-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RDrFbcm2cXlr2E631oUqSPxv+FBDzaTFv2BL6ppx8nRj/hXFgJkuZyaz6MQ8Kb/R GXDLkxaSVEssdGER/XxgZw== 0000912057-02-013014.txt : 20020415 0000912057-02-013014.hdr.sgml : 20020415 ACCESSION NUMBER: 0000912057-02-013014 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SATCON TECHNOLOGY CORP CENTRAL INDEX KEY: 0000889423 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 042857552 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11512 FILM NUMBER: 02597425 BUSINESS ADDRESS: STREET 1: 161 FIRST STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176610540 MAIL ADDRESS: STREET 1: 161 FIRST STREET CITY: CAMBRIDGE STATE: MA ZIP: 02142 10-K/A 1 a2074850z10-ka.txt 10-K/A ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-K/A AMENDMENT NO. 1 TO FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended September 30, 2001 Commission file number 1-11512 -------------------- SATCON TECHNOLOGY CORPORATION (Exact name of Registrant as specified in its Charter) DELAWARE 04-2857552 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 161 FIRST STREET, 02142 CAMBRIDGE, MASSACHUSETTS (ZIP CODE) (Address of principal executive offices)
(617) 661-0540 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act TITLE OF CLASS COMMON STOCK, $.01 PAR VALUE -------------------------- 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/A or any amendment to this Form 10-K/A. / / The aggregate market value of the Registrant's Common Stock, $.01 par value per share, held by non-affiliates of the Registrant was $65,108,176 based on the last reported sale price of the Registrant's Common Stock on the Nasdaq National Market as of the close of business on December 31, 2001 ($5.20). There were 16,539,597 shares of Common Stock outstanding as of April 1, 2002. ============================================================================== This Amendment No. 1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 2001 is being filed solely for the purpose of filing financial statements of Beacon Power Corporation in accordance with the requirements of Rule 3-09 of Regulation S-X. ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS PART II: FINANCIAL STATEMENTS OF BEACON POWER CORPORATION AND ITS SUBSIDIARY Independent Auditors' Report Consolidated Balance Sheets at December 31, 2001 and 2000 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. 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. 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. Notes to Consolidated Financial Statements 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 1 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. 2 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. 3 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
4 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. 5
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 -
6 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 ====================================================================================
7 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 (40,571) 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
8 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. 9 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. 10 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. 11 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 ===============================
12 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 13 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, 14 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%
15 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 Average of Options Contractual Exercise Number Exercise Exercise Price Outstanding Life Price of 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
16 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 17 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. 18 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 $551,000, $59,000 and $2,404,000 during 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 19 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. 20
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
21 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K/A: 1. CONSOLIDATED FINANCIAL STATEMENTS OF BEACON POWER CORPORATION AND ITS SUBSIDIARY: Consolidated Balance Sheets as of December 31, 2001 and 2000 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. Consolidated Statements of Changes in 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. 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. Notes to Consolidated Financial Statements 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth of Massachusetts on April 1, 2002. SATCON TECHNOLOGY CORPORATION By: /s/ David B. Eisenhaure ---------------------------------- David B. Eisenhaure President, Chief Executive Officer and Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
NAME CAPACITY DATE /s/ David B. Eisenhaure - ----------------------------- David B. Eisenhaure Chairman of the Board of April 1, 2002 Directors, President and Chief Executive Officer (Principal Executive Officer) /s/ Ralph M. Norwood - ----------------------------- Ralph M. Norwood Vice President, Chief April 1, 2002 Financial Officer and Treasurer (Principal Financial Officer) /s/ John J. McCabe - ----------------------------- John J. McCabe Controller and Chief April 1, 2002 Accounting Officer (Principal Accounting Officer) /s/ Michael C. Turmelle - ----------------------------- Michael C. Turmelle Director, Vice President and April 1, 2002 Chief Operating Officer /s/ James L. Kirtley, Jr. - ----------------------------- James L. Kirtley, Jr. Director, Vice President and April 1, 2002 Chief Scientist /s/ Marshall J. Armstrong - ----------------------------- Marshall J. Armstrong Director April 1, 2002 - ----------------------------- Alan P. Goldberg Director /s/ Anthony J. Villiotti - ----------------------------- Anthony J. Villiotti Director April 1, 2002 /s/ Gerald L. Wilson - ----------------------------- Gerald L. Wilson Director April 1, 2002
23 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION 2.1 Amended and Restated Asset Purchase Agreement among SatCon Film Microelectronics, Inc., Film Microelectronics Inc., and Albert R. Snider, dated as of April 3, 1997, is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated April 16, 1997. 2.2 Stock Purchase Agreement, dated as of October 21, 1999, by and among the Registrant, Mechanical Technology Incorporated, Ling Electronics, Inc. and Ling Electronics, Ltd. is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 2.3 Asset Purchase Agreement, dated as of November 16, 1999, by and between the Registrant and Northrop Grumman Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 16, 1999. 2.4 Asset Purchase Agreement by and among Inverpower Controls Ltd., the Registrant and SatCon Power Systems Canada Ltd., dated June 25, 2001, is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated July 13, 2001. 3.1 Certificate of Incorporation of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 3.2 Bylaws of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 3.3 Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on May 12, 1997, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997. 3.4 Bylaws Amendment of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997. 3.5 Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 17, 1999, is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated August 25, 1999. 3.6 Certificate of Designation of Series and Statement of Variations of Relative Rights, Preferences and Limitations of Preferred Stock, dated as of August 25, 1999, relating to the Series A Preferred Stock is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated August 25, 1999. 3.7 Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 15, 2000 is incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2000. 3.8 Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on May 4, 2001, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2001.
24
EXHIBIT NO. DESCRIPTION 4.1 Specimen Certificate of Common Stock, $.01 par value, is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 10.1(*) Employment Agreement, dated July 1, 1992, between the Registrant and David B. Eisenhaure is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 10.2(*) Employment Agreement, dated July 1, 1992, between the Registrant and Michael C. Turmelle is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 10.3 Change of Control Letter Agreement, dated March 22, 2000, between the Registrant and Sean F. Moran is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2000. 10.4(*) 1992 Stock Option Plan is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286). 10.5(*) 1994 Stock Option Plan is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1994. 10.6(*) 1996 Stock Option Plan is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1996. 10.7(*) 1998 Stock Incentive Plan is incorporated herein by reference to Exhibit B to the Registrant's Definitive Schedule 14A filed January 26, 1999. 10.8(*) 1999 Stock Incentive Plan is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1999. 10.9(*) 2000 Stock Incentive Plan is incorporated herein by reference to Exhibit C to the Registrant's Preliminary Schedule 14A filed March 19, 2001. 10.10 Lease, dated October 21, 1993, between the Registrant and Gunwyn/First Street Limited Partnership is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286) and First Amendment to Lease, dated June 22, 1998, by and between the Registrant and Gunwyn/First Street Limited Partnership is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1998. 10.11(+) Manufacturing Agreement between Applied Materials, Inc. and its wholly-owned subsidiaries and the Registrant, dated as of February 20, 1997, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997. 10.12 Securities Purchase Agreement, dated as of May 28, 1997, by and among the Registrant, Beacon Power Corporation and DQE Enterprises, Inc. is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated May 28, 1997. 10.13 Securities Purchase Agreement, dated as of October 23, 1998, by and among Beacon Power Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro Generation Technology Fund, L.L.C. and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 23, 1998. 10.14 Amended and Restated License Agreement, dated as of October 23, 1998, by and between the Registrant and Beacon Power Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 23, 1998.
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EXHIBIT NO. DESCRIPTION 10.15 Registration Rights Statement, dated as of October 23, 1998, by and among Beacon Power Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro Generation Technology Fund, L.L.C., and the Registrant, setting forth certain registration rights granted by the Registrant is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 23, 1998. 10.16 Registration Rights Statement, dated as of October 23, 1998, by and among Beacon Power Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro Generation Technology Fund, L.L.C. and the Registrant, setting forth certain registration rights granted by Beacon Power Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 23, 1998. 10.17 Lease, dated February 27, 1996, by and between the Registrant and Diamond Management, Inc. is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1998. 10.18 Lease, dated March 5, 1998, by and between the Registrant and Harold W. Slovin is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1998. 10.19 North America Distributor Agreement, dated June 4, 1998, by and between SatCon Film Microelectronics, Inc., a division of the Registrant, and Falcon Electronics, Inc. is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1998. 10.20 Asset Purchase Agreement, dated as of January 4, 1999, among K&D MagMotor Corp., the Registrant, Inductive Components, Inc., Lighthouse Software, Inc. and Thomas Glynn is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated January 4, 1999. 10.21 Asset Purchase Agreement, dated as of March 31, 1999, by and between HyComp, Inc. and HyComp Acquisition Corp., a wholly-owned subsidiary of the Registrant, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999. 10.22 Note Purchase Agreement, dated as of June 22, 1999, by and among Beacon Power Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro Generation Technology Fund, L.L.C. and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999. 10.23 Note and Warrant Purchase Agreement, dated as of August 2, 1999, by and among Beacon Power Corporation, Perseus Capital, L.L.C., DQE Enterprises, Inc., Micro Generation Technology Fund, L.L.C. and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 1999. 10.24 License and Technical Assistance Agreement, dated as of June 7, 1999, by and between Delco Remy America, Inc. and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Amendment No. 1 to the Quarterly Report on Form 10-Q for the period ended March 31, 1999. 10.25 Securities Purchase Agreement, dated as of August 25, 1999, among the Registrant and the purchasers listed on Schedule I thereto is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated August 25, 1999.
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EXHIBIT NO. DESCRIPTION 10.26 Registration Rights Agreement, dated as of August 25, 1999, among the Registrant and the investors named on the signature pages thereof is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated August 25, 1999. 10.27 Form of Warrants issued on August 25, 1999 in connection with the sale of the Series A Preferred Stock is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated August 25, 1999. 10.28 Securities Purchase Agreement, dated as of October 21, 1999, between the Registrant and Mechanical Technology Incorporated is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 10.29 SatCon Registration Rights Agreement, dated as of October 21, 1999, between the Registrant and Mechanical Technology Incorporated is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 10.30 MTI Registration Rights Agreement, dated as of October 21, 1999, between Mechanical Technology Incorporated and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 10.31 Form of Stock Purchase Warrant issued on October 21, 1999 by the Registrant to Mechanical Technology Incorporated is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 10.32 Form of Stock Purchase Warrant issued on October 21, 1999 by Mechanical Technology Incorporated to the Registrant is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 21, 1999. 10.33 Sublease, dated November 16, 1999, between the Registrant and Northrop Grumman Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 16, 1999. 10.34 Transition Services Agreement, dated as of November 16, 1999, between the Registrant and Northrop Grumman Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 16, 1999. 10.35 Memorandum of Understanding, entered into on November 16, 1999, between the Registrant and Northrop Grumman Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 16, 1999. 10.36 Registration Rights Agreement, dated as of November 16, 1999, between the Registrant and Northrop Grumman Corporation is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 16, 1999. 10.37 Stock Purchase Warrant issued on February 4, 2000 by the Registrant to Northrop Grumman Corporation is incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 1999. 10.38 Promissory Note, dated October 6, 1999, made in favor of the Registrant by Michael C. Turmelle in the amount of $10,000, together with Promissory Note, dated December 6, 1999, made in favor of the Registrant by Michael C. Turmelle in the amount of $75,000, is incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 1999.
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EXHIBIT NO. DESCRIPTION 10.39 Demand Promissory Note, dated February 25, 2000, made in favor of the Registrant by Beacon Power Corporation in the amount of $300,000, together with First Amendment to Demand Promissory Note, dated March 16, 2000, is incorporated by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2000. 10.40 Consulting Agreement, dated July 19, 2000, between the Registrant and Marshall J. Armstrong is incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2000. 10.41 Agreement between the Department of Energy and the Registrant is incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2000. 10.42 Master Lease Agreement, dated as of August 31, 2000, by and between General Electric Corporation and the Registrant is incorporated by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 2000. 10.43 Cooperation Agreement by and between the Registrant and Beacon Power Corporation, dated April 25, 2001, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2001. 10.44 Warrant, dated May 25, 2001, issued to Brown Simpson Partners I, Ltd. is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated May 25, 2001. 10.45 Amendment No. 1 to Registration Rights Agreement, dated as of May 25, 2001, among the Registrant and the parties whose names appear on Schedule I thereto is incorporated herein by reference to the Registrant's Current Report on Form 8-K dated May 25, 2001. 21.1(**) Subsidiaries of the Registrant. 23.1(**) Consent of Arthur Andersen LLP. 23.2 Consent of Deloitte & Touche LLP 99(**) Risk Factors.
- ----------------------- (*) Management contract or compensatory plan or arrangement required to be filed as an Exhibit to the Annual Report on Form 10-K for the year ended September 30, 2001. (**) Previously filed. (+) Confidential treatment has been granted with respect to certain portions of this Exhibit. 28 EX-23.2 3 a2074850zex-23_2.txt EX-23.2 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Nos. 033-75934, 333-04280, 333-08047, 333-75339, 333-43802 and 333-67504 on Form S-8 and Registration Nos. 333-05939, 333-37921, 333-87157, 333-48936 and 333-67328 on Form S-3 of SatCon Technology Corporation of our report on the financial statements of Beacon Power Corporation dated March 8, 2002, appearing in this Amendment No. 1 to the Annual Report on Form 10-K of SatCon Technology Corporation for the year ended September 30, 2001. /s/ DELOITE & TOUCHE LLP Boston, Massachusetts March 27, 2002 -----END PRIVACY-ENHANCED MESSAGE-----