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UNITED STATES
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, 2004

Commission file number 1-11512

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

        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 $60,885,763 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 ($2.45). There were 33,182,694 shares of Common Stock outstanding as of December 23, 2004.

        DOCUMENTS INCORPORATED BY REFERENCE:    Portions of the Registrant's Proxy Statement for its 2005 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

PART I

        This Annual Report on Form 10-K contains or incorporates forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Act of 1934. You can identify these forwad-looking statements by our use of the words "believes," "anticipates," "plans," "expects," "may," "will," "intends," "estimates," "and similar expressions, whether in the negative or in the affirmative. The forward-looking statements contained in this Annual Report are generally located in the material set forth under the headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," but may be found in other locations as well. Although we believe that these forward-looking statements reasonably reflect our plans, intentions and expectations disclosed in the forward-looking statements, our actual results could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements under the heading "Factors Affecting Future Results" under Item 7 that we believe could cause our actual results to differ materially from the forward-looking statements that we make. We do not intend to update information contained in any forward-looking statements we make.

Item 1. BUSINESS

Recent Developments

        On June 16, 2004, SatCon Technology Corporation (the "Company") filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (the "SEC"). The registration statement was declared effective by the SEC, allowing the Company to offer and sell up to $25 million aggregate amount of its common stock, preferred stock and warrants from time to time in one or more offerings. The terms of any such future offerings would be established at the time of such offering. At the time any of the securities covered by the registration statement are offered for sale, a prospectus supplement will be prepared and filed containing specific information about the terms of any such offering. As of November 30, 2004 no securities have been sold under the universal shelf registration statement on Form S-3.

        On December 22, 2004, we sold 4,848,485 shares of common stock under the universal shelf registration statement directly to a group of investors for proceeds of $7,470,000, net of transaction costs. As part of the December 22, 2004 financing we also issued warrants to purchase up to 2,181,818 shares of common stock. These warrants have an exercise price of $2.00 per share. These warrants are immediately exercisable and expire on December 21, 2009. A portion of the proceeds was used to pay off amounts outstanding on our line of credit.

        On December 21, 2004, we amended our existing $6.2 million credit line agreement with Silicon Valley Bank (the "Bank") through March 1, 2005. Through December 23, 2004, we had peak borrowings of $1.7 million on our credit line. As of December 23, 2004 there are no amounts outstanding under the credit line.

Overview

        SatCon Technology Corporation was organized as a Massachusetts corporation in 1985, reincorporated as a Delaware corporation and began trading as a public company in 1992. We design, develop, manufacture and market key enabling technologies and systems for high-performance, high-efficiency power conversion and control applications in large, growth markets, including defense, distributed power generation, power quality, transportation, semiconductor capital equipment and wireless communications.

        From 1985 to 1992, 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/

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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 form the foundation for our power and energy management technologies. Beginning in 1996, through a combination of internal product development and targeted acquisitions, we have pursued a strategy of leveraging our core intellectual property assets into a product portfolio of commercial power conversion and control systems.

        Since 1996, our revenue has increased from $9.4 million, primarily from funded research and development, to $34.2 million in 2004, of which $27.0 million, or 79%, was derived from product sales and the balance was from funded research and development. Over the past several years, we have introduced new products that we believe we can transition into commercial production within the next few years. These products include our Rotary Uninterruptible Power Supply (UPS) systems for continuous power quality, our Power Conditioning Systems for alternative energy and distributed power applications and our Power Control Modules for the U.S. Navy's proposed "all-electric" fleet of ships. Since 1996, through a series of strategic acquisitions, we have added manufacturing capacity, expanded our commercial product lines, broadened our customer base and increased our commercial revenue. 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. We acquired HyComp, Inc., a manufacturer of hybrid microelectronics in April 1999, followed by Ling Electronics, Inc., a manufacturer of shaker vibration test and measurement 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 that were used in their power electronics and electric vehicle business groups. 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. We also obtained Inverpower's UL and CE certification capability. In September 2002, we acquired the machinery, inventory, backlog and intellectual property of Sipex Corporation's thin film and hybrid assembly operations that supplies product to the defense and aerospace industry.

        These acquisitions have provided us with increased revenues, a manufacturing capability to transition our technology into commercial products, and an expanded customer base. We sell our commercial products into the following applications:

        In fiscal year 2004, we continued to focus our efforts on combining our high-power electronics and control systems into enabling components of power control systems such as our Rotary Uninterruptible Power Supply ("UPS") and Power Quality System, our Power Conditioning Systems for distributed

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power generation and Power Control Modules for use in the U.S. Navy's future "all-electric" ships. In concentrating our efforts on these power control systems, we focused our resources toward completing product development and marketing and selling these new products.

        During fiscal year 2004, we continued our efforts to reduce operating costs, reduce our cash burn rate and position ourselves for profitability. We reduced outside services costs and moved our corporate and Applied Technology groups to less costly space. We also raised cash through a financing transaction, which is discussed above under "Recent Developments." See also Note J to the notes to the consolidated financial statements for a discussion of our fiscal year 2004 financing transactions.

        We believe that there is a strengthening demand for our power control products in potentially significant markets, particularly given the renewed global focus on alternative energy. Because of its need for reliability and increased power within decreased size requirements, the military continues to be an early adopter of our power control products that offer reduced size, greater density and increased reliability at high power ratings.

        Revenues for our fiscal years ended September 30, 2004, 2003 and 2002 were $34.2 million, $27.0 million and $41.6 million, respectively. We sell our products both domestically and internationally, and our international sales for our fiscal years ended September 30, 2004, 2003 and 2002 were $3.7 million, $3.3 million and $7.2 million, respectively.

        Our web site is www.satcon.com and we make available through this site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with the SEC. These reports may be accessed through our website's investor relations page.

Industry Background

        In the United States, we have seen several trends develop which have had the effect of increasing the demand for power electronics and alternative energy products including:

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Growth in alternative energy sources such as fuel cells, photovoltaics and wind-turbines among others as the cost and reliance on fossil fuels has increased.



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Growing demand for high-quality, high-reliability power, as more mission-critical and sensitive electronics are interconnected.



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Increased concerns regarding the capacity and reliability of the electric utility grid.



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Increasing demand for electricity, driven by the proliferation of computers and electronics technology.



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Increased use of electrical systems versus mechanical systems.



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Growing environmental concerns regarding pollution from transportation and conventional power generation.

        As a result of these market dynamics, power generation concerns and environmental issues, both business and government are seeking more reliable, cleaner and more cost-effective solutions to their 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 power control products to convert, store and manage electricity. In order to be commercially viable and operate effectively, these 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 power control products. Market dynamics, power generation uncertainty and environmental concerns have also led to the emergence of

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markets for uninterruptible power supply and power quality systems, distributed power generation, high-reliability defense systems, and hybrid electric vehicles. We have technologies and products that serve all of these markets.

Our Solution

        Our solution is to provide power control products and systems that encompass the following key attributes:

        Performance.    Our products use proprietary designs to ensure that high-quality power is produced during peak, as well as steady-state, operations. 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.

        Reliability.    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. We design our products to support the long-life, always-on requirements of the distributed power generation and power quality markets.

        Efficiency.    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. 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.

        High Power Density.    We design our products to meet the distributed power market's demands for 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 and aboard ships where weight and space requirements are stringent.

        Flexibility.    We develop and manufacture our products for use in various distributed power generation and power quality systems such as fuel cells, photovoltaics, microturbines, cogeneration systems and UPS systems that are modular and scalable to meet a wide range of power requirements. 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.

Strategy

        Our strategy is to use our expertise and proprietary technologies to develop a portfolio of knowledge-intensive enabling systems for high-performance, high-efficiency power conversion and controls applications. We believe these systems will position us to serve such large growth markets as defense, distributed power generation, power quality, transportation, semiconductor capital equipment and wireless communications. Our customers include defense and aerospace contractors, the U.S. government, industrial manufacturers, semiconductor equipment fabricators, and communication systems providers, among many others. 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. Other elements of our long-term strategy include the following:

        Design and develop proprietary products that are integral components in power conversion, distributed power generation and motional control systems. We believe that we have a competitive advantage resulting from our engineering expertise and proprietary knowledge in the areas of power electronics, electromagnetics, mechanical and thermal dynamics, system controls and microelectronics 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.

        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 the 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 market and we believe will offer us opportunities for expansion of existing product lines into new markets and with new customers.

        Develop strategic alliances with other companies to exploit technological advantages of our product lines. These alliances may take the form of marketing, sales, distribution and/or manufacturing agreements.

Segments

        Our financial results by business segments for the fiscal years ended September 30, 2004, 2003 and 2002 are presented in Note U to the Consolidated Financial Statements included in this Annual Report on form 10-K.

Products

        We design, develop and manufacture high-efficiency, high-reliability and long-lived power control 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 have a wide range of prices from several cents for electronics resistors to several thousands of dollars for complex packaged circuits; from several hundreds of dollars for precision industrial automation motors to tens of thousands of dollars for computer driven specialty motor systems; from hundreds of thousands of dollars for smaller UPS systems to over one million dollars for larger UPS systems depending on accessories. Our funded research and development is priced according to the level of complexity of the project, the amount of deliverable units and the time and effort entailed within each project. Prices charged can range from a few hundreds of thousands of dollars to several million dollars for each project.

        Our products are sold through our three business segments: SatCon Power Systems, SatCon Electronics and SatCon Applied Technology.

SatCon Power Systems

        SatCon Power Systems manufactures and sells our high power line of power control 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 and StarSine™ amplifiers and power converters. We also developed our line of commercial Rotary UPS Systems for back-up power and power quality. We completed product development and testing and installed our first 250 kilowatt and 2.2 megawatt systems in calendar 2003. During the past year, we also continued development efforts including: power control

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systems for distributed power generation including UL compliance testing, and StarSine industrial and commercial power conversion and conditioning products. Revenues for our fiscal years ended September 30, 2004, 2003 and 2002 from our Power Systems business unit were approximately $17.4 million, $12.5 million and $19.9 million, respectively.

        During the fiscal year 2004, $6.0 million of revenue was generated by the sales of Power Solutions, $3.7 million was generated by the sales of shaker vibration test systems, $3.5 million was generated by the sales of magnetic levitation systems, $0.8 million was generated by the sale of Rotary UPS systems and $3.2 million was generated by the sales of industrial automation and machine tool motors and parts. Motors for fuel cell automobiles have generated little revenue to date as these motors are in the development and test phase.

        Power Solutions.    We sell DC and AC power solutions from 5 kilowatts to 100 megawatts, 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.

        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 we 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.

        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.

        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.

        Rotary UPS Systems.    Our Rotary Uninterruptible Power Supply (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 5 kilowatts of power. Our Rotary UPS product combines a diesel generator, supplied by Cummins, Inc., SatCon's preferred supplier, 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

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remote locations. The protection provided by these systems is critical to defense, government and commercial entities that cannot be out of power even for a fraction of a second.

        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.

        Power Conditioning Systems.    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 Powergate® 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 fiscal year 2002 and further introduced a line of Power Conditioning Systems for photovoltaic applications in fiscal year 2003, which has successfully grown in product offerings and orders over this past fiscal year.

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 our fiscal years ended September 30, 2004, 2003 and 2002 from our Electronics business unit was approximately $9.5 million, $9.2 million and $10.9 million, respectively. The following are descriptions of some of our products within the Electronics business unit:

        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 and test modules, sub-assemblies and fully integrated electronic systems for both military and commercial customers that require compact, high reliability systems.

        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 sold directly to customers and also are further integrated internally 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 substrates and components to military and commercial equipment markets.

        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 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, 2004, 2003 and 2002 from Applied Technology was approximately $7.2 million, $5.3 million and $10.8 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

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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.

        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.

        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. We are under contract to deliver modular, electrical power converter and control assemblies, or Power Control Modules, as part of the Navy's on-going development of the "all-electric" ship platform. We have been awarded approximately $14.0 million in product development funding to date on this program. As of September 30, 2004, approximately $1.9 million of the $14.0 million remains in backlog.

        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.

        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.

Strategic Relationships

        In order to formalize potential collaboration with General Atomics on future work relating to shipboard power distribution, we entered into a teaming agreement with General Atomics in February 2003 in which each party agrees to assist the other in preparing proposals. It further provides that if General Atomics is seeking work in the program area, it will use us as its subcontractor and we agree that we will not collaborate with another entity if General Atomics is soliciting work in that area. It is the intent of the parties to coordinate their respective endeavors in order to obtain additional contracts in the program area. The term of the teaming agreement was originally three years, unless terminated earlier by mutual agreement of the parties. In September 2003, that agreement was extended to five years through March 2007, subject to termination provisions. However, there can be no assurance that any material revenues or expenses will be associated with the teaming agreement in the future.

Significant Customers

        Significant customers for the years ended September 30, 2004, 2003 and 2002 are as follows:

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        The loss of any one or more of these customers could have a material adverse effect on SatCon. In addition, approximately 50% of our revenue during fiscal year 2004 was derived from government contracts and subcontracts with the U.S. government's prime contractors.

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 years ended September 30, 2004, 2003 and 2002, we expended $6.0 million, $5.0 million and $7.2 million, respectively, on funded research and development and other revenue 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 approximately $0, $1.5 million and $6.0 million on internally-funded research and development during our fiscal years ended September 30, 2004, 2003 and 2002, respectively.

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 and responding to unsolicited requests for proposals and through our Internet site.

Backlog

        Our backlog consists primarily of product development contracts, orders for power control systems, electronics and motion control products. At September 30, 2004, our backlog was approximately $24 million. Of this amount, approximately $20 million is scheduled to be shipped during our fiscal year 2005. 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.

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Competition

        We believe that competitive performance in the marketplace for power control products depends 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 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. 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.

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.

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        As of September 30, 2004, we held 71 U.S. patents and had 2 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. The expiration dates of our patents range from 2009 to 2021, with the majority expiring after 2015.

        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.

        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.

Foreign Operations:

        We have foreign operations through our Power Systems subsidiary in Burlington, Ontario, Canada.

Government Regulation

        We presently are subject to various federal, state and local laws and regulations relating to, among other things, export control energy generation, 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 the necessary government permits and have been in substantial compliance with all of these applicable laws and regulations.

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

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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, 2004, we had a total of 178 full-time employees, 3 part-time employees and 31 contract employees. Of the total, 67 persons were employed in engineering, 102 in manufacturing, 31 in administration and 12 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.

Risk Related to our Business

        Our future results remain difficult to predict and may be affected by a number of factors which could cause actual results to differ materially from forward-looking statements contained in this Annual Report on Form 10-K and presented elsewhere by management from time to time. These factors include business conditions within the distributed power, power quality, aerospace, transportation, industrial, utility, telecommunications, silicon wafer manufacturing, factory automation, aircraft and automotive industries and the world economies as a whole. Our revenue growth is dependent, in part, on technology developments and contract research and development for both the government and commercial sectors and no assurance can be given that we will continue to obtain such funds. In addition, our growth opportunities are dependent on our new products penetrating the distributed power, power quality, aerospace, transportation, industrial, utility, telecommunications, silicon wafer manufacturing, factory automation, aircraft and automotive markets. No assurance can be given that new products can be developed, or if developed, will be commercially viable; that competitors will not force prices to unacceptably low levels or take market share from us; or that we can achieve and maintain profitability in these or any new markets. Because of these and other factors, including, without limitation, the factors set forth below, past financial performance should not be considered an indicator of future performance. Investors should not use historical trends to anticipate future results and should be aware that the market price of our common stock experiences significant volatility.

Item 2. PROPERTIES

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

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

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Item 3. LEGAL PROCEEDINGS

        From time to time, we are a party to routine litigation and proceedings in the ordinary course of business.

        In July 2003, Donald R. Gililland, Sharon Gililland, Vernon Dunham and Jean Dunham, owners of the real property commonly known as 4890 E. La Palma Avenue, Anaheim, CA 92870 (collectively the "Owners"), filed a complaint with the Orange County Superior Court against the Company and co-defendant, Mechanical Technologies, Inc. ("MTI") for breach of lease relating to the former headquarters of Ling Electronics in Anaheim, CA. The Company acquired Ling Electronics from MTI in 1999. The complaint alleges, among other things, failure of the Company to maintain/repair premises. The Owners allege that the cost of correction and repair of the various breaches by the Company of its obligations under the Lease will exceed the sum of $400,000. The Company does not believe that this complaint has substantial merit and has vigorously defended against the claims. Discovery is ongoing. Trial is tentatively set for February 2005.

        In October 2003, the Company was served with a Complaint by a former employee seeking, among other claims, severance and bonus compensation. In July of 2004, the employee filed an amended complaint in which two additional former employees joined the action seeking similar damages. The plaintiffs are seeking damages under multiple theories and claims in excess of $750,000. The Company has denied the allegations contained in the complaint and believes the claims are entirely without merit. It has and will continue to defend vigorously against the action.

        On or about January 23, 2004, the Company received a communication from Maltmans, a Canadian insurance adjuster for Falconbridge Dominicana, C.Por.A. (Falcondo), providing notice of a claim against the Company for costs and damages resulting from a fire at Falcondo's facility in the Dominican Republic. The Company is a subcontractor on an installation at Falcondo's facility in the Dominican Republic. Maltmans sent similar demands to other contractors and suppliers of the project. Maltmans claims that preliminary estimates of losses are in excess of $10 million. Maltmans provided no basis for the estimated loss or any substantiation of the purported claim against the Company. The Company has maintained that there is no causal relationship between the products and services we provided at the facility and the fire that occurred. Our insurance company has coordinated the gathering of information regarding the fire with the general contractor and Falcondo's insurance representatives. On November 17, 2004, the Company received notification from Maltmans that they will not be seeking any compensation related to this claim.

        On or about August 31, 2004, the Company was informed that Bristol Investment Group, Inc. had filed a Demand for Arbitration with the American Arbitration Association claiming that it was owed money and warrants under a September 2002 agreement whereby Bristol was to have arranged for a private placement financing transaction. The total amount at issue is approximately $240,000. The Company believes the demand is without merit and has counterclaimed against Bristol seeking repayment of monies already paid and unspecified damages for Bristol's breach of the agreement. The Company does not believe that the matter will materially adversely affect the Company's results of operations or financial condition.

        We are not aware of any other 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 or net cash flows.

Item 4. SUBMISSION OF MATTERS TO A 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, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        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, 2003 and 2004:

        On December 9, 2004, the last reported sale price of our common stock as reported on the Nasdaq National Market was $2.00 per share. As of December 9, 2004, there were 28,333,210 shares of our common stock outstanding held by approximately 280 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, our Amended and Restated Accounts Receivable Financing Agreement with Silicon Valley Bank, dated as of December 9, 2003, as amended, provides for certain limitations on the payment of dividends by us on our common stock. Furthermore, under the terms of our Series B Preferred Stock, we may not pay dividends on our common stock without the consent of the holders of at least 75% of the outstanding shares of Series B Preferred Stock.

Recent Sales of Unregistered Securities

        Not applicable

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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, 2004, 2003 and 2002 and the consolidated balance sheet data as of September 30, 2004 and 2003 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, 2001 and 2000 and the consolidated balance sheet data as of September 30, 2002, 2001 and 2000 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K.