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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 ACT OF 1934

For the Fiscal Year Ended September 30, 2002

Commission file number 1-11512

SATCON TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its Charter)

(617) 661-0540
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Class
Common Stock, $.01 Par Value

Securities registered pursuant to Section 12(g) of the Act: None

        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 ý    No o

        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. ý

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o    No ý

        The aggregate market value of the Registrant's Common Stock, $.01 par value per share, held by non-affiliates of the Registrant was $12,520,803 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 the last business day of the Registrant's most recently completed second fiscal quarter ($3.25). There were 16,904,827 shares of Common Stock outstanding as of December 27, 2002.

        DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy Statement for its 2003 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

PART I

Item 1. BUSINESS

Recent Developments

        We need an immediate infusion of equity capital to sustain our operations. We anticipate that our existing cash and cash resources will enable us to fund our operations through only approximately January 15, 2003. We are operating under a forbearance agreement with Silicon Valley Bank which is currently enabling us to borrow minimal levels of working capital from Silicon Valley Bank. On December 13, 2002, we executed a term sheet with an institutional investor to raise between $5 and $7 million of equity capital. The term sheet contemplates that $3 to $5 million of the equity investment will be funded during the week of January 6, 2003 and the remaining $2 million will be funded promptly after the registration statement we are required to file with the Securities and Exchange Commission is declared effective registering all of the underlying equity securities in this financing.

        If Silicon Valley Bank decides to discontinue lending to us or we are unable to close an equity financing with the institutional investor or other investors prior to January 15, 2003, we will be forced to furlough or permanently lay off a significant portion of our work force. This will have a material adverse effect on us. Under these circumstances, we may not be able to continue our operations. Further, without additional cash resources, we may not be able to keep all or a significant portion of our operations going for a sufficient period of time to enable us to sell all or portions of our assets or operations at other than distressed sale prices. Even if we are able to consummate the financing with the institutional investor prior to January 15, 2003 and retain a credit facility with Silicon Valley Bank, we may still require additional cash resources in the future to fund our anticipated operating losses, to grow, to develop new or enhance existing products and services and to respond to competitive pressures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" below.

        Under the proposed terms of the term sheet with the institutional investor, we would issue shares of convertible preferred stock for $15,000 per share and warrants to purchase 5,000 shares of common stock for each share of convertible preferred stock issued. The preferred stock will be convertible into a number of shares of common stock equal to 15,000 divided by the conversion price of the stock (which will initially be $1.50). The convertible preferred stock will accrue dividends of 8% per annum, increasing to 12% on January 1, 2004. Under the proposed terms of the term sheet with the institutional investor, we may opt to pay the dividends in cash or in kind. Nevertheless, our current credit facility prohibits, and future credit facilities will likely prohibit, the payment of any cash dividend. The dividend for the first year will be paid at the closing in shares of common stock, valued based on the conversion price of the preferred stock, and thereafter will be paid on a quarterly basis. The warrants will be exercisable for a five-year term and will have an exercise price of $2.00 per share.

        As mentioned above, the term sheet with the institutional investor contemplates that we will issue between $3 million and $5 million of the convertible preferred stock at a first closing during the week of January 6, 2003. The remaining $2 million will be funded promptly after the registration statement we are required to file to register the common stock issuable upon conversion of the convertible preferred stock and exercise of the warrants is declared effective. We are required to file the registration statement within 30 days after the first closing and use our best efforts to have the registration statement declared effective within 90 days after the first closing. If the registration statement is not declared effective within 120 days of the first closing, we will be obligated to pay to the investors liquidated damages equal to 1.5% of the amount invested for each 30-day period, beginning 90 days after the first closing, that the registration statement is not effective.

        If we issue shares of common stock at a purchase price below the conversion price of the convertible preferred stock or the exercise price of the warrants, the conversion price and the exercise price, as applicable, will be adjusted on a weighted average basis.

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        If we consummate any private equity or equity-linked financing within 12 months after the first closing, the investors in our convertible preferred stock will have a right of first offer to purchase all or part of that financing. In addition, if we enter into a private equity or equity-linked financing within 24 months after the first closing, the investors will have the rights to exchange their shares of convertible preferred stock at the stated value of the securities issued in that financing.

        To date, the documentation relating to the financing with the institutional investor has been produced by counsel to the institutional investor but has not been finalized. There can be no guarantee that we will be able to secure financing with the institutional investor on these or any other terms, or that we will be able to successfully close this financing and raise the $5 million to $7 million contemplated by the term sheet.

        Any securities offered to the institutional investor will not be or have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements.

Overview

        SatCon was organized as a Massachusetts corporation in 1985 and reincorporated as a Delaware corporation in 1992. We are developing enabling technologies for the emerging critical power marketplace where power quality and uninterruptible power are important. We design, develop and manufacture high-efficiency high power electronics and a variety of standard and custom high-performance machines for specific applications. Our critical power products convert, store and manage electricity for businesses and consumers, the U.S. Government and the military that require high-reliability electronics and controls and high-quality, uninterruptible power. We are utilizing our engineering and manufacturing expertise to develop products we believe will be integral components of distributed power generation and power quality systems. Our specialty motors are typically designed and manufactured for unique customer requirements such as high power-to-size requirements or high efficiency.

        We have been developing technology in power and energy management since our inception. Power and energy management is the combination of products and technology to improve the efficiency of machines and systems in the generation, storage or usage of energy. During fiscal year 2002, we focused on the development of a 2.2 megawatt Rotary UPS system, a three phase utility multimode inverter for on-site power generation and modular power control modules for potential application on an "all-electric" ship. In some critical power applications, customers cannot afford even a millisecond of power outage. These potential customers will need and demand reliable power all the time.

        Prior to 1993, we were primarily funded through research and development contracts with the U.S. government. These contracts were directed at developing new technologies in motion control, control software and electronics. Through this work, we built an engineering base in magnetics, motor/drive technology, digital signal processing and high-speed electronics. From 1993 to 1996, we expanded that base through commercially-funded research and development to include high-power electronics, high-density packaging and advanced materials. Together, these engineering skills formed the foundation for our power and energy management technology. Since 1996, we have concentrated on employing that technology to solving market needs and transitioning from technology development to product development and manufacturing.

        Since 1996, our revenue has increased from $9.4 million, primarily from funded research and development, to $41.6 million in 2002, of which $30.8 million, or 74%, was derived from product sales and the balance was from funded research and development and other revenue. We are also introducing new products, which we believe we can transition into commercial production over the next few years, products such as our Rotary Uninterruptible Power Supplies, Power Conditioning Systems and Power Control Modules.

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        Since 1996, we have expanded our business and capabilities through several acquisitions. In January 1997, we acquired our MagMotor division, a manufacturer of custom and standard electric motors. In April 1997, we acquired Film Microelectronics, Inc., a manufacturer of thin film substrates and hybrid microelectronics. In January 1999, we acquired Inductive Components, Inc., a value-added supplier of customized electric motors, and Lighthouse Software, Inc., a supplier of control software for machine tools. We acquired HyComp, Inc., a manufacturer of hybrid microelectronics in April 1999 followed by Ling Electronics, Inc., a manufacturer of shaker vibration test systems, power converters, amplifiers and controllers, which we acquired in October 1999. In November 1999, we acquired intellectual property, tooling and other assets from Northrop Grumman Corporation used in their power electronics business area. In July 2001, we acquired substantially all of the assets of Inverpower Controls, Ltd., a manufacturer of power electronics and high-speed digital controls for use in industrial power and power quality systems. Inverpower also has UL and CE certification capability. On September 27, 2002, we acquired the data conversion product line from Sipex Corporation.

        These acquisitions have provided us with increased revenues, a manufacturing capability to transition our technology into commercial products, and a market presence from which we can derive the need for new products based on our technology. Over the past five years, we have sought to expand our markets in power and energy management to include telecommunications, industrial automation, semiconductor manufacturing, aircraft, high-reliability shipboard power conversion and controls and electric and hybrid-electric vehicles and distributed power generation. We sell our current products into the following markets:

        Revenues for our fiscal years ended September 30, 2002, 2001 and 2000 were $41.6 million, $41.7 million and $31.1 million, respectively. We operate through three business units, which sell these products as follows:

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Power Systems—Power conversion systems, power electronics systems, digital control software, high performance motors, and vibration test systems for the UPS and power quality, distributed power generation, hybrid-electric vehicles, industrial automation, machine tools and semiconductor manufacturing markets. In fiscal year 2002, revenue from our Power Systems business unit was approximately $19.9 million.

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Electronics—Hybrid microcircuits and electronic components for aircraft, satellites, defense system, telecommunications and medical instruments. In fiscal year 2002, revenue from our Electronics business unit was approximately $10.9 million.

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Applied Technology—Intelligent electronics systems, controls, motors and magnetic structures for defense and government applications such as shipboard electronics and military and commercial hybrid-electric vehicles. In fiscal year 2002, revenue from our Applied Technology business unit was approximately $10.8 million.

        In 2002, we focused our new product development efforts on combining our high-power electronics and control systems into enabling components of critical power systems such as our Rotary

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Uninterruptible Power Supply (UPS) and Power Quality System, our Power Conditioning Systems for distributed power generation and Power Control Modules for use in the U.S. Navy's future "all-electric" ships. In concentrating our efforts on these critical power systems, we focused our resources toward completing product development and building and testing prototypes. We have also conducted customer surveys to understand market requirements. We have established some strategic relationships with key customers and suppliers, and have successfully demonstrated our UPS, Power Quality and Distributed Power Generation products. We believe that there is a developing market demand for these products.

        During fiscal 2002, we also focused our efforts on developing our management team, cutting costs and reducing our cash burn rate. We added new members to our management team that we believe will help enable us to accomplish our strategic objectives of completing our product development efforts while reducing our cost structure.

        In fiscal 2002, Mike Williams came in to serve as senior Vice-President and General Manager of SatCon Power Systems. Mike began his career with General Electric (GE) in 1969 in Lynn, Massachusetts developing large turbine and aircraft engines and most recently he managed the Industrial Systems Solutions division. Also joining us this past fiscal year was our new Chief Financial Officer, Ralph Norwood. Ralph worked for over twenty years at Polaroid Corporation where he served as both the vice president and treasurer and the vice president and controller of the corporation.

        We also focused our efforts in fiscal 2002 toward streamlining our costs. In our first quarter, we expended $7.9 million in cash with a loss of $5.3 million on revenues of $8.3 million. The cash burn was due in part to spending primarily on product development and capital expenses related to our UPS and Power Quality products. We realized that such expenditures would have to be reduced significantly given economic conditions. We immediately sought ways to reduce cash burn and reduce our loss position while attempting to recover our revenue growth.

        We reduced our cash burn to $5.0 million in the second quarter, $3.5 million in the third quarter and $2.1 million in the final quarter. We also improved our earnings position by reducing our loss to $5.0 million in the second quarter, including a $1.5 million charge for restructuring, and to approximately $3.5 million in the last two quarters. At the same time we increased revenue from $8.3 million in the first quarter to $11.2 million in the fourth quarter and a total for the year of $41.6 million.

Industry Background

        We believe the markets for critical power products are entering a period of expansion. UPS and power quality; distributed power, such as on-site power generation; "all-electric" ships and "fly-by-wire" aircraft that replace mechanical systems with electrical ones; hybrid-electric vehicles, that replace conventional internal combustion engines with a combination of a smaller internal combustion engine and electric motors; among others, are product areas that are approaching commercialization. In the United States, this expansion is being driven by several factors, including:

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Growing demand for high-quality, high-reliability power, as more mission-critical and sensitive electronics are interconnected. The growing importance—and the proliferation of—electronics and computer networks that are power-quality sensitive has heightened the awareness of the importance of the quality and reliability of electricity. As the need for high-quality power grows, avoiding downtime and damaged equipment due to power-related problems will become increasingly important.

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Increasing demand for electricity, driven by the proliferation of computers and electronics technology. The demand for electricity has increased rapidly in recent years due in large part to the use of high speed, high power electronics, complex defense systems, computer based manufacturing

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equipment, e-commerce and telecommunications systems. This growth reflects a trend toward electrification of energy use throughout the developed world.

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Increased use of electrical systems versus mechanical systems. There is a growing displacement of higher efficiency electrical systems replacing older mechanical system technology. The change is taking place as we see more electrified platforms like the U.S. Navy's "all-electric" ship, increased electrification of the automobile and a growing proliferation of computer based industrial machining and manufacturing. These large electrical systems are being made possible by higher power, faster electronics and have created a market for our power conversion and control systems as components of larger critical power systems.

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Growing environmental concerns regarding pollution from transportation and conventional power generation. Among the most significant environmental effects of energy production and consumption is the emission of greenhouse gases, such as carbon dioxide, methane and nitrogen oxides. The United States, as one of the world's largest producers and consumers of fossil fuels, is responsible for a major portion of the global energy-related emissions. Utilities, due to their reliance on coal-burning power plants, and automobiles are two of the largest sources of air pollution. Global environmental concerns are emphasizing the need to find cleaner forms of transportation and power generation such as hybrid-electric vehicles and fuel cell power generation sources.

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Growth in alternative energy sources such as fuel cells, photovoltaics and wind-turbines among others. Because of environmental concerns and the need for highly reliable power, these alternative energy power generation sources are becoming more prevalent as supplements, and sometimes replacements to, the utility grid. Because they do not generate useable electrical power at the source, they require high power electronics and controls to convert the electricity generated into useable, computer grade electricity.

        As a result of market dynamics, power generation uncertainty and environmental concerns, business and government are seeking more reliable, cleaner and more cost-effective solutions to their critical power needs. The demand for reliable, high-quality, cleaner power is creating a growing market for distributed power generation and power quality systems. All of these systems require critical power products to convert, store and manage electricity. In order to be commercially viable and operate effectively, these critical power products must be highly reliable, efficient, low-cost and compact. Many of these products must be highly customized to meet the evolving needs of the distributed power generation and power quality marketplace. We believe this provides us with an opportunity to apply our technical expertise to meet these needs and to manufacture and supply critical power products. Market dynamics, power generation uncertainty and environmental concerns have also lead to the development of the following markets:

Uninterruptible Power Supply and Power Quality Market

        UPS systems maintain a predictable quality of electricity during power outages or periods of low power quality. These systems can be used as a replacement to the electricity grid for an unlimited time, needing only to be refueled. In addition to their primary role of providing uninterruptible power in the absence of the grid, our UPS system is designed to work in conjunction with the electricity grid to provide high quality power, without the fluctuations caused by power surges, sags and brownouts. These electrical disturbances can also cause system malfunctions within automated industrial processes, data centers or other industries with computer driven systems. As a result, UPS and power quality systems are used to support the operation of computer centers, manufacturing facilities and communication and other electronic networks in the event of power losses and are particularly important to those users who operate 24 hours a day, seven days a week, or where there are critical operations that cannot be interrupted even for one millisecond.

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        Currently, when electrical power is lost or its quality drops, lead-acid batteries provide back-up electricity until a generator can be manually engaged. Batteries have poor reliability and reduced life expectancy. The dangers of explosion and acid spills are additional environmental concerns associated with lead-acid batteries.

Distributed Power Generation Market

        With the deregulation of the electric utility industry, the ability to offer new forms of electrical power generation such as distributed, on-site, power generation is creating new markets, products and opportunities. Distributed power, that is power generated independent of the electric utility grid, locates power-generating capability closer to the end user. The distributed generation of electrical power from clean diesels, microturbines, solar arrays, wind turbines or fuel cell systems is potentially an environmentally cleaner, more efficient and more reliable means of producing electricity when compared to conventional generation and distribution methods. Distributed power generation systems can also alleviate congestion on highly loaded utility distribution networks and offer an alternative to power line extensions in remote regions. Fuel cells, microturbines and photovoltaics are technologies that are being developed by several companies to address the distributed power generation market.

Defense Systems Market

        Defense systems require high reliability electronics. With the continuing electrification of modern defense systems, the need to distribute and manage electrical power has become more critical. Aircraft, transportation and ship systems are becoming more sophisticated and the electronics required for these systems demand greater reliability and improved performance in smaller packages. In some instances electrical systems are replacing entire mechanical systems to gain performance advantages and reduce overall maintenance costs.

        While aircraft systems continue to require high reliability electronics like those used in heads-up displays or cruise missile video electronics, new systems, like "fly-by-wire" aircraft that employ increasing numbers of electrical systems to replace mechanical systems are being developed. New "all-electric" ships are being designed to replace mechanical systems with electrical systems both in the distribution of electricity and the use of it in such applications as "all-electric" gun systems.

        New secure communication systems require higher speed amplifiers. New airborne mine sweeping equipment requires modern compact power conversion equipment. New radar systems require more efficient electronics, and many of the defense electronics systems require vibration testing.

Hybrid-Electric Vehicles

        Prices of oil and refined products will strongly influence the demand for hybrid-electric vehicles. In the last year, significant increases in crude oil and gasoline prices have renewed a national public policy debate regarding substitute fuel sources. We believe these higher prices, if sustained, will increase demand for substitute fuel sources and may result in regulatory incentives to develop and commercialize vehicles powered by alternative fuel sources.

        We believe that fuel cell hybrid-electric vehicles have the potential to be the leading alternative to internal combustion engines in meeting clean air initiatives while offering greater driving range and performance than electric vehicles. Hybrid-electric vehicles can reduce air pollution while offering greater driving range and performance than electric vehicles. Hybrid-electric vehicles function by creating mechanical energy from a source such as an internal combustion engine or fuel cell. The mechanical energy is then transformed into electricity by a generator and transferred to an electric drive train, which propels the vehicle. Excess electricity is stored in an energy storage system consisting of a battery or flywheel. All hybrid-electric vehicles require complex power and control electronics to convert, condition and manage electricity, as well as high-performance motors, electric drive trains and energy storage systems.

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Our Solution

        Our solution is to provide critical power products and systems that encompasses the following key attributes demanded by the critical power marketplace:

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Performance. At a minimum, distributed power generation and power quality systems must provide the same degree of quality power that is provided by the traditional electric utility system that supplies electric power for commercial, industrial and residential usage. Our products use proprietary designs to ensure that high-quality power is produced during peak as well as steady-state operations.

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Reliability. We design our products to support the long-life, always-on requirements of the distributed power generation and power quality markets. We have experience designing and manufacturing high-reliability, long-life electronics for applications such as aircraft navigation systems and satellite uplink electronics. We design, manufacture and test our electronics to last at least fifteen years.

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Efficiency. The overall efficiency of a distributed power generation system, or its ability to deliver power with minimum energy loss, is vital to its effective commercialization and depends on the efficiency of all of its component parts. We apply our power electronics expertise to design and manufacture our products to meet the efficiency needs of our customers as defined by their specifications and the end use of the product.

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High Power Density. High power density, or the ability to convert, condition and manage large amounts of energy within a compact design, is required for cost reduction and is critical in applications such as automobiles where weight and space requirements are stringent. We design our products to meet the distributed power market's demands for high power density.

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Flexibility. Due to the rapidly evolving nature of the distributed power and power quality industries, our engineers work closely with our customers to address overall systems design issues as well as to ensure that our products meet their system specifications. We develop and manufacture our products for use in various distributed power generation and power quality systems such as fuel cells, microturbines, cogeneration systems and UPS systems that are modular and scalable to meet a wide range of power requirements.

Strategy

        Our strategy is to use our expertise and proprietary technologies to leverage SatCon into a position of leadership as a provider of critical power systems for a variety of applications including UPS and power quality systems, alternative energy and distributed power generation systems, defense systems, clean transportation and industrial automation. Our strategy to leverage ourselves into a leadership position is two-fold: first, since the power control system is an enabler for critical power products, we believe that our control system expertise positions us to be a key supplier to the marketplace; second, we believe that we possess the enabling technology in power electronics, magnetics and software controls to position SatCon to compete as an integrator of critical power systems—developing innovative power systems using our power electronics and control software and integrating third party "best of breed" power generation and energy storage.

        Our critical power customers include semiconductor fabricators, industrial manufacturers, defense and aerospace contractors, and transportation and communication systems. We believe that by designing and developing our products with cross-market applications, our success should be less dependent upon the adoption of a specific application or on the business of a single market participant. To accomplish our objective, we are also pursuing the following:

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Design and develop proprietary products that are integral components in UPS, power quality and distributed power generation systems. We believe that we have a competitive advantage resulting

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from our engineering expertise and proprietary knowledge in the areas of power electronics, electromagnetics, mechanical and thermal dynamics, system controls and microelectronic design.

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Establish our products as industry standards and become a major supplier to the UPS and power quality, distributed power generation, military, hybrid-electric vehicle and industrial automation markets by working with our customers to determine cost and performance requirements as we design and build our products to meet those requirements.

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Develop manufacturing capabilities to give us a competitive advantage in our markets. We are developing semi-automated manufacturing processes and have expanded our manufacturing capacity in an effort to reduce costs as production volumes increase. In addition to installing low-cost, high-volume manufacturing capacity at existing facilities, we intend to continue to pursue our strategy of enhancing our manufacturing capabilities through acquisitions.

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Acquire new products, manufacturing capabilities and technologies. We believe that the opportunistic acquisition of new products, manufacturing capabilities and technologies will enhance our competitive position and growth opportunities. Historically, the acquisition of products or companies has been a key element of our business strategy. Our first acquisition, MagMotor, provided us with revenue in the industrial automation market, and a manufacturing capability with which to build our MagLev™ systems for use in the semiconductor manufacturing industry. Since then, we have had similar experiences with Film Microelectronics, Ling Electronics, the Northrop Grumman power electronics group, Inverpower Controls and most recently, on September 27, 2002, the acquisition of data conversion product lines from Sipex Corporation. These companies brought technology, products and capacity that have enabled us to offer UPS and power quality products to an emerging critical power market and we believe will offer us opportunities for expansion of existing product lines into new markets and with new customers.

Products

        We design, develop and manufacture high-efficiency, high-reliability and long-lived critical power products that convert, store and manage electricity. We are using our electronics and manufacturing expertise to develop products that meet the high-reliability, high-efficiency, low-cost and compact-size requirements of the distributed power generation and power quality markets. Our products are sold through our three business units:

SatCon Power Systems

        SatCon Power Systems manufactures and sells our high power line of critical power systems including our standard lines of high-performance motors for the industrial machinery, factory automation and automotive markets; MagLev™ integrated suspension and motor systems; and Ling Electronics vibration test systems StarSine™ amplifiers. It has also been developing a new line of commercial Rotary UPS Systems for back-up power and power quality, for which we have been completing product development and testing over this past year; power conversion systems for distributed power generation which were in the final stages of development and UL compliance testing in fiscal year 2002 and Inverpower industrial and commercial power conversion and conditioning products. Revenues for our fiscal years ended September 30, 2002, 2001 and 2000 from our Power Systems business unit were approximately $19.9 million, $20.2 million and $14.1 million, respectively.

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        During fiscal 2002, $7.5 million of revenue was generated by the sale of Power Solutions, $6.5 million was generated by the sale of Ling Electronics' shaker vibration test systems, $2.7 million was generated by the sale of magnetic levitation systems to Applied Materials and $3.2 million was generated selling industrial automation and machine tool motors. Motors for fuel cell automobiles have generated little revenue to date as these motors are in the development and test phase.

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Power Solutions.  We sell DC and AC power solutions from 5KW to 200MW, static transfer switches, static voltage regulators, frequency converters and AC arc furnace line controllers. Our product lines include power quality equipment for mitigation of electrical disturbances and power supplies for a variety of industrial, energy and environmental applications. We believe our products provide our customers with solutions that minimize power disturbances, minimize capital and operating costs, reduce energy consumption and improve productivity and quality.



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Shaker Vibration Test Systems.  We sell shaker vibration test systems that enable manufacturers to understand how their mechanical and electronic products will perform after exposure to vibrations. Our shaker vibration test systems are designed to replicate vibrations ranging from continuous shaking to high impact forces such as those arising from dropping a product on the floor or landing a plane. Our shaker vibration test systems are used for testing a variety of products, including small electronic components, computer hardware, consumer electronics, automobiles and aerospace and satellite structures. In addition, since our acquisition of Ling Electronics in October 1999, we have begun to sell a line of digitally modulated power amplifiers under the StarSine™ label. We sell these amplifiers individually and as components of our shaker vibration test systems.



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Magnetic Levitation Systems.  We manufacture magnetic levitation, or MagLev™, systems that enable machinery to rotate or move without contacting other machine parts. Our MagLev™ systems use electro-magnetic fields to lift mechanical components without any surface contact. Sensors within the system determine the actual position of the levitated object and send signals to a high-speed digital controller, which commands electricity to activate the electro-magnets thereby making the object move away from any surface it is about to contact. This is done at extremely high speeds in order to maintain the stability of the levitated object and can be accomplished with objects that spin, such as motors, or objects that move in one direction, like pistons or push rods. Our largest selling MagLev™ system is the integrated suspension and motor, or ISAM, system that is sold to Applied Materials, Inc. for silicon wafer manufacturing.



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Industrial Automation Motors.  We manufacture brush and brushless DC motors for the industrial automation market. These small, high-efficiency motors are available with a variety of options including optical encoders, tachometers, brakes, custom cables and connectors. Our industrial automation motors are typically used in semiconductor equipment manufacturing, medical device assembly and other automated assembly processes.



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Machine Tool Motors.  We manufacture a line of precise positioning motors for use with machine tools such as computer numerical controlled machines. These include machining centers, lathes and milling machines.



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Fuel Cell Vehicle Auxiliary Motors.  We are currently developing a line of high-performance motors for auxiliary uses, such as fuel pumps, in fuel cell hybrid-electric vehicles. We are also developing these high-performance motors for use in commercial and residential fuel cell power generation systems.

SatCon Electronics

        SatCon Electronics designs and manufactures advanced electronic assemblies for the aerospace, defense, wireless and telecom industries including thin film products and custom modules. Revenue for

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our fiscal years ended September 30, 2002, 2001 and 2000 from our Electronics business unit was approximately $10.9 million, $10.6 million and $8.3 million, respectively. The following are descriptions of some of our products within the Electronics business unit:

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Custom Modules—We manufacture standard and custom microcircuits, which are a combination of several electronic components imbedded in a miniature printed circuit board. Due to their size, versatility and high reliability, these hybrid microcircuits are used in a broad spectrum of applications. Using our semi-automated manufacturing capability we build modules, sub-assemblies and fully integrated electronic systems for both military and commercial customers that require compact, high-speed electronic systems.



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Power Modules—SatCon Electronics designs, manufactures and tests modules for high power applications. These modules are used as building blocks for motor control applications in aerospace, automotive, industrial, medical and defense.



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Thin Film Products—Thin film substrates are miniature printed circuits onto which small electronic components are mounted, such as those used in hybrid microcircuits. Our thin film products are integrated into electronic devices that require small, high-reliability components. Substrate and resistor products manufactured by SatCon Electronics are used for high-speed telecommunications applications, military modules and high-frequency wireless devices. We supply components to original equipment manufacturers and suppliers.



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RF Products—SatCon Electronics provides solutions to both military and commercial wireless communications. Using our design, analysis and test capability we build standard and custom amplifiers, switches and passive devices for secure communication systems, cell tower base stations, point-to-point data transmission, and wireless Large Area Networks.

SatCon Applied Technology

        Our Applied Technology business unit designs and builds power conversion products, which include power electronics, high-efficiency machines and control systems for a variety of defense and commercial applications. Our objective is to transition prototype development contracts into multiyear production programs. Revenue for our fiscal years ended September 30, 2002, 2001 and 2000 from Applied Technology was approximately $10.8 million, $10.9 million and $8.7 million, respectively.

        We pursue development programs in areas where we have technical expertise and where we believe there is significant long-term production potential for the developed technology. Technical disciplines represented at our Applied Technology business unit include electromechanics, digital and analog electronics, power electronics and electronic packaging, thermal management, motor dynamics, materials, software development, control technology, and system integration. To date, SatCon Applied Technology has built products for use in distributed power generation, energy storage and power quality, high performance electric machinery, transportation and defense systems, including components for military hybrid-electric vehicles, "all-electric" ships and aircraft subsystems.

        For more information, you can visit our website at www.satcon.com.

Funded Research and Development

        We perform funded research and development in connection with government programs and for third parties. We pursue funded research and development in areas where we have technical expertise and where we believe there is significant commercial application for the developed technology. We have performed funded research and development in connection with the development of each of our product areas.

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        We also have specialized engineering expertise in the areas of power electronics, electromechanics, mechanical and thermal dynamics, system controls and microelectronic design. We have leveraged research and development funding from industry and government sources to design, develop and manufacture electronics for power conversion, amplification and storage, high-performance electric motors, flywheel energy storage systems and system controls software. We continue to pursue industry and government funding to supplement the on-going development of our products.

        In 1999, we entered into an agreement with the U.S. Department of Energy, or DOE, for the research, development and demonstration of a power conversion system for a new generation of hybrid-electric vehicles. Under this government contract, we have been engaged to design a power conversion system that can be manufactured at high volume and low cost. We believe that the resulting design will enable us to enhance our manufacturing capabilities to produce our power conversion products for distributed power generation systems. This program was funded half by us and half by DOE. The total DOE approved budget for this program was $10.0 million through September 29, 2002. As of September 30, 2002, revenues for this program had totaled $2.5 million in fiscal 2002, $3.1 million in fiscal 2001, $3.4 million in fiscal 2000 and $1.0 million in fiscal 1999. We expect to complete final hardware deliveries in the first half of fiscal year 2003.

New Product Opportunities

Rotary Uninterruptible Power Supply (UPS) Systems

        During fiscal year 2002, we continued to work on completing the development of a line of Rotary Uninterruptible Power Supply, or UPS, systems for sale as back up power supplies and power quality systems. Our line of Rotary UPS systems are designed to provide both power quality and UPS functions in power ranges from 250 kilowatts to 2.2 megawatts and beyond in single or multiple unit systems. For comparison, 2.2 megawatts would be enough power to supply 440 homes using an average of 5kw of power. In fiscal year 2002, we concentrated on completing the development and test of the 2.2 megawatt system for industrial and manufacturing operations.

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SatCon's 2.2 Megawatt Rotary UPS System

        Our Rotary UPS product combines a diesel generator, a flywheel energy storage system, electronics and a proprietary control system into an uninterruptible power supply. We believe that this system is an attractive alternative to lead-acid battery based UPS systems due to its seamless transition during power outages, increased reliability, longer life and the ability to operate effectively in remote locations.

Power Conditioning System

        We have developed modular power conditioning systems such as our Three Phase Utility Interactive Multi-Mode Inverter for use in connection with large, commercial sized, fuel cell or microturbine distributed power generation systems that produce power ranging from 200 kilowatts to 5 megawatts. Our power conditioning systems are designed to convert the DC power generated by an alternative energy source, such as a fuel cell, into useable AC power. They also provide the interface with the electric utility grid, an energy storage device, like a battery or flywheel, and the end user applications. These units use a technology that allows them to be combined and scaled to handle high-power requirements. We introduced this product during our 2002 fiscal year.

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SatCon's Three Phase Utility Interactive Multi-Mode Inverter (UL 1741 Compliant)

        In 2002, our Three Phase Utility Interactive Multi-Mode Inverter was determined to be in compliance with the UL 1741 "Standard for Inverters, Converters, and Controllers for Use in Independent Power Systems." At that time, the SatCon power inverter was the highest power rated, on-site generation inverter to comply with the UL 1741 Standard. By meeting the UL 1741 requirements, we believe that our Power Conditioning Systems are well-positioned to become the leading choice for customers interested in creating their own distributed power using fuel cells in conjunction with, or completely separate from, the utility grid. In addition to fuel cell applications, these UL compliant inverters are designed to be compatible with photovoltaics, microturbines and other on-site power generation systems.

Power Control Modules

        As part of a defense contractor team that includes General Atomics and Gibbs and Cox, we have been developing an Integrated-Fight-Through-Power System for potential application to the U.S. Navy's "all-electric" ship. As part of the most recent program phase, awarded in late fiscal year 2002, we are under contract to deliver modular, electrical power converter and control assemblies, or Power Control Modules for land testing. The next phase of the program requires us to deliver power control modules for installation on the RV Triton, a British research vessel, for at-sea testing. As part of the Navy's on-going development of the "all-electric" ship platform, we have been awarded approximately $12.0 million in product development funding to date, $8.9 million of which was awarded in fiscal 2002.

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SatCon's Power Control Modules as Components of the US Navy's Integrated-Fight-
Through-Power System

        Developing methods for distributing and converting power from large-scale turbines to end use applications aboard a ship, we believe, is an example of how distributed power can become the future of electrical power generation and distribution for a wide range of applications. We believe that the technology developed by us in connection with the Integrated Fight-Through-Power System will have other commercial applications. We also believe that our involvement with the Integrated-Fight-Through-Power System program positions us to become a more traditional supplier of advanced ship power converters for future "all-electric" ship and other Navy shipboard applications.

Significant Customers

        The U.S. Department of Defense accounted for 5.7%, 6.8% and 9.8% of our total revenue for our fiscal years ended September 30, 2002, 2001 and 2000, respectively. For our fiscal years ended September 30, 2002, 2001 and 2000, revenue from the U.S. Department of Energy accounted for 6.1%, 7.4% and 11.5% of our total revenue, respectively. For our fiscal years ended September 30, 2002, 2001 and 2000, revenue from Applied Materials accounted for 4.7%, 8.3% and 10.6% of our total revenue, respectively. For our fiscal years ended September 30, 2002, 2001 and 2000, revenue from General Atomics accounted for 12.0%, 9.4% and 1.7% of our total revenue, respectively. The loss of any one or more of these customers would have a material adverse effect on SatCon.

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Research and Development

        We believe that the continued and timely development of new products and enhancements to our existing products is necessary to maintain our competitive position. We use technologies developed by our business units, together with information supplied by our distributors and customers, to design and develop new products and product enhancements and to reduce the time-to-market for our products.

        During the fiscal year ended September 30, 2002, $10.8 million, or 26%, of our revenue was attributable to research and development activities funded by commercial customers and U.S. government agency sponsors. Under the agreements funded by the U.S. government, the government retains a royalty-free license to use the technology developed for government purposes and we retain exclusive rights to the technology for commercial and industrial applications. The rights to technology developed under contracts funded by commercial customers are negotiated on a case-by-case basis. We expended $5.7 million, $6.2 million and $3.5 million on internally-funded research and development during our fiscal years ended September 30, 2002, 2001 and 2000, respectively. During our fiscal year ended September 30, 2002, our most concentrated effort was directed toward building the power inverter for an on-site power generation system and our 250 kilowatt and 2.2 megawatt rotary UPS and power quality systems.

Sales and Marketing

        We sell our products and services both domestically and internationally through our direct sales force and through independent distributors and representatives. Our direct sales staff manages our key customer accounts, provides customer support and identifies significant market opportunities in their respective markets.

        Each of our three divisions manages its own marketing organization and is responsible for developing sales and advertising literature, such as product announcements, catalogs, brochures and magazine articles in trade and other publications. Publication of significant events or material information is handled through our corporate office.

        We maintain close contact with our customers' design and engineering staffs in order to provide the appropriate products for our customers' applications. We maintain this close working relationship with our customers throughout the life of a product, and we believe that it has been a key component of our customers' satisfaction.

        We compete for and market our research and development contracts through several methods, including pursuing new and existing customer relationships in the commercial and government sectors, responding to Small Business Innovative Research calls for proposals and calls for proposals listed in the daily publication, Commerce Business Daily, seeking to maintain a strong technical reputation within the community, responding to unsolicited requests for proposals and through our Internet site.

Backlog

        Our backlog consists primarily of product development contracts, orders for critical power systems, electronics and motion control products. At September 30, 2002, our backlog was approximately $16 million. Of this amount, approximately $13 million is scheduled to be shipped during fiscal year 2003. These amounts exclude approximately $2 million of UPS orders booked in November 2001 but which are unlikely to be shipped. Many of our contracts and sales orders may be canceled at any time with limited or no penalty. In addition, contract awards may be subject to funding approval from the U.S. government and commercial entities, which involves political, budgetary and other considerations over which we have no control. Our backlog at September 30, 2001 was $21.0 million. We believe that our backlog at any time should not be used as an indication of future revenue.

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Competition

        We believe that competitive performance in the marketplace for critical power products depend upon several factors, including product price, technical innovation, product quality and reliability, range of products, customer service and technical support. We believe our technical innovation emphasizing product performance and reliability, supported by our commitment to strong customer service and technical support, enables us to continue to compete successfully against the following competitors:

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Manufacturers of converters and inverters for alternative energy such as Trace Engineering, a division of Xantrex Technology, Inc., Asea Brown Boveri Ltd., Siemens Corporation and Alstom S.A.;



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Manufacturers of electronic modules such as Omnirel L.L.C., Aeroflex Inc., Teledyne Inc. and DDC & R, Inc.; manufacturers of thin film substrates such as MIC Technology, an Aeroflex Company and Ultrasource, Inc.;



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Manufacturers of motors such as MCG Inc., Reliance Electric CO/DE, CMC Industries, Inc. and other regional and specialty motor manufacturers;



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Manufacturers of shaker vibration test systems such as Ling Dynamics Systems, Ltd. and Unholtz-Dickie, Corp.;



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Manufacturers of Uninterruptible Power Supplies such as Piller, Inc. and Hitech Power Protection bv.; and



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Developers of advanced power electronics and machines such as Moog, Semikron, Eaton and Silicon Power.

        Some of our competitors have substantially greater financial resources than we do and could devote greater resources to the development, promotion, sale and support of their products and may have more manufacturing expertise and capacity. In addition, some of our competitors have more extensive customer bases and broader customer relationships than we do.

Manufacturing

        We manufacture our products at our facilities located in Marlborough, Massachusetts; Worcester, Massachusetts and Burlington, Ontario, Canada. We believe our existing manufacturing capacity is sufficient to meet our current needs. Our goal is to mass manufacture high volume, low-cost products as our products gain market acceptance and the markets for our products develop. We believe that most of the raw materials used in our products are readily available from a variety of vendors. Additionally, we design and develop our products to use commodity parts in order to simplify the manufacturing process. We have a semi-automated production line in our Marlborough, Massachusetts facility. We intend to add additional production lines for our products in the future as demand dictates and our revenues enable. We have made and expect to continue to make technological improvements that reduce the costs to manufacture our products.

        Our manufacturing facilities are subject to numerous environmental laws and regulations, particularly with respect to industrial waste and emissions. Compliance with these laws and regulations has not had a material impact on our capital expenditures or competitive position.

        We believe that most of the raw materials used in our products are readily available from a variety of vendors. Additionally, we design and develop our products to use commodity parts in order to simplify the manufacturing process.

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Intellectual Property

        Our success and competitiveness depend on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing on the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright law and contract restrictions to protect the proprietary aspects of our technologies. 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.

        As of December 10, 2002, we held 75 U.S. patents and had 10 patent applications pending with the U.S. Patent and Trademark Office. We have also obtained corresponding patents in the rest of North America, Europe and Asia. In addition, we have a non-exclusive, royalty-free license for non-automotive applications for 38 other patents that were issued to our employees and subsequently assigned to DaimlerChrysler in connection with the now completed Chrysler Patriot racecar project. The expiration dates of our patents range from 2007 to 2021, with the majority expiring after 2016.

        In 1997, we granted Beacon Power Corporation a perpetual, worldwide, royalty-free, exclusive right and license to our flywheel technology for stationary, terrestrial applications. Beacon Power was formed as a spin off of SatCon Technology Corporation. In November of 2000, Beacon Power became a publicly traded company. In September of 2001 we made a 5,000,000-share distribution of our Beacon Power ownership to our stockholders and currently own approximately 11% of Beacon Power following that distribution.

        Many of the U.S. patents described above are the result of retaining ownership of inventions made under U.S. government-funded research and development programs. As a qualifying small business, we have retained commercial ownership rights to proprietary technology developed under various U.S. government contracts and grants, including small business innovation research contracts. With respect to any invention made with government assistance, the government has a nonexclusive, nontransferable, irrevocable, paid-up license to use the technology or have the technology employed for or on behalf of the U.S. government throughout the world. Under certain conditions, the U.S. government also has "march-in rights." These rights enable the U.S. government to require us to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to responsible applicants, upon terms that are reasonable under the circumstances.

Government Regulation

        We presently are subject to various federal, state and local laws and regulations relating to, among other things, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. To date, we believe that we have obtained all necessary government permits and have been in substantial compliance with all of these applicable laws and regulations.

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Government Contracts

        We act as a prime contractor or major subcontractor for many different U.S. government programs, including those that involve the development of electro-mechanical transportation, navigation and energy-related products. Over its lifetime, a program may be implemented by the award of many individual contracts and subcontracts, or contracts with option years, or partially funded contracts.

        U.S. government contracts include provisions permitting termination, in whole or in part, without prior notice, at the U.S. government's discretion. The U.S. government generally pays compensation for work actually done and commitments made at the time of termination, and some allowance for profit on the work performed. The U.S. government may also terminate for default in performance and pay only the value delivered to the U.S. government. It can also hold the contractor responsible for reprocurement costs.

        Our government contract business is also subject to specific procurement statutes and regulations and a variety of socio-economic and other factors. Failure to comply with these regulations and requirements could lead to loss of contract or suspension or debarment from U.S. government contracting or subcontracting for a period of time. Examples of these statutes and regulations are those related to procurement integrity, export control, employment practices, the accuracy of records and the recording of costs.

        Sales to the U.S. government may be affected by changes in research interests in the areas in which we engage, changing government department budgets, and changing procurement policies.

Employees

        At September 30, 2002, we had a total of 275 full-time employees, 5 part-time employees and 29 contract employees. Of the total, 90 persons were employed in engineering, 153 in manufacturing, 42 in administration and 24 in sales and marketing. Our future success depends in large part on the continued service of our key technical and senior management personnel, and on our ability to attract, retain and motivate qualified employees, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and the development of new products and processes. The competition for such personnel is intense, and the loss of key employees could have a material adverse effect on us. None of our employees are represented by a union. We believe that our relations with our employees are good.

Item 2. PROPERTIES

        We lease office, manufacturing and research and development space in the following locations:

        Our Cambridge, Massachusetts lease contains an additional 13,000 square feet of space, which is subleased to a third party until December 31, 2002. Our Anaheim, California lease contains an additional 77,000 square feet of space, of which 25,000 square feet is subleased to a third party through the term of the lease. We are seeking a sublet tenant for the remainder of the space.

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        We believe our facilities are adequate for our current needs and that adequate facilities for expansion, if required, are available.

Item 3. LEGAL PROCEEDINGS

        From time to time, we are a party to routine litigation and proceedings in the ordinary course of business. We are not aware of any current or pending litigation to which we are or may be a party that we believe could materially adversely affect our results of operations or financial condition.

Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

        No matter was submitted to a vote of security holders during the fourth quarter of our fiscal year covered by this report through the solicitation of proxies or otherwise.

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PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS

        Our common stock is publicly traded on the NASDAQ National Market under the symbol "SATC."

        The following table sets forth the range of high and low sales prices of our common stock as reported on the NASDAQ National Market for our fiscal years ended September 30, 2001 and 2002:

        On December 27, 2002, the last reported sale price of our common stock as reported on the NASDAQ National Market was $1.43 per share. As of December 27, 2002, there were 16,904,827 shares of our common stock outstanding held by approximately 227 holders of record.

Dividend Policy

        We have never paid cash dividends on our common stock. We currently intend to retain earnings, if any, to fund the development and growth of our business and do not anticipate paying cash dividends for 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. In addition, the Loan and Security Agreement between Silicon Valley Bank and us, dated as of September 13, 2002, provides for certain limitations on the payment of dividends by us on our common stock.

Recent Sales of Unregistered Securities

        On August 23, 2002, we issued to J.P. Turner & Company, LLC, in connection with investor awareness and business advisory services rendered by J.P. Turner & Company, LLC pursuant to an investment banking agreement with us, a warrant exercisable for 250,000 shares of our common stock, at an exercise price of $1.75 per share. This warrant expires on August 23, 2005. This warrant was issued in reliance upon the exemptions from registration under Section 4(2) of the Securities Act or Regulation D promulgated thereunder, relative to sales by an issuer not involving any public offering.

        On September 13, 2002, we issued to Silicon Valley Bank, in connection with a loan and security agreement with Silicon Valley Bank, a warrant exercisable for 181,951 shares of our common stock, at an exercise price of $1.374 per share. This warrant expires on September 13, 2007. This warrant was issued in reliance upon the exemptions from registration under Section 4(2) of the Securities Act or Regulation D promulgated thereunder, relative to sales by an issuer not involving any public offering.

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        During the fiscal year ended September 30, 2002, we issued 202,049 shares of our common stock to our employees pursuant to a discretionary 401(k) match authorized by our Board of Directors. Such securities were issued without registration and are freely tradable pursuant to Employee Benefit Plans Release Nos. 33-6188 and 33-6281.

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

        You should read the data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data set forth below for our fiscal years ended September 30, 2002, 2001 and 2000 and the consolidated balance sheet data as of September 30, 2002 and 2001 are derived from our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for our fiscal years ended September 30, 1999 and 1998 and the consolidated balance sheet data as of September 30, 2000, 1999 and 1998 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. The statement of operations for our fiscal year ended September 30, 2002 includes the results of the acquisition of assets from Sipex Corporation beginning from September 27, 2002, the date which we acquired assets from Sipex Corporation.

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