulting services to be provided by the investors in exchange
for annual issuances of shares of the Company's Class A Stock. During 2000, 1999
and 1998, $586,000, $300,000 and $175,000, respectively, was recorded as
consulting expense relating to these agreements, and 67,232 (ultimately 134,464
shares of common stock), 145,000 and 120,000 shares of Class A Stock in 2000,
1999 and 1998, respectively, were issued as compensation under these contracts.
Prepaid and accrued consulting expenses have been recorded annually, based on
the terms and dates of the consulting agreements. The services provided by the
investors were recorded based upon the value of the securities issued. These
contracts all expired upon the completion of the initial public offering of the
Company's common stock in November 2000.
Patents. The Company has entered into an agreement with SatCon whereby SatCon
granted the Company a perpetual license to use the technology patented by SatCon
relating to the field of flywheel energy storage products, systems and processes
for stationary terrestrial applications.
Services Agreements. Through 2000, SatCon performed certain research and
development, administrative and other services for the Company. Amounts paid to
SatCon for such services amounted to approximately $0, $551,000, $59,000 and
$2,404,000 during 2001, 2000, 1999 and the period from inception to December 31,
2001, respectively. No amounts were payable to SatCon relating to such services
at either December 31, 2001 or 2000.
Inventory. The Company used SatCon to perform certain engineering and other
processing tasks on certain of the electrical components of its product. This
was discontinued during 2001, with the Company's next generation electronics. As
such, the Company had no inventory at SatCon for processing at December 31,
2001. At December 31, 2000, the Company had $153,500 of its inventory at SatCon
for processing. The Company had payables to SatCon for electronic component
purchases totaling $35,532 and $52,725 at December 31, 2001 and 2000,
respectively.
Distribution Agreement. In 1997, the Company signed a 20-year agreement which
granted an investor exclusive rights to distribute certain of the Company's
products in a territory comprised of seven Mid-Atlantic states and the District
of Columbia. However, the Company retained the right to distribute products
directly to cable television and telephone companies.
14. Summary of Non-cash Investing and Financing Activities:
During the year ended December 31, 2001, 2000 and 1999, cash paid for interest
was approximately $34,000, $370,000 and $184,000, respectively.
During the year ended December 31, 2001, 2000 and 1999, cash paid for taxes was
approximately $1,600, $1,800 and $500, respectively.
During 2001, 2000 and 1999, the Company acquired assets totaling $0, $281,034
and $0 of assets with capital leases.
During the year ended December 31, 2001, the Company recorded a decrease in
deferred compensation from the issuance of non-qualified stock options to third
parties of $1,580,352. This was offset by a charge to additional paid in
capital. During 2000, the Company recorded an increase in deferred compensation
from the issuance of non-qualified stock options to third parties of $1,844,649.
This is offset by a credit to additional paid in capital.
During 2000, the Company converted its bridge notes of $3,550,000 and accrued
interest on those notes totaling $275,560 into Class E redeemable convertible
preferred stock.
In April 2000, the Company cancelled certain warrants that were issued in
conjunction with the Class E Preferred stock. This resulted in a charge to
Additional Paid in Capital of $170,000.
As a result of its initial public stock offering during the fourth quarter of
2000, the Company converted 4,767,907 shares of its Class A Preferred Stock into
9,535,814 shares of its common stock.
As a result of its initial public stock offering during the fourth quarter of
2000, the Company converted 6 shares of its Class C preferred stock into 12
shares of its common stock.
As a result of its initial public stock offering during the fourth quarter of
2000, the Company converted all of its outstanding shares of its Class D, E and
F redeemable convertible preferred stock into 19,823,704 shares of its common
stock.
During 2000, the company paid dividends on its redeemable convertible preferred
stock totaling $1,086,307 through the issuance of 859,330 shares of its common
stock.
As a result of its initial public stock offering during the fourth quarter of
2000, the Company paid accrued consulting expense totaling $498,284 with 134,464
shares of its common stock.
In December 2000, the Company issued 1,982,876 shares of its common stock as a
result of two holders of the Company's warrants exercising a portion of their
warrants in a cashless exercise transaction.
During 1999 the Company issued warrants valued at $450,000 in conjunction with
certain financing arrangements.
During 1999 the Company issued non-qualified stock options valued at $65,318 for
certain consulting agreements.
15. Quarterly Results (Unaudited)
In management's opinion, this unaudited information includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any future
quarters.
2001
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------
Revenue $ - $ - $ - $ -
Loss from operations (6,296,072) (6,869,317) (8,063,401) (6,662,471)
Net loss $ (5,799,436) $ (6,302,084) $(7,588,410) $(6,455,738)
Loss per share - basic and diluted $ (0.14) $ (0.15) $ (0.18) $ (0.15)
Weighted-average common shares
outstanding 42,169,642 42,523,462 42,739,635 42,760,695
2000
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------------------------------------
Revenue $ - $ - $ - $ 50,000
Loss from operations (2,893,697) (2,295,054) (4,582,851) (7,976,123)
Net loss $ (3,018,735) $(2,526,898) $(4,247,082) $(7,625,323)
Loss per share - basic and diluted $ (179.17) $ (73.39) $ (34.74) $ (0.39)
Weighted-average common shares
outstanding 16,848 34,430 122,269 19,504,373
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning executive officers of the Company that responds to this
Item is incorporated by reference from Item 4A contained in Part 1 of this Form
10-K. The information that responds to this Item with respect to Directors is
incorporated by reference from the section entitled "Election of Directors" in
the Company's definitive proxy statement for its 2002 Annual Meeting of
Stockholders, which is required to be filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934 ("Exchange Act") and which will be filed with
the SEC not later than 120 days after the end of the Company's fiscal year (the
"Proxy Statement"). Information with respect to compliance by the Company's
directors and executive officers with Section 16(a) of the Exchange Act is
incorporated by reference from the section entitled "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement.
Item 11. Executive Compensation
Information required in response to this Item is incorporated by reference from
the section entitled "Compensation of Executive Officers" in the Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required in response to this Item is incorporated by reference from
the sections entitled "Election of Directors" and "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Information required in response to this Item is incorporated by reference from
the section entitled "Other Information Relating to Directors, Nominees and
Executive Officers" in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
1. Financial Statements
The financial statements are listed under Part II, Item 8 of this Report.
2. Financial Statement Schedules
Schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because the information is
disclosed in the Consolidated Financial Statements or because such schedules are
not required or not applicable.
3. Exhibits
The exhibits are listed below under Part IV, Item 14(c) of this report.
Reports on Form 8-K
None
Exhibits
Exhibit
Number Description of Document
3.1 Sixth Amended and Restated Certificate of Incorporation (Incorporated
by reference to Exhibit No. 3.1 to the Registration Statement on Form
S-1 of Beacon Power Corporation No. 333-43386 filed on November 16,
2000).
3.2 Amended and Restated Bylaws (Incorporated by reference to Exhibit No.
3.2 to the Registration Statement on Form S-1 of Beacon Power
Corporation No. 333-43386 filed on November 16, 2000).
10.1.1 Securities Purchase Agreement by and among SatCon Technology
Corporation, Duquesne Enterprises (n/k/a DQE Enterprises, Inc.) and
Beacon Power Corporation dated May 28, 1997 (Incorporated by reference
to Exhibit No. 10.1.1 to the Registration Statement on Form S-1 of
Beacon Power Corporation No. 333-43386 filed on November 16, 2000).
10.1.2 Securities Purchase Agreement by and among Beacon Power Corporation,
Perseus Capital, L.L.C., Duquesne Enterprises (n/k/a DQE Enterprises,
Inc.), Micro-Generation Technology Fund, L.L.C. and SatCon Technology
Corporation dated October 23, 1998 (Incorporated by reference to
Exhibit No. 10.1.2 to the Registration Statement on Form S-1 of Beacon
Power Corporation No. 333-43386 filed on November 16, 2000).
10.1.3 Securities Purchase Agreement by and among Beacon Power Corporation,
Perseus Capital, L.L.C., Duquesne Enterprises (n/k/a DQE Enterprises,
Inc.), Micro-Generation Technology Fund, L.L.C. and SatCon Technology
dated April 7, 2000 (Incorporated by reference to Exhibit No. 10.1.3
to the Registration Statement on Form S-1 of Beacon Power Corporation
No. 333-43386 filed on November 16, 2000).
10.1.4 Securities Purchase Agreement by and among Beacon Power Corporation,
Perseus Capital, L.L.C., Micro-Generation Technology Fund, L.L.C.,
Mechanical Technology Incorporated, The Beacon Group Energy Investment
Fund II, L.P. and Penske Corporation dated April 21, 2000 (Incorporated
by reference to Exhibit No. 10.1.4 to the Registration Statement on
Form S-1 of Beacon Power Corporation No. 333-43386 filed on November
16, 2000).
10.1.5 Securities Purchase Agreement by and among Beacon Power Corporation,
Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro-Generation
Technology Fund, L.L.C., Mechanical Technology Incorporated, GE Capital
Equity Investments, Inc., The Beacon Group Energy Investment Fund II,
L.P. and Penske Corporation dated May 23, 2000 (Incorporated by
reference to Exhibit No. 10.1.5 to the Registration Statement on Form
S-1 of Beacon Power Corporation No. 333-43386 filed on November 16,
2000).
10.1.6 Investor Rights Agreement by and among Beacon Power Corporation,
Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro-Generation
Technology Fund, L.L.C., Mechanical Technology Incorporated, GE Capital
Equity Investments, Inc., The Beacon Group Energy Investment Fund II,
L.P., Penske Corporation, SatCon Technology Corporation, James S.
Bezreh, Russel S. Jackson, Russell A. Kelley, Stephen J. O'Connor, Jane
E. O'Sullivan and Robert G. Wilkinson dated May 23, 2000 (Incorporated
by reference to Exhibit No. 10.1.6 to the Registration Statement on
Form S-1 of Beacon Power Corporation No. 333-43386 filed on November
16, 2000).
10.1.7 Form of Warrant of Beacon Power Corporation issued pursuant to class D
financing and list of holders thereof (Incorporated by reference to
Exhibit No. 10.1.7 to the Registration Statement on Form S-1 of Beacon
Power Corporation No. 333-43386 filed on November 16, 2000).
10.1.8 Form of Warrant of Beacon Power Corporation issued pursuant to class E
financing and list of holders thereof (Incorporated by reference to
Exhibit No. 10.1.8 to the Registration Statement on Form S-1 of Beacon
Power Corporation No. 333-43386 filed on November 16, 2000).
10.1.9 Form of Warrant of Beacon Power Corporation issued pursuant to class F
bridge financing and list of holders thereof (Incorporated by reference
to Exhibit No. 10.1.9 to the Registration Statement on Form S-1 of
Beacon Power Corporation No. 33-43386 filed on November 16, 2000).
10.1.10 Form of Warrant of Beacon Power Corporation issued pursuant to class F
financing and list of holders thereof (Incorporated by reference to
Exhibit No. 10.1.10 to the Registration Statement on Form S-1 of Beacon
Power Corporation No. 333-43386 filed on November 16, 2000))
10.1.11 Warrant of Beacon Power Corporation issued to Cox Communications, Inc.
dated August 2, 2000 (Incorporated by reference to Exhibit No. 10.1.11
to the Registration Statement on Form S-1 of Beacon Power Corporation
No. 333-43386 filed on November 16, 2000).
10.1.12 Warrant of Beacon Power Corporation issued to Kaufman-Peters dated
August 2, 2000 (Incorporated by reference to Exhibit No. 10.1.12 to the
Registration Statement on Form S-1 of Beacon Power Corporation No.
333-43386 filed on November 16, 2000).
10.1.13 Warrant of Beacon Power Corporation issued to GE Capital Equity
Investments, Inc. dated October 24, 2000 (Incorporated by reference
to Exhibit No. 10.1.13 to the Registration Statement on Form S-1 of
Beacon Power Corporation No. 333-43386 filed on November 16, 2000).
10.1.14 Second Amended and Restated 1998 Stock Incentive Plan of Beacon Power
Corporation (Incorporated by reference to Exhibit No. 10.1.14 to the
Registration Statement on Form S-1 of Beacon Power Corporation No.
333-43386 filed on November 16, 2000).
10.1.15 Form of Incentive Stock Option Agreement of Beacon Power Corporation
(Incorporated by reference to Exhibit No. 10.1.15 to the Registration
Statement on Form S-1 of Beacon Power Corporation No. 333-43386 filed
on November 16, 2000).
10.1.16 Form of Non-Qualified Stock Option Agreement of Beacon Power
Corporation (Incorporated by reference to Exhibit No. 10.1.16 to the
Registration Statement on Form S-1 of Beacon Power Corporation No.
333-43386 filed on November 16, 2000).
10.1.17 Form of Non-Qualified Stock Option Agreement of Beacon Power
Corporation issued to certain consultants on July 24, 2000 and list of
holders thereof (Incorporated by reference to Exhibit No. 10.1.17 to
the Registration Statement on Form S-1 of Beacon Power Corporation No.
333-43386 filed on November 16, 2000).
10.1.18 Amended and Restated License Agreement by and between Beacon Power
Corporation and SatCon Technology Corporation dated October 23, 1998
(Incorporated by reference to Exhibit No. 10.1.18 to the Registration
Statement on Form S-1 of Beacon Power Corporation No. 333-43386 filed
on November 16, 2000).
10.1.19 Lease between Beacon Power Corporation and BCIA New England Holdings
LLC dated July 14, 2000 (Incorporated by reference to Exhibit No.
10.1.20 to the Registration Statement on Form S-1 of Beacon Power
Corporation No. 333-43386 filed on November 16, 2000).
10.1.20 Letter Agreement among Beacon Power Corporation, GE Capital Equity
Investments, Inc. and GE Corporate Research and Development dated
October 24, 2000 (Incorporated by reference to Exhibit No. 10.1.24 to
the Registration Statement on Form S-1 of Beacon Power Corporation No.
333-43386 filed on November 16, 2000).
10.1.21 Form of Director and Officer Indemnification Agreement (Incorporated by
reference to Exhibit No. 10.1.25 to the Registration Statement on Form
S-1 of Beacon Power Corporation No. 333-43386 filed on November 16,
2000).
10.1.22 Form of Employment Agreement and list of parties thereto (Incorporated
by reference to Exhibit No. 10.1.26 to the Registration Statement on
Form S-1 of Beacon Power Corporation No. 333-43386 filed on November
16, 2000).
10.1.23 Employment Agreement Dated December 1, 2001 between F. William Capp and
Beacon Power Corporation.
11.1 Statement of Computation of Earnings per Share. (This exhibit has been
omitted because the information is shown in the financial statements
or notes thereto.)
23.1 Consent of Deloitte & Touche LLP
SIGNATURES
Pursuant to the requirements of Section 13 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.
BEACON POWER CORPORATION
By: /s/ F. William Capp
---------------------------
F. William Capp
President and Chief Executive Officer
Date: April 1, 2002
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.
Signature Title Date
/s/ F. William Capp President and Chief Executive
-------------------- Officer and Director
F. William Capp (Principal Executive Officer) April 1, 2002
/s/ James M. Spiezio Vice President of Finance and
-------------------- Chief Financial Officer
James M. Spiezio (Principal Financial Officer) April 1, 2002
/s/ Stephen A. Spanos Corporate Controller
--------------------- (Principal Accounting Officer)
Stephen A. Spanos April 1, 2002
/s/ Philip J. Deutch
Philip J. Deutch Director April 1, 2002
/s/ Alan P. Goldberg
Alan P. Goldberg Director April 1, 2002
/s/ Nancy Hawthorne
Nancy Hawthorne Director April 1, 2002
/s/ Jack P. Smith
Jack P. Smith Director April 1, 2002
/s/ Kenneth M. Socha
Kenneth M. Socha Director April 1, 2002
/s/ William E. Stanton
William E. Stanton Director April 1, 2002
-------------
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-50260 of Beacon Power Corporation on Form S-8 of our report dated March 8,
2002 appearing in this Annual Report on Form 10-K of Beacon Power Corporation
for the year ended December 31, 2001.
/S/ Deloitte & Touche, LLP
Boston, MA
March 27, 2002