SATCON TECHNOLOGY CORP - 10-Q Quarterly Report

Use these links to rapidly review the document
TABLE OF CONTENTS

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 29, 2003

Commission File Number 1-11512

SATCON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of Incorporation or organization)		04-2857552 (IRS Employer Identification No.)
161 First Street Cambridge, Massachusetts (Address of principal executive offices)		02142-1221 (Zip Code)

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

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock, $0.01 Par Value,
18,930,061 shares outstanding as of April 28, 2003.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements of SatCon Technology Corporation
	Consolidated Balance Sheets as of March 29, 2003 (Unaudited) and September 30, 2002 (Audited)
	Consolidated Statements of Operations (Unaudited)
	Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
	Consolidated Statements of Cash Flows (Unaudited)
	Notes to Interim Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Certifications
Exhibit Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED BALANCE SHEETS

			March 29, 2003			September 30, 2002
			(Unaudited)			(Audited)
ASSETS
Current assets:
	Cash and cash equivalents		$	302,210		$	2,120,306
	Accounts receivable, net of allowance of $1,174,362 at March 29, 2003 and $898,322 at September 30, 2002			4,314,451			7,227,006
	Unbilled contract costs and fees			893,785			1,607,244
	Inventory			11,105,398			10,246,022
	Prepaid expenses and other current assets			1,299,484			988,040

		Total current assets		17,915,328			22,188,618
Investment in Beacon Power Corporation (Note C)				847,064			800,005
Warrants to purchase common stock (Note C)				12,579			15,988
Property and equipment, net				8,420,849			9,239,363
Goodwill, net (Note C)				704,362			6,234,653
Intangibles, net (Note C)				3,183,997			3,729,483
Other long-term assets				141,029			152,015

		Total assets	$	31,225,208		$	42,360,125

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Bank line of credit		$	107,767		$	—
	Current portion of long-term debt			248,674			266,808
	Accounts payable			6,510,019			5,877,805
	Accrued payroll and payroll related expenses			1,697,778			1,669,372
	Other accrued expenses			2,002,643			1,772,180
	Deferred revenue			2,395,756			638,769
	Accrued restructuring costs			609,864			992,496
	Liability related to Series A Preferred stock (Note D)			3,176,000			—

		Total current liabilities		16,748,501			11,217,430
Long-term debt, net of current portion				660,911			772,679
Other long-term liabilities				280,284			444,406
Stockholders' equity:
	Preferred stock; $0.01 par value, 1,000,000 shares authorized; 253.8 and no shares issued and outstanding at March 29, 2003 and September 30, 2002, respectively (Note D)			—			—
	Common stock; $0.01 par value, 50,000,000 shares authorized; 18,664,952 and 16,741,646 shares issued and outstanding at March 29, 2003 and September 30, 2002, respectively			170,442			167,416
	Additional paid-in capital			116,231,134			115,800,692
	Accumulated deficit			(102,726,218	)		(85,220,361	)
	Accumulated other comprehensive loss			(139,846	)		(822,137	)

		Total stockholders' equity		13,535,512			29,925,610

		Total liabilities, redeemable convertible preferred stock and stockholders' equity	$	31,225,208		$	42,360,125

The accompanying notes are an integral part of these consolidated financial statements.

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended						Six Months Ended
		March 29, 2003			March 30, 2002			March 29, 2003			March 30, 2002
Revenue:
Product revenue		$	4,250,142		$	7,466,142		$	9,580,805		$	13,589,769
Funded research and development and other revenue			1,296,162			2,833,925			2,886,429			5,050,458

Total revenue			5,546,304			10,300,067			12,467,234			18,640,227

Operating costs and expenses:
Cost of product revenue			5,577,724			7,820,222			11,678,316			13,757,067
Research and development and other revenue expenses:
	Funded research and development and other revenue expenses		1,206,948			1,608,760			2,587,266			3,325,323
	Unfunded research and development expenses		532,875			1,671,032			1,113,710			3,644,256

	Total research and development and other revenue expenses		1,739,823			3,279,792			3,700,976			6,969,579
Selling, general and administrative expenses			3,913,950			4,016,308			7,693,675			7,878,470
Amortization of intangibles			147,328			148,560			294,061			297,224
Write-off of impaired goodwill and intangible assets (Note C)			5,751,082			—			5,751,082			—

	Total operating costs and expenses		17,129,907			15,264,882			29,118,110			28,902,340

Operating loss			(11,583,603	)		(4,964,815	)		(16,650,876	)		(10,262,113	)
Net realized gain on sale of marketable securities			—			16,956			—			16,956
Net unrealized loss on warrants to purchase common stock			(9,246	)		(93,719	)		(3,409	)		(343,606	)
Write-down of investment in Beacon Power Corporation (Note C)			(541,885	)		—			(541,885	)		—
Other income/(expense)			55,700			—			55,700			—
Interest income			841			77,904			2,541			263,880
Interest expense			(169,940	)		(32,603	)		(367,928	)		(68,128	)

Net loss		$	(12,248,133	)	$	(4,996,277	)	$	(17,505,857	)	$	(10,393,011	)

Net loss per weighted average share, basic and diluted		$	(0.69	)	$	(0.30	)	$	(1.01	)	$	(0.63	)

Weighted average number of common shares, basic and diluted			17,831,359			16,539,597			17,354,495			16,539,597

The accompanying notes are an integral part of these consolidated financial statements.

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the six months ended March 30, 2002

(Unaudited)

									Accumulated Other Comprehensive Loss
	Common Shares	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Net Unrealized Gain on Marketable Securities			Unrealized Gain/(Loss) on Beacon Power Corporation			Foreign Currency Translation Adjustment			Total Accumulated Other Comprehensive Income/(Loss)			Total Stockholders' Equity			Comprehensive Loss
Balance, September 30, 2001 (Audited)	16,539,597	$	165,396	$	114,593,612	$	(64,459,763	)	$	26,367		$	4,364,035		$	(178,577	)	$	4,211,825		$	54,511,070
Net loss	—		—		—		(10,393,011	)		—			—			—			—			(10,393,011	)	$	(10,393,011	)
Change in unrealized gain on marketable securities	—		—		—		—			(26,367	)		—			—			(26,367	)		(26,367	)		(26,367	)
Change in unrealized gain (loss) on Beacon Power Corporation common stock	—		—		—		—			—			(4,752,970	)		—			(4,752,970	)		(4,752,970	)		(4,752,970	)
Reclassification of common stock warrants from liability to equity	—		—		192,448		—			—			—			—			—			192,448			—
Stock-based compensation related to options to purchase common stock to consultants	—		—		15,200		—			—			—			—			—			15,200			—
Foreign currency translation adjustment	—		—		—		—			—			—			(25,010	)		(25,010	)		(25,010	)		(25,010	)

Comprehensive loss																								$	(15,197,358	)

Balance, March 30, 2002	16,539,597	$	165,396	$	114,801,260	$	(74,852,774	)		—		$	(388,935	)	$	(203,587	)	$	(592,522	)	$	39,521,360

The accompanying notes are an integral part of these consolidated financial statements.

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the six months ended March 29, 2003

(Unaudited)

									Accumulated Other Comprehensive Loss
	Common Shares	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Unrealized Loss on Beacon Power Corporation			Foreign Currency Translation Adjustment			Total Accumulated Other Comprehensive Loss			Total Stockholders' Equity			Comprehensive Loss
Balance, September 30, 2002 (Audited)	16,741,646	$	167,416	$	115,800,692	$	(85,220,361	)	$	(588,944	)	$	(233,193	)	$	(822,137	)	$	29,925,610
Net loss	—		—		—		(17,505,857	)		—			—			—			(17,505,857	)	$	(17,505,857	)
Change in unrealized gain (loss) on Beacon Power Corporation common stock	—		—		—		—			47,059			—			47,059			47,059			47,059
Other than temporary write-down of investment in Beacon Power Corporation	—		—		—		—			541,885			—			541,885			541,885			541,885
Issuance of common stock to 401(k) Plan	302,589		3,026		410,342		—			—			—			—			413,368			—
Issuance of warrants to purchase common stock	—		—		20,100		—			—			—			—			20,100			—
Issuance of common stock in connection with Series A warrant exercise	1,258,549		—		—		—			—			—			—			—			—
Issuance of common stock in lieu of first year dividend on Series A Preferred Stock	362,168		—		—		—			—			—			—			—			—
Foreign currency translation adjustment	—		—		—		—			—			93,347			93,347			93,347			93,347

Comprehensive loss																					$	(16,823,566	)

Balance, March 29, 2003	18,664,952	$	170,442	$	116,231,134	$	(102,726,218	)		—		$	(139,846	)	$	(139,846	)	$	13,535,512

The accompanying notes are an integral part of these consolidated financial statements.

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

				Six Months Ended
				March 29, 2003			March 30, 2002
Cash flows from operating activities:
	Net loss			$	(17,505,857	)	$	(10,393,011	)
		Adjustments to reconcile net loss to net cash used in operating activities:
			Depreciation and amortization		1,246,082			1,108,019
			Allowance for doubtful accounts		157,462			124,095
			Allowance for excess and obsolete inventory		645,112			650,000
			Net realized gain on sale of marketable securities		—			(16,956	)
			Net unrealized loss on warrants to purchase common stock		3,409			385,857
			Change in contingent obligation to common stock warrant holders		—			(42,251	)
			Write-off of impaired goodwill and intangible assets		5,751,082			—
			Write-down of investment in Beacon Power Corporation		541,885			—
			Non-cash compensation expense		433,468			15,200
			Gain on sale of equipment		(55,700	)		—
		Changes in operating assets and liabilities:
			Accounts receivable		2,755,093			1,416,939
			Unbilled contract costs and fees		713,459			155,520
			Prepaid expenses and other current assets		(311,444	)		(265,903	)
			Inventory		(1,504,488	)		(2,375,367	)
			Other long-term assets		10,986			47,000
			Accounts payable		632,214			(811,355	)
			Accrued expenses and payroll		1,299			(365,161	)
			Other liabilities		1,592,865			(9,952	)

		Total adjustments			12,612,784			15,685

	Net cash used in operating activities				(4,893,073	)		(10,377,326	)

	Cash flows from investing activities:
		Purchases of property and equipment			(240,685	)		(2,526,398	)
		Proceeds from the sale of marketable securities			—			9,889,273
		Proceeds from the sale of equipment			68,450			—

	Net cash (used in) provided by investing activities				(172,235	)		7,362,875

	Cash flows from financing activities:
		Net borrowings under bank line of credit			107,767			—
		Repayment of long-term debt			(129,902	)		(208,563	)
		Net proceeds from issuance of convertible preferred stock			3,176,000			—

	Net cash provided by (used in) financing activities				3,153,865			(208,563	)

	Effect of foreign currency exchange rates on cash and cash equivalents				93,347			(58,358	)

	Net increase in cash and cash equivalents				(1,818,096	)		(3,281,372	)
	Cash and cash equivalents at beginning of period				2,120,306			11,051,465

	Cash and cash equivalents at end of period			$	302,210		$	7,770,093

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-Cash Investing and Financing Activities:
Change in unrealized gain(loss) on marketable securities				$	—		$	(26,367	)
Change in unrealized gain(loss) on Beacon Power Corporation common stock				$	47,059		$	(4,752,970	)

The accompanying notes are an integral part of these consolidated financial statements.