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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(AMENDMENT NO. 1)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-8403
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ENERGY CONVERSION DEVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 38-1749884
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1675 WEST MAPLE ROAD, TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 280-1900
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE PER SHARE
------------------------------------------
(Title of Class)
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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X].
THE AGGREGATE MARKET VALUE OF STOCK HELD BY NON-AFFILIATES (BASED UPON THE
LAST SALE PRICE OF SUCH STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM ON AUGUST
31, 1995) WAS APPROXIMATELY $129 MILLION. AS OF AUGUST 31, 1995, THERE WERE
219,913 SHARES OF THE COMPANY'S CLASS A COMMON STOCK AND 8,188,685 SHARES OF
THE COMPANY'S COMMON STOCK OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE> 2
PART I
ITEM 1: BUSINESS
OVERVIEW
Energy Conversion Devices, Inc. (the "Company") is a leader in the
synthesis of new materials and the development of advanced production
technology and innovative products. The Company was founded in 1960 by
Stanford R. Ovshinsky and Iris M. Ovshinsky. Under the direction of
Stanford R. Ovshinsky, principal inventor, the Company has pioneered the
development of products and production technology based on amorphous and
related materials, with an emphasis on alternative energy and advanced
information technologies. Unlike the ordered, three-dimensional arrays
found in crystalline materials, the Company's proprietary synthetic
materials Ovonic materials are designed to exploit unique properties that
result from engineered chemical and structural disorder. The chemical and
structural composition of Ovonic materials makes possible the development
and commercialization of new products with unique chemical, electrical,
mechanical and optical properties and superior performance
characteristics.
The Company has used an integrated approach to product development
since its inception that seeks to minimize the customary barriers between
research and development, production design and product planning. The
Company's thrust has been developing products that have technological
advantages over available alternatives and that are capable of being
produced commercially on an economically competitive basis. The Company
is currently engaged in manufacturing and selling its proprietary products
through joint ventures and licensing arrangements as well as through its
own internal production operations. The Company is also continuing its
research and development efforts, largely funded through contracts with
U.S. Government agencies and the United States Advanced Battery Consortium
("USABC"), to broaden and build upon its product and technological base.
The Company has established a multidisciplinary business, scientific
and technical organization to commercialize products based on its
technologies. Its activities range from research and development to
manufacturing and selling products as well as designing and building
production machinery. The Company has recognized the need to protect its
technology and maintains an extensive patent portfolio consisting
currently of 328 issued United States patents and 802 foreign
counterparts. The patent portfolio includes numerous basic and
fundamental patents covering amorphous and related materials as well as
patents covering products and production technologies.
The Company conducts its battery business through its 97%-owned
subsidiary, Ovonic Battery Company, Inc. ("Ovonic Battery"). The Company
has also formed three joint ventures in the field of alternative energy,
GM Ovonic L.L.C. ("GM Ovonic"), United Solar Systems Corp. ("United
Solar") and Sovlux. GM Ovonic was established to manufacture and
commercialize Ovonic nickel metal-hydride ("Ni-MH") batteries for electric
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vehicle ("EV") applications. The Company's Ovonic Battery subsidiary owns
a 40% equity interest in GM Ovonic and General Motors Corporation
("General Motors") owns a 60% equity interest. The Company and Canon Inc.
of Japan ("Canon") each own a 49.98% equity interest in United Solar, a
joint venture formed for the continued development, manufacture and sale
of photovoltaic ("solar energy") products under license from the Company.
Mrs. Haru Reischauer, a director of both the Company and United Solar,
owns the balance of the outstanding shares of United Solar. The
Company also owns a 50% equity interest in Sovlux, a joint venture with
Scientific and Industrial Enterprise Kvant ("Kvant"), a leading energy
company in Russia. Sovlux was established to manufacture licensed
photovoltaic products and batteries in Russia for worldwide sales.
In the field of information processing technology, the Company's
Ovonic phase-change erasable optical memory technology is rapidly becoming
the international choice of major optical disk manufacturers. The
Company's licensees in this area include Matsushita Electric Industrial
Co., Ltd. ("Matsushita"), Toshiba Corporation ("Toshiba"), Asahi Chemical
Industry Co., Ltd. ("Asahi"), Hitachi, Ltd. ("Hitachi"), Plasmon Limited
("Plasmon"), Sony Corporation ("Sony"), International Business Machines
Corporation ("IBM") and Toray Industries, Inc. ("Toray").
The Company's MicrOvonic electrical memories are being prepared for
production in collaboration with Micron Technology, Inc. ("Micron"), the
largest DRAM manufacturer in the United States. In September 1994, the
Company entered into a royalty-bearing license agreement with Micron. The
MicrOvonic thin-film semiconductor memory technology has a wide variety of
applications and is intended to replace conventional DRAM, SRAM and flash
EEPROM memory devices.
The Company has also entered into a variety of other strategic
alliances and license agreements for the commercialization of its
technologies.
Company Structure
_________ECD_________
| | |
| | |
| | |
Sovlux | United Solar
50% | 49.98%
|
|
Ovonic
Battery_______
97% |
|
|
GM Ovonic
40%
Certain technical terms used herein are defined in the section
captioned "Glossary of Technical Terms" appearing at the end of this Item
1 on page 17.
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MAJOR BUSINESSES
The Company has invented and developed Ovonic materials, products and
production technology for use in the fields of energy, information and
synthetic materials. The Company's goals have been to develop unique and
proprietary cost-effective products to address important environmental,
energy and new materials needs.
ENERGY GENERATION AND STORAGE.
Energy activities, specifically in the areas of rechargeable
batteries and photovoltaic systems, represent a major element of the
Company's business strategy. Environmentally-safe methods of generating
and storing energy have become critical in today's world. The Company's
battery and photovoltaic technologies are gaining worldwide recognition,
particularly in light of recent concerns about air pollution, global
warming, ozone layer depletion, dependence on imported oil and related
concerns involving international stability, balance of payments and
economic development.
RECHARGEABLE BATTERIES. The Company's Ovonic Battery subsidiary has
developed a proprietary Ni-MH battery technology using Ovonic materials
which has achieved recognition by major battery manufacturers throughout
the world. The Company believes that all Ni-MH batteries are covered by
the Company's basic patents. Ovonic Battery currently has over a dozen
consumer battery licensees and has established a dominant patent position
in the field of Ovonic Ni-MH batteries, with 36 issued United States
patents and 180 foreign counterparts. Numerous United States and foreign
patent applications are in various stages of preparation and prosecution.
The Ovonic Ni-MH batteries are being manufactured and sold throughout
the world under licensing and joint venture arrangements. Ovonic Battery
is also in volume production of the Ni-MH battery negative electrode for
sale to its licensees and its GM Ovonic joint venture.
Ovonic Ni-MH batteries store over twice as much energy as standard
nickel cadmium ("Ni-Cd") or lead acid batteries of equivalent weight. In
addition, Ovonic Ni-MH batteries have high power, long cycle life, no
memory effect and are maintenance free. Moreover, Ovonic Ni-MH batteries
do not contain cadmium or lead, both environmentally hazardous substances.
Ovonic Ni-MH batteries can be made in a wide range of sizes and have a
wide range of applications, including hand-held consumer electronics,
power tools, utility applications, electric vehicles, including electric
two- and three-wheeled vehicles, and industrial batteries.
During the fiscal year ended June 30, 1995, Ovonic Battery produced
negative electrodes for sale to certain licensees for assembly into
complete batteries for consumer and EV applications and has doubled its
production capacity of electrodes and hydride materials. It is continuing
to expand its production capabilities. Additionally, Ovonic Battery is
producing batteries for EV applications engineered and designed for volume
production. The Ovonic Ni-MH battery, by virtue of its engineered
materials, possesses superior performance characteristics without the
limitations of conventional batteries.
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Ovonic Battery continues to further improve the performance characteristics
of its Ovonic Ni-MH batteries.
Ovonic Battery is currently focusing on three principal battery
markets: rechargeable batteries for portable electronics and consumer
applications, electric vehicle batteries and batteries for the propulsion
of two- and three-wheeled vehicles. These batteries can also serve
industrial applications such as energy storage for remote power generation
and battery-operated material handling and industrial equipment.
RECHARGEABLE PORTABLE ELECTRONICS AND CONSUMER BATTERIES. The need
for high energy density storage batteries has continued to grow in recent
years. The push toward portable electronic products such as cellular
telephones, portable computers and cordless tools has created a large
market for rechargeable batteries and has fueled research to investigate
new, even higher energy density battery systems. Although conventional
storage batteries, such as Ni-Cd, have been further improved in design and
packaging in recent years, the demand for higher performance batteries
continues to increase. At present, conventional Ni-Cd batteries have an
energy density of 30-35 watt-hours/kilogram. Ovonic Ni-MH batteries have
achieved an energy density of 80 watt-hours/kilogram, with the potential
for substantial further improvements.
Ovonic Ni-MH batteries offer a convenient "drop in" replacement for
Ni-Cd batteries in portable electronic and household appliances. Consumer
and governmental awareness that cadmium from Ni-Cd batteries represents a
serious health problem has begun to drive the industry away from Ni-Cd
batteries. The desire of the battery industry to be cadmium-free is also
a major factor in the growing interest in Ovonic Ni-MH batteries.
Ovonic Battery has licensing arrangements with many of the world's
largest battery manufacturing companies. Ovonic Battery's proprietary
battery technology has been licensed for consumer battery applications to
Hitachi Maxell, Ltd. of Japan ("Hitachi Maxell"); Samsung Electronics Co.,
Ltd. ("Samsung"), a large electronic equipment manufacturer in Korea;
Sylva Industries, Ltd. in Hong Kong ("Sylva"), one of the world's largest
manufacturers of 9-volt batteries and button cells; Varta Batterie AG
("Varta"), Europe's largest battery company; Sovlux, the Company's joint
venture in Russia; Harding Energy Systems Inc. ("Harding"); Eveready
Battery Company, Inc. ("Eveready") (formerly Gates Energy Products, Inc.),
the largest United States rechargeable consumer battery company; Walsin
Technology Corporation ("Walsin"), a large Taiwanese company; and a
leading Japanese battery company pursuant to a confidential licensing
arrangement. In addition, the Ovonic battery technology is being used in
consumer battery applications by three consumer battery manufacturers
based in Japan. Ovonic consumer batteries are in volume production by
most of these companies.
ELECTRIC VEHICLE BATTERIES. The strategic importance of EVs both in
the United States and worldwide has increased greatly in recent years.
This heightened interest is due to many concerns such as air pollution,
global warming, ozone layer depletion and dependence on oil. To address
some of these concerns, California has adopted regulations requiring 2% of
all automobiles sold in 1998 be zero emission vehicles. This required
percentage of zero emission vehicles is to increase to 10% by 2003.
Similar
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proposed regulations are under consideration by other states. EVs
are considered to be the only practical form of zero emission vehicle.
Independent of regulations, several major automobile manufacturers
have active programs underway for the development of EVs. Since Ovonic
Ni-MH battery technology provides two to two-and-a-half times the range as
the same mass of lead acid batteries, several major automobile
manufacturers are using Ovonic Ni-MH battery technology as they prepare to
commercialize and market EVs.
GM OVONIC. In June 1994, Ovonic Battery and General Motors formed a
joint venture, GM Ovonic, to manufacture and sell Ovonic Battery's
proprietary Ni-MH batteries for EV applications to all EV manufacturers on
a worldwide basis. GM Ovonic is owned 40% by Ovonic Battery and 60% by
General Motors. Ovonic Battery has contributed intellectual property,
licenses, production processes, know-how, personnel and engineering services
pertaining to Ovonic Ni-MH battery technology to the joint venture.
General Motors' contribution consists of operating capital, plant, equipment
and management personnel necessary for the volume production of batteries.
The management team has been formed and facility design and preparation and
equipment procurement for GM Ovonic are under way to move the Ovonic Ni-MH
battery technology to the EV marketplace.
The GM Ovonic manufacturing plant in Dayton, Ohio is being readied
and is scheduled to begin production during the first half of 1996. GM
Ovonic is currently conducting pre-production and production scale-up
engineering activities at a manufacturing facility in Troy, Michigan. In
parallel, Ovonic Battery has been producing a small quantity of batteries
which have been sold to GM Ovonic for installation in various vehicles.
Stanford R. Ovshinsky and Robert C. Stempel, former Chairman and
Chief Executive Officer of General Motors, serve as Ovonic Battery's
representatives on the five-member Board of Managers of GM Ovonic. Mr.
Stempel serves as senior technical and business advisor to Mr. Ovshinsky
and is technical consultant to General Motors for electric vehicles and
batteries.
OTHER EV BUSINESS AGREEMENTS. In addition to its GM Ovonic joint
venture, Ovonic Battery has entered into royalty-bearing license
agreements for the manufacture of EV batteries and related products
outside of the United States with Hyundai Motor Co., Ltd. of Korea
("Hyundai"), Varta, Sovlux, the Company's joint venture in Russia, and
Sylva. Hyundai, Sylva and Sovlux have restricted rights to sell EV
batteries in North America. Varta's license includes the right to
manufacture EV batteries subject to certain limitations and restrictions
on manufacturing in North America. Ovonic Battery continues to provide EV
batteries for testing to major automobile manufacturers worldwide as they
prepare to commercialize and market EVs.
USABC, a partnership among Ford Motor Company, General Motors and
Chrysler Corporation, with funding participation from the United States
Department of Energy ("DOE") and the Electric Power Research Institute,
was formed in 1991 to develop
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promising battery technologies for EVs. In May 1992, Ovonic Battery was
awarded a three-year, $18.5 million cost-sharing contract by USABC for
development of a "mid-term" Ni-MH battery for EVs. In April 1993, Ovonic
Battery received an additional $1.4 million purchase order from USABC for the
supply of prototype batteries for installation in EVs. In August 1994,
Ovonic Battery was awarded an additional $5.5 million cost-sharing contract
to continue its development efforts by working on advanced materials and
battery design for further improving battery performance characteristics and
reducing battery cost.
Ovonic Battery believes it has the only battery technology with the
capability to meet or exceed the USABC's "mid-term" goals for EV battery
performance. Ovonic Battery has been designing and building cells and
modules for independent evaluation by USABC as well as testing advanced
prototype batteries with favorable results.
<TABLE>
<CAPTION>
CHARACTERISTIC USABC MID-TERM CURRENT OVONIC ADVANCED BATTERY
- -------------- MAJOR TECHNICAL PERFORMANCE(1) PERFORMANCE(2)
GOALS -------------- ----------------
--------------------
<S> <C> <C> <C>
Energy Density 80 watt-hours/kg. 75-80 watt-hours/kg. 85-90 watt-hours/kg.
Power Density 150 watts/kg. 180 watts/kg. > 200 watts/kg.
Cycle Life 600 cycles 600 cycles 1000 cycles
Life 5 years 10 years 10 years
100% Recharge Time 6 hours or less 1 hour (60% in 15 1 hour (60% in 15
Time minutes) minutes)
</TABLE>
----------------------------
(1) Indicates independently verified performance with the exception of
life, which is projected based on cycle life results and history of
small portable batteries using the same materials and manufacturing
process. Based on this battery performance, a purpose-built EV
achieves:
_ More than 200 miles on a single charge
_ 0 to 60 mph acceleration in 8 seconds
_ Battery lifetime equal to the life of the vehicle
_ Battery quick charge to 60% of its capacity in 15 minutes
Moreover, the Ovonic Ni-MH battery is robust, maintenance free and free
of lead, cadmium and other environmentally hazardous substances.
(2) Indicates performance already achieved on a prototype level at Ovonic
Battery. For example, commercial products of Ovonic Battery licensees
in small portable batteries have achieved an energy density as high as
80 watt-hours/kilogram. Prototype batteries of advanced design
have demonstrated performance characteristics that satisfy or exceed
individual USABC mid-term goals. Optimization of all performance
characteristics within a particular cell design is an ongoing activity.
With respect to energy density, Ovonic Battery believes that
significant potential for even higher performance exists. Based on
laboratory measurements of advanced materials, optimized construction
and designs, Ovonic Battery projects that energy density can be
improved to as high as 120-150 watt-hours/kilogram.
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In late 1993, a watershed event occurred when a General Motors' Impact
vehicle powered by Ovonic batteries travelled 201 miles on a single charge.
In March 1994, a Solectria electric vehicle powered by Ovonic batteries
won the electric stock-car race at the Arizona Public Service Electric 500 held
in Phoenix, Arizona. In June 1994, an Ovonic battery-powered Solectria won
first place and achieved the most distance covered, 214 miles, on a single
charge in the American Commuter category of the 1994 Tour de Sol, a race of 48
electric and solar vehicles.
In May 1995, a four-passenger electric car, the Solectria Sunrise, powered
by Ovonic Ni-MH batteries, set a record for distance travelled on a single
charge 238 MILES in mixed city/highway driving conditions.
TWO- AND THREE-WHEELED VEHICLES. Ovonic Battery has installed Ovonic
Ni-MH batteries in scooters converted to electric power and successfully
demonstrated the application of its battery for two-wheeled electric vehicles.
Ovonic Battery considers two- and three-wheeled electric vehicles a potential
large-volume market since these types of vehicles are the primary mode of
transportation in many European and developing countries throughout the world,
including India, China and Taiwan. Electric two- and three-wheeled vehicles
using Ovonic batteries should improve the acute air pollution problems in these
regions caused by conventional two- and three-wheeled vehicles.
In June 1994, the Company entered into a letter agreement with Sanoh
Industrial Co., Ltd. ("Sanoh"), which provides for a royalty-bearing license
for the manufacture of Ovonic Ni-MH batteries for the propulsion of
motorcycles, motorscooters, bicycles and mopeds.
In March 1995, the Company entered into a royalty-bearing license
agreement with Walsin granting Walsin the right to manufacture and sell Ovonic
Ni-MH batteries for two- and three-wheeled vehicles.
PHOTOVOLTAICS. Photovoltaic (PV) systems provide a clean and simple
solid-state method for direct conversion of sunlight into electrical energy.
The major barrier to the widespread use of direct solar-to-electrical energy
conversion has been the lack of an inexpensive solar cell technology. The
Company and its American joint venture, United Solar, are leaders in thin-film
amorphous photovoltaic technology. They have pioneered a unique approach to
the manufacture of photovoltaic products that result in photovoltaic products
that are substantially lighter and more rugged than other photovoltaic
technologies, require much less energy to produce and in high volume can be
produced at significantly lower cost than is attainable with other products.
The Company's proprietary position in photovoltaics ranges from the invention
of materials and the development of products to the design and manufacture of
production equipment. The Company and United Solar have more than 150 U.S.
patents and their accomplishments have been recognized throughout the world.
Crystalline silicon was the original materials technology used by the
photovoltaic industry. First widely used in earth satellites, conventional
crystalline silicon solar cells
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are fabricated in a step-and-repeat, batch process from small wafers of single
crystal or polycrystalline silicon semiconductor materials. Notwithstanding
the substantial advances that have been made in the development of this
technology, the cost of crystalline photovoltaic modules still is high because
of high materials costs and because many processing steps are needed to
manufacture the modules. Crystalline silicon solar cell modules also are bulky
and break easily.
The Company has developed technology to reduce the material cost in a
solar cell using the Company's proprietary thin film, vapor-deposited amorphous
silicon alloy materials. Amorphous silicon (a-Si) absorbs light more
efficiently than its crystalline counterpart so the a-Si solar cell thickness
can be 50 to 100 times less, thereby significantly reducing material cost.
Amorphous cells with different light absorption properties also can be
deposited one on top of another to capture the broad solar spectrum more
effectively, which increases the energy-conversion efficiency of the multi-cell
device and improves performance stability.
The Company and its United Solar joint venture hold current world records
for both large- and small-area conversion efficiency for amorphous silicon
solar cells, as measured by the DOE's National Renewable Energy Laboratory
("NREL"). Conversion efficiency is the percentage of sunlight that is
converted into electricity. In January 1994, the DOE and United Solar
announced that United Solar had set a world record of 10.2% stabilized energy
conversion efficiency for large area (one-square foot) amorphous silicon alloy
photovoltaic modules, which the DOE characterizes as a major breakthrough.
To further reduce the manufacturing cost of photovoltaic modules, the
Company has pioneered the development of a proprietary continuous roll-to-roll
solar cell deposition process. Using a roll of flexible stainless steel that
is typically a half-mile long and 14 inches wide, nine thin-film layers of a-Si
alloy are deposited sequentially in a high yield, automated machine to make a
continuous, stacked three-cell structure. The roll of solar cell material then
is processed further for use in a variety of photovoltaic products. This basic
approach that the Company has pioneered is unique in the industry and has
important implications for the manufacture of semiconductor devices other than
solar cells.
The Company's photovoltaic cells are substantially lighter and more rugged
than other photovoltaic technologies and require much less energy to produce
than conventional crystalline solar cells. Moreover, the Company believes that
in high-volume production its photovoltaic modules will be significantly less
expensive than conventional crystalline silicon and other thin-film solar
modules produced on glass and can be cost competitive with fossil fuels. The
Company and United Solar have also developed unique products for the building
industry such as PV shingles and metal roofing products to emulate conventional
roofing materials in form, construction, function and installation. The
importance of these products for the building industry has been recognized both
domestically and abroad. The Company believes that the market for PV roofing
products represents an important opportunity for large-volume production and
sale to the building industry.
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The Company has formed two joint ventures to manufacture photovoltaic
modules and systems and to sell them throughout the world.
In 1990, the Company and Canon formed United Solar for the continued
development, manufacture and sale of Ovonic solar cells under license from the
Company. United Solar is owned 49.98% by the Company and 49.98% by Canon.
Canon has invested $50,000,000 in United Solar.
The Company and United Solar have been producing a variety of PV products
and selling PV modules and systems throughout the world. United Solar
presently has a 1.5 megawatt ("MW") facility in Troy, Michigan, where it
manufactures products for marine applications, remote power applications, PV
powered lighting systems and grid integrated systems.
United Solar plans to upgrade and more than triple its production
capacity. United Solar has placed an $8 million order with the Company for the
new machinery and equipment, planned to be operational in mid 1996, which will
incorporate the 10.2% world record technology for stabilized energy conversion
efficiency and will have annual production capacity of photovoltaic cells
capable of producing 5MW of electricity .
Also in 1990, the Company formed a joint venture, Sovlux, with Kvant, a
leading energy company in Russia, to manufacture the Company's photovoltaic
products in the countries of the former Soviet Union. Sovlux is owned 50% by
the Company and 50% by Kvant. In 1990, Kvant entered into machine-building
contracts with the Company for the construction of photovoltaic manufacturing
equipment and battery equipment. The Company has completed these machines and
shipped them to Kvant. The machines have been installed in Sovlux's plant in
Moscow. The joint venture arrangements provide that Kvant contribute this
equipment to the joint venture in exchange for its 50% ownership interest. The
Company's contribution to the venture consists solely of the technology
necessary to support Sovlux's operations. To date, Sovlux has conducted
pre-production activities consisting of further manufacturing plant preparation
and machinery optimization. In June 1995, Kvant received a $550,000
subcontract from NREL for "U.S./Russian Collaboration for Development and
Commercialization of Photovoltaic Products," a seven-month program to complete
the start-up of pre-commercial operations of the 2MW Sovlux plant in Moscow.
In 1990, the Company completed a three-year research contract administered
by the DOE's Solar Energy Research Institute ("SERI"), the predecessor of NREL,
aimed at further development of high efficiency amorphous silicon-based alloy
thin-film solar cells. Triple-cell devices were fabricated in this research
program with an initial active-area conversion efficiency of 13.7%, the highest
efficiency reported to date for any thin-film amorphous solar cell. In January
1991, a new three-year SERI research contract, focused on development of
stable, high-efficiency amorphous silicon triple-cell modules, was awarded to
United Solar. In April and July 1992, the Company was awarded two cost-sharing
research contracts for a total of $10.9 million to further improve photovoltaic
manufacturing technologies and utility module design and demonstration from
SERI's successor, NREL.
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In September 1993, the Company was awarded a three-year, approximately
$9.2 million cost-sharing contract by the DOE for the development and
demonstration of photovoltaic systems to be used in roof-top construction in
lieu of shingles and other roofing materials. In connection with the
DOE agreement, the Company is working with a multi-disciplinary team of
industry participants to facilitate the use of solar roofing materials by the
building industry. Other key members of the team include United Solar, the
National Association of Home Builders Research Center, Detroit Edison Company,
Arizona Public Service Company and Minoru Yamasaki Associates, an international
architectural firm. The roof-top photovoltaic arrays will be architecturally
integrated into building structures to replace building or other roofing
materials. The roof-top arrays are being designed to be installed directly
into a standard residential wood roof structure without the need for additional
structural support. All technology developed under the DOE agreement will be
made available to United Solar. The building industry offers a large
opportunity for PV applications. The Company believes that the PV roofing
products represent an important opportunity for large-volume production and
sale to the building industry.
In July 1994, the Company was awarded a $3 million cost-sharing contract
for research and development for high-efficiency photovoltaics by NREL.
OTHER ENERGY TECHNOLOGIES. In November 1993, the Company was awarded a
$250,000, one-year contract by NREL to develop bulk processing technology to
scale-up the Company's previously developed thin-film alloys for thermally
activated hydrogen storage.
In April 1994, the Company was awarded a $100,000 Phase I Small Business
Innovation Research ("SBIR") contract by the Advanced Research Projects Agency
to develop improved metal hydrides for thermally activated energy storage in
unmanned undersea vehicles and land electric vehicles. A two-year Phase II
SBIR contract in the amount of $750,000 for this project was awarded to the
Company in June 1995.
In May 1994, the Company was awarded a $50,000, six-month grant by the
Department of Defense ("DOD") to use thin film microwave deposition techniques
to develop new alloys to be used in high-efficiency thermoelectric devices. In
July 1995, the Company was awarded a $500,000 Phase II, two-year grant by the
DOD to continue the developments achieved in the Phase I program.
INFORMATION TECHNOLOGIES.
The Company has developed a number of key technologies in the fields of
information processing, storage and displays. In the past, products have been
developed by the Company for data input (image scanners); data output (copier
and laser printer drums); data display (active matrix flat panel displays); and
data storage (optical and semiconductor memory devices).
OPTICAL MEMORY. The Company is the originator of the high data density
phase-change erasable (PCE) optical memory disc technology. The Company's
Ovonic PCE
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optical memory stores many times the amount of data as fast as a
conventional rigid magnetic disc of the same size, in a convenient, removable
disc format. The Company has licensed its optical memory technology to
Matsushita, Toshiba, Plasmon, Asahi, Hitachi, Sony, Toray and IBM.
The Company's lead licensee in optical memories, Matsushita, is working to
make the Ovonic PCE optical memory the international standard. Matsushita
introduced under its Panasonic brand name a dual function disk drive in mid
1995. This dual function disk drive ("PD") uses the Ovonic optical phase
change technology licensed to Matsushita. The Matsushita drive can read
conventional CD-ROM disks now widely used for software distribution and
multimedia applications as well as read and write large capacity phase change
optical memory disks. Many of the Company's optical memory technology
licensees have announced they will also be making PD drives and storage media,
and several have begun commercial sales. The products being sold by the
Company's licensees have been met with enthusiastic industry and consumer
acceptance.
In January 1994, the Company announced that it will be working with
Polaroid Corporation ("Polaroid") to develop low-cost, high storage capacity
removable optical memory media for use in electronic photography and other
imaging applications as well as a wide range of computer data storage
applications. The Company has granted Polaroid worldwide exclusive rights to
the Company's proprietary optical memory materials to produce Ovonic phase
change media on substrates manufactured by low-cost continuous web embossing
processes.
NON-VOLATILE SEMICONDUCTOR MEMORY. The Company, on the basis of its
pioneering technology, developed the first non-volatile semiconductor memory,
the Ovonic EEPROM, for computer data storage in the 1960s. The Company has
advanced and extended that early work and is now developing in collaboration
with Micron a proprietary family of new high performance non-volatile
semiconductor memory MicrOvonic Memory and information processing devices.
This technology is designed to provide non-volatile computer data storage with
the speed of current, volatile DRAM semiconductor system memory as well as to
decrease the cost of production. The technology also offers an opportunity to
develop new, fast computer architectures that eliminate the data transfer
bottlenecks caused by the current computer memory hierarchy. The Ovonic memory
can, in a single layer, replace the multiple memory layers which are used in
today's personal computers. Another application of the technology is intended
for use in the rapidly growing flash EEPROM market. Flash EEPROMs are used in
portable electronic devices such as laptop computers, pagers, and cellular
telephones as all-solid-state, low-power replacements for magnetic hard disk
storage. Still another application of the Company's non-volatile semiconductor
memory technology can provide a basis for practical, highly complex, three
dimensional neural network systems for use in advanced artificial intelligence
and speech and image pattern recognition.
In September 1994, the Company entered into an exclusive, royalty-bearing,
worldwide license agreement with Micron. Under this agreement, Micron has the
right to use the Company's patents applicable to non-volatile thin-film memory
technology. The principal subsidiary of Micron is Micron Semiconductor Inc.,
the largest DRAM
-12-
<PAGE> 13
manufacturing company in the United States, which manufactures
and markets DRAM and SRAM semiconductor memory devices and other semiconductor
products. Micron does not have the right to license, assign, or sublicense the
Company's semiconductor technology to any other third party.
The Company entered into a $2 million, cost-sharing Subcontract Agreement
with Micron in July 1995 under Micron's Advanced Research Projects Agency Prime
Contract to perform research into advanced SRAM technology.
While the Company licensed its previous flat panel display and image
processing technology to its former subsidiary, OIS Optical Imaging Systems,
Inc. ("OIS"), the Company intends to continue its activities in this field
employing new technology.
SYNTHETIC MATERIALS.
The Company has developed a new low-cost, transparent vapor barrier
coating for flexible plastic beverage containers and packaging films. The
Company has also developed and demonstrated manufacturing technology and
processes for depositing these coatings with cost-effective, roll-to-roll
continuous production. The Company's vapor barrier coating technology is
environmentally friendly and can be used to extend the shelf life of food,
beverages, pharmaceutical and other types of sensitive commercial products.
The vapor barrier coating production process deposits an amorphous film that
significantly improves the barrier properties of commodity polymer films.
The Company has supplied samples of its proprietary low pressure microwave
deposited vapor barrier coatings on various polymer films to numerous major
international packaging corporations. The Company is engaged in business
discussions and negotiations with these packaging corporations.
In December 1994, the Company entered into a definitive license agreement
with Hirano Tecseed Co., Ltd. ("Hirano") under which Hirano received a
royalty-bearing license to make in Japan and sell in Japan and Asia low
pressure microwave equipment for depositing the Company's clear coat films onto
webs of substrate material. Pursuant to this agreement, the Company received
an up-front licensing fee in the form of the transfer of ownership to the
Company of a vapor barrier coating machine.
The Company also acquired a nonexclusive, royalty-free license from its
former subsidiary, Ovonic Synthetic Materials Company, Inc. ("OSMC"), to make,
use and sell products using clear coating and superconductivity technologies
previously licensed to OSMC.
MACHINE DIVISION AND CENTRAL ANALYTICAL LABORATORY
The Machine Division operates as a profit center for the Company's
machine-building and engineering activities. It has extensive experience in
designing and building proprietary automated production equipment and has
designed and built for the Company and its licensees five generations of
photovoltaic production lines, as well as research,
-13-
<PAGE> 14
development and manufacturing equipment for batteries, vapor barrier coating
and other materials technology. The Machine Division has designed and is
currently building the new 5MW machinery and equipment ordered by United Solar.
The Company's Central Analytical Laboratory conducts analysis of materials
produced by the Company and its joint venture partners and licensees as well as
materials produced by other companies. The Company also maintains an advanced
materials technology group that supports the efforts of each of the Company's
business areas.
RESEARCH AND DEVELOPMENT
The nature of the Company's business has required, and will continue to
require, the necessary expenditures for research and development to support the
commercial activities of the Company. Increasingly, such funds have been
forthcoming from United States government agencies, the USABC and the Company's
licensees. The materials, production technologies and products being developed
and produced by the Company, Ovonic Battery and the Company's joint venture
partners are technologically sophisticated and are designed for markets
characterized by rapid technological change and competition based, in large
part, upon technological and product performance advantages.
The following is a summary of the Company's consolidated direct
expenditures, excluding the allocation of patents, depreciation and general and
administrative expenses, for product research and development for the five
years ended June 30, 1995. Information for OSMC is included through June 30,
1992. All of the Company's research and development costs are expensed as
incurred.
Research and Development Expenditures
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ----------
(Restated)
<S> <C> <C> <C> <C> <C>
Sponsored $9,154,263 $6,927,883 $5,306,030 $2,360,632 $2,278,564
by Licensees
and Government
Agencies
Sponsored by
the Company 2,808,219* 1,357,341 1,958,328 3,689,073 2,307,325
----------- ---------- ---------- ---------- ----------
$11,962,482 $8,285,224 $7,264,358 $6,049,705 $4,585,889
=========== ========== ========== ========== ==========
</TABLE>
* Includes product development expenses related to the Company's
Microelectronics program which currently receives $125,000 per month from
Micron in connection with the September 1994 license agreement
(accordingly net Company-sponsored R&D is less than $1 million).
-14-
<PAGE> 15
SOURCES AND AVAILABILITY OF RAW MATERIALS
Materials, parts, supplies and services used in the Company's business are
generally available from a variety of sources. However, interruptions in
production or delivery of these goods and services could have an adverse impact
on the Company's manufacturing operations.
PATENTS AND PROPRIETARY RIGHTS
Since its founding in 1960, the Company's research and development efforts
have focused on amorphous and related materials. The Company has established a
multidisciplinary business, scientific and technical organization ranging from
research and development to manufacturing and selling products as well as
designing and building production machinery. The Company has recognized the
need to protect carefully those activities. The Company's extensive patent
portfolio consists of 328 United States patents and 802 foreign counterparts.
The Company's patent portfolio includes numerous basic and fundamental patents
applicable to the field of amorphous and related materials. The Company
invents not only materials but also develops low-cost production technologies
and high-performance products. The Company's patents therefore cover not only
materials but also the production technology and products developed by the
Company.
The Company believes that worldwide patent protection is important for it
to compete effectively in the marketplace. The Company's patents have not,
however, been tested judicially. See "Item 3: Legal Proceedings" on page 20
of this Report. No assurance can accordingly be given as to either the
validity or scope of the patent protection.
CONCENTRATION OF REVENUES
See Note B of the Notes to Consolidated Financial Statements on page 47 of
this Report.
BACKLOG
The Company has a $6.3 million backlog of orders as of August 31, 1995 in
battery packs and electrodes and machine-building contracts. The backlog at
September 30, 1994 was $6.3 million. The Company expects to fill all of its
current backlog within the current fiscal year.
-15-
<PAGE> 16
COMPETITION
The principal competitive advantages of the Company include its products,
production technology, extensive patent portfolio, inventions and research and
development activities. In the areas of consumer rechargeable batteries, EV
batteries, photovoltaics and information technologies, the Company has entered
into joint venture or licensing agreements with established industrial
companies that the Company believes possess the financial resources and
manufacturing and marketing capabilities to commercialize products based on the
Company's technologies.
The Company competes with firms, both domestic and foreign, that
manufacture and sell products, as well as firms that perform research and
development. Some of these firms are among the largest industrial companies in
the world and have well-established product lines, extensive resources and
large research and development staffs and facilities.
The Company is currently engaged in manufacturing and selling its
proprietary products through joint ventures and licensing arrangements, as well
as through its own internal production operations. The ability of the Company
to maintain its competitive leadership in the future will depend not only on
continuing product and technological advances but also on the strength and
ability of the Company's licensees and joint venture partners.
EMPLOYEES
As of August 31, 1995, the Company had a total of 278 employees, including
130 full-time Ovonic Battery employees. The aforementioned numbers do not
include employees of the Company's joint ventures or licensees. The Company
considers its relations with its employees to be excellent.
-16-
<PAGE> 17
GLOSSARY OF TECHNICAL TERMS
Certain technical terms used herein have the following meanings:
Amorphous - having an atomic structure that is not periodic.
Battery Memory Effect - an undesirable phenomenon in Ni-Cd batteries
where repeated shallow discharge cycles affect battery performance.
Clear Coatings - a transparent coating that protects or seals the
underlying substrate.
Crystalline - having a repeating atomic structure in all three dimensions.
Cycle Life - the number of times a rechargeable battery can be charged
and discharged.
Disordered - lacking order. Order is defined over some scale of length
such as short range, intermediate range or long-range and may refer to
atomic position (structural order), type of atom (compositional order),
or other physical properties such as magnetic and electric polarization
and others.
DRAM (Dynamic Random Access Memory) - a type of semiconductor memory
device used for the main system memory in most computers.
Electrode (battery) - the chemically active portions of a battery.
Energy Density - the amount of energy stored in a specific volume or
weight.
Flash EEPROM (Electrically Erasable Programmable Read-Only Memory) - a
type of semiconductor memory device that retains stored data even with
the power off and which is electrically reprogrammable.
Hydrides - solid materials that store hydrogen.
Non-Volatile - a property of some types of computer memory which
retain stored data even when power is removed.
Optical Memory - a computer memory technology that uses lasers to
record and play back data stored on a rotating disc.
Ovonic - the term used to describe the Company's proprietary materials,
products and technologies.
-17-
<PAGE> 18
PCE (Phase Change Erasable) - an optical memory technology in which
data is stored or erased on memory media by means of a laser beam that
switches the structural phase of a thin-film material, for example,
changes between a crystalline and an amorphous state.
Photovoltaic (PV) - direct conversion of light into electrical energy.
Power Density - the amount of power a battery can deliver per unit
volume or weight.
Prismatic Batteries - larger batteries with cases that have rectangular
parallel faces.
Roll-to-Roll Process - a process where a roll of substrate is
continuously converted into a roll of product.
Semiconductor - a class of materials with special electrical properties
used to fabricate solar cells, transistors, integrated circuits and
other electronic devices.
SRAM (Static Random Access Memory) - a type of very fast semiconductor
memory device.
Stabilized Energy Conversion Efficiency - the long-term ratio of
electrical output to light input.
Thin Film - a very thin layer of material formed on a substrate.
Vapor Permeation Barrier Coating - a coating that prevents the passage
of oxygen and water vapor.
-18-
<PAGE> 19
ITEM 2: PROPERTIES
A summary of the principal facilities of the Company and Ovonic Battery
follows:
<TABLE>
<CAPTION>
No. Of Date
Square Leased Or
Location Feet Acquired
- ------------------------------ ------------- ---------
<S> <C> <C>
The Company:
1675 West Maple Road, Troy, MI 31,550 October 1965
1050 East Square Lake Road, 11,000 August 1981
Bloomfield Township, MI
1621 Northwood, Troy, MI 24,900 January 1991
Ovonic Battery:
1864 Northwood, Troy, MI 12,480 March 1982
1826 Northwood, Troy, MI 12,480 October 1982
1707 Northwood, Troy, MI 27,400 October 1992
1334 Maplelawn, Troy, MI 28,100 December 1994
------
TOTAL 147,910
=======
</TABLE>
The foregoing properties, which are generally of brick and block
construction, are devoted primarily to the product development, pre-production
and production activities and administrative and other operations of the
Company and Ovonic Battery. The Company's Bloomfield Township facility is
currently leased to a third party on a month-to-month basis as an educational
facility with the Company retaining rights to use this facility. Management
believes that the above facilities are generally adequate for present
operations.
The Company and Ovonic Battery utilize their substantial amount of
testing, analytical, research and development and production equipment in their
operations. During the fiscal year ended June 30, 1995, the Company and Ovonic
Battery purchased approximately $1.1 million of equipment, excluding additional
equipment which was leased from Financing for Science International during the
year ended June 30, 1995. The testing, analytical and research and development
equipment used in the Company's and Ovonic Battery's development programs are
being fully utilized.
-19-
<PAGE> 20
ITEM 3: LEGAL PROCEEDINGS
On August 8, 1994, Ovonic Battery filed an action with the United States
International Trade Commission ("ITC") seeking an order halting the importation
into the United States of Ni-MH batteries made by three consumer battery
manufacturers based upon Ovonic Battery's United States Patent #4,623,597
covering Ovonic Battery's proprietary technology for Ni-MH batteries (the "'597
Patent"). In December 1994 and January 1995, the three consumer battery
manufacturers entered into agreements with the Company and Ovonic Battery
amicably settling the differences which led to the ITC action and paving the
road for future cooperation in the further development of Ni-MH batteries.
On June 30, 1995, SAFT America, Inc. ("SAFT") filed a complaint in the
Federal District Court for the District of Delaware naming Ovonic Battery,
subsequently amended to name the Company, as defendants and asking that the
Court invalidate Ovonic Battery's '597 Patent and declare that SAFT has not
infringed the '597 Patent.
According to the complaint and amended complaint filed by SAFT, this
action was a defensive measure on the part of SAFT for the purpose of avoiding
a possible action by the Company and Ovonic Battery involving SAFT in the ITC.
On September 15, 1995, the Company and Ovonic Battery filed counterclaims
against SAFT, its parent SAFT, S.A., and related companies or entities Societe
de Services de Propriete Industrielle, Agence Nationale de Valorisation de
Recherche, GS-SAFT and Japan Storage Battery Company, Inc. (the
"Counterdefendants").
The Company and Ovonic Battery claim that one or more of the
Counterdefendants (i) infringe Ovonic Battery's '597 Patent as well as two
additional Ovonic Battery patents, (ii) breached confidential agreements made
with the Company and Ovonic Battery, (iii) breached fiduciary duties owed to
the Company and Ovonic Battery, (v) are guilty of common law unfair competition
and (vi) violated the Lanham Act.
Management of the Company and Ovonic Battery believe that the allegations
of SAFT are without merit. The Company and Ovonic Battery intend to vigorously
defend against the allegations of SAFT and intend to press for the relief
sought in their counterclaims asserted against the Counterdefendants.
There are no other legal proceedings which have arisen in the ordinary
course of business which management believes to be material.
-20-
<PAGE> 21
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of the Company held on Thursday,
April 27, 1995 (the "Meeting"), the following directors were elected for the
ensuing year and until their successors shall be duly elected and qualified:
<TABLE>
<CAPTION>
For Withheld
------------- -----------
<S> <C> <C>
Stanford R. Ovshinsky 12,053,171 484,059
Iris M. Ovshinsky 12,053,171 484,059
Ralph F. Leach 12,053,903 483,327
Jack T. Conway 12,053,903 483,327
Nancy M. Bacon 12,054,205 483,025
Hellmut Fritzsche 12,054,205 483,025
Momoko Ito 12,054,205 483,025
Walter J. McCarthy, Jr. 12,054,205 483,025
Florence I. Metz 12,054,205 483,025
H. Reischauer 12,054,205 483,025
N.J. Robfogel 12,054,205 483,025
S.K. Stynes 12,054,205 483,025
</TABLE>
It was announced at the Meeting that Mr. Joseph L. Parkinson would not be
standing for election as a director, and that he had informed the Board of the
Company that, while he will continue to work with the Company, his duties in
his new job as President, Chief Executive Officer and Chairman of Integrated
Information Technology, Inc. would not permit him to continue as a director of
the Company.
On May 12, 1995, Momoko Ito, a long-time colleague and director of the
Company, died. Ms. Ito's invaluable contributions to the Company will be
remembered with the greatest appreciation and respect.
Also approved at the Meeting was the Company's 1995 Non-Qualified Stock
Option Plan (with 8,749,836 For; 923,410 Against; 174,304 Abstentions; and
2,689,680 Broker Non-Votes) and the appointment of Deloitte & Touche LLP as
independent accountants for the fiscal year ending June 30, 1995 (with
12,477,274 For; 35,092 Against; and 24,864 Abstentions).
-21-
<PAGE> 22
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of July 24, 1995, shares of the Company's Common Stock, par value $.01
per share ("Common Stock"), began trading on the NASDAQ National Market System
under the symbol "ENER." From May 22, 1995 until July 24, 1995, the Company's
Common Stock was traded on the NASDAQ SmallCap Market. From December 31, 1993
until May 22, 1995, the shares were traded on the National Association of
Securities Dealers OTC Bulletin Board.
Shares of the Company's Class A Common Stock, par value $.01 per share
("Class A Common Stock"), are not publicly traded.
As of August 31, 1995, there were approximately 3,000 holders of record of
Common Stock and four holders of record of Class A Common Stock.
The following table sets forth the reported high and low bid quotations
for the Company's Common Stock for the following quarters:
For the Fiscal Year Ended June 30
(in Dollars Per Share)
<TABLE>
<CAPTION>
1996 1995 1994
High Low High Low High Low
---- --- ----- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter
through
September 22,
1995 $19.375 $15.50 $12.625 $10.625 $12.125 $ 8.625
Second Quarter $ 12.25 $ 9.75 $10.875 $ 8.125
Third Quarter $ 16.50 $11.625 $13.375 $ 6.75
Fourth Quarter $20.875 $14.625 $14.375 $ 9.75
</TABLE>
The above-listed quotations may include inter-dealer prices which may not
necessarily represent actual transactions. The Company has paid no cash
dividends in the past and no cash dividends are expected to be paid in the near
future.
-22-
<PAGE> 23
ITEM 6: SELECTED FINANCIAL DATA
Set forth below is certain financial information taken from the Company's
audited consolidated financial statements (See Item 1: Description of
Business).
<TABLE>
<CAPTION>
June 30,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ------------ ------------ ------------ ------------
(Restated)*
<S> <C> <C> <C> <C> <C>
Revenues:
Product Sales $10,298,019 $ 7,366,668 $ 2,731,342 $ 7,038,731 $ 8,329,430
Royalties 1,205,036 228,630 103,224 35,046 60,111
Revenues from business agreements 29,297,560 11,533,224 9,248,192 7,166,960 6,576,732
Other 543,143 228,853 315,620 381,834 1,268,164
----------- ------------ ------------ ------------ ------------
TOTAL REVENUES 41,343,758 19,357,375 12,398,378 14,622,571 16,234,437
----------- ------------ ------------ ------------ ------------
Net Income (Loss) from Operations 5,796,184 (4,057,754) (5,652,422) (6,439,719) (4,388,946)
Interest expense (545,738) (536,059) (302,876) (189,768) (755,457)
Interest income 244,722 61,489 109,776 343,146 481,557
Gain on disposition of investment in OIS -- 536,530 282,861 5,719,801
Loss on disposition of investment in OSMC -- (1,786,128)
Adjustment of Contingent Promissory Note -- (265,000)
Other non-operating income (net) 110,496 103,138 42,055 174,140
----------- ------------ ------------ ------------ ------------
Total Other Income (Expense) (190,520) 165,098 131,816 4,261,191 (538,900)
----------- ------------ ------------ ------------ ------------
Net Income (Loss) $ 5,605,664 $(3,892,656) $ (5,520,606) $(2,178,528) $(4,927,846)
=========== ============ ============ ============ ============
Net Income (Loss) per Common Share
and Common Equivalent Share $ .63 $ (.51) $ (.75) $ (.32) $ (.78)
Net Income (Loss) per Common Share
Assuming Full Dilution $ .56 $ (.51) $ (.75) $ (.32) $ (.78)
At year end:
Total Assets $23,331,019 $10,494,363 $8,746,932 $7,149,103 $13,397,475
Long-Term Debt $3,012,079 $3,484,234 $3,183,528 $1,267,964 $1,297,537
Contingent Promissory Note - - - - $4,220,375
Working Capital (Deficit) $9,310,685 $(2,330,209) $ (3,120,850) $(1,770,214) $(4,479,721)
Stockholders' Equity (Deficit) $7,899,667 $(4,930,135) $ (7,500,323) $(3,292,616) $(4,022,425)
</TABLE>
-23-
* See Note L to the financial statements.
<PAGE> 24
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the year ended June 30, 1995, the Company had total
revenues of $41,344,000. The Company's business strategy to develop and
license new products and production technology with third parties generated
royalties of $1,205,000 and revenues of $29,298,000. Additionally, product
sales were $10,298,000 and other revenue was $543,000.
The Company had net income for the year ended June 30, 1995 of
$5,606,000, primarily due to consumer battery agreements with two consumer
battery manufacturers entered into in December 1994, a consumer battery
agreement entered into with a third consumer battery manufacturer in January
1995 and an agreement with Walsin (all described below).
As of June 30, 1995, the Company had unrestricted consolidated
cash and cash equivalents of approximately $6,259,000, an increase of
approximately $4,143,000 from June 30, 1994. As of June 30, 1995, the Company
had consolidated working capital of approximately $9,311,000, compared with a
consolidated working capital deficit of $2,330,000 as of June 30, 1994.
In the year ended June 30, 1995, the Company received
$1,062,000, $1,188,300, $1,727,000 and $1,000,000, respectively, upon
the sale of the Company's Common Stock in private placement transactions and
through the exercises of warrants and options for the purchase of the Company's
Common Stock and the sale of Ovonic Battery stock.
The Company believes that revenues from licensing of the
Company's technology, royalties, product sales and new and existing
business agreements, together with cash available, will be sufficient to satisfy
current estimates of cash requirements for operations based upon the Company's
expectations as to the timing and amounts of such revenue. The Company
currently is in negotiations and/or discussions to procure additional revenues
and funding through new business, licensing and financing agreements, as well as
the private placement of its stock. Although the Company has obtained the
necessary revenue and financing in the past, and while there are no assurances
that it can do so in the future, the Company believes that it will receive
additional revenues and funds from these sources.
During the year ended June 30, 1995, approximately $1,098,000
cash was provided by operations. The difference between the net income
of approximately $5,606,000 and the net cash provided by operations was due to
the $3,500,000 license fee from Walsin under the March 1995 license agreement
($2,500,000 received in August 1995 and $1,000,000 to be received in January
1996), the $330,000 recognized in revenue under an amended license agreement
with Hitachi Maxell, the $472,000 due from Sylva under the March 1995 amended
license agreement as discussed below, and the increase in
-24-
<PAGE> 25
inventory at June 30, 1995, partially offset by depreciation expenses,
stock issued to consultants and directors for services rendered and non-cash
compensation in connection with Ovonic Battery's stock option agreement with its
Chief Executive Officer. In addition, during this period approximately
$1,139,000 of machinery and equipment was purchased or constructed. During the
next 12 months, Ovonic Battery plans to purchase approximately $500,000 of
machinery and equipment. This equipment is principally for expansion of Ovonic
Battery's manufacturing capacity which will be financed by utilizing lease
financing arrangements similar to those described below.
In March 1995, the Company entered into a royalty-bearing
license agreement with Walsin, a Taiwanese company, in the field of
nickel metal hydride batteries for consumer applications and electric-powered
scooters and motorcycles. The agreement provides for total payments of
$5,000,000 over a period of time and/or completion of certain events. The
Company recognized revenue from license fees of $3,500,000 in the fiscal year
ended June 30, 1995, representing payments for the license due from Walsin in
August 1995 and January 1996.
Also in March 1995, the Company entered into an amendment to
its license agreement with Sylva. This amendment extends certain
additional technology, licenses and technical support to Sylva as well as
providing for a reduced royalty rate. In consideration for such additional
technology, Sylva will pay Ovonic Battery, over a period of less than two years,
total additional license fees of $800,000, with an initial payment of $300,000
received in the year ended June 30, 1995. At June 30,1995, the Company
recognized $767,000 in license fees from Sylva, representing the present value
of such additional license fees.
Also in March 1995, the Company entered into an amendment to
its license agreement with Hitachi Maxell. As part of this amendment,
the Company received from Hitachi Maxell 150 shares of Ovonic Battery common
stock (approximately 5%) previously sold to Hitachi Maxell and a $200,000
reduction in the advance royalties previously paid by Hitachi Maxell. Hitachi
Maxell received additional technology rights and a reduced royalty rate. The
Company recognized a license fee of $330,000 related to this non-cash
transaction representing the estimated value of the license granted to Hitachi
Maxell.
In January 1995, the Company received a $7,565,000 order from
United Solar for solar cell manufacturing equipment to provide
production capacity of solar cells capable of producing 5 MW of electricity. As
of June 30, 1995, the Company received advance payments of $3,510,000 on this
order and commenced design work and construction on this equipment. In
September 1995, United Solar and ECD amended the contract to increase the
purchase price to $7,996,000.
In December 1994, the Company entered into consumer battery
agreements with two consumer battery manufacturers in the field of
consumer nickel metal hydride batteries. In January 1995, the Company entered
into an additional consumer battery agreement with a third consumer battery
manufacturer in the same field. Pursuant to the three consumer battery
agreements, the Company amicably settled the differences
-25-
<PAGE> 26
between itself and the three consumer battery manufacturers which had
led to the initiation of an action with the ITC in September 1994 seeking an
order halting the importation into the United States of nickel metal hydride
batteries made by the three companies. The consumer battery agreements dispose
of the issues in the ITC action on a mutually acceptable basis and pave the way
for future cooperation in the field of consumer nickel metal hydride batteries.
The consumer battery agreements entered into in December 1994 provide for
nonrefundable payments to the Company totaling $10,000,000 which were received
by the Company in December 1994 and January 1995. The consumer battery
agreement entered into in January 1995 provides for payment to the Company of up
to $5,000,000, starting with a $500,000 nonrefundable payment received in
January 1995, and running royalties based on a sliding scale as additional lump
sum payments are made under the agreement. All three of these consumer battery
agreements provide for future payments based on sales of nickel metal hydride
batteries.
In connection with these settlements, the Company, pursuant to
a contingent fee agreement, paid the law firm representing it in the ITC
action a contingent fee based on the amounts received by the Company in
connection with the settlements, together with reimbursement for out-of-pocket
expenses. Additionally, the contingent fee agreement provides that the Company
will pay to the law firm a portion (up to a certain limitation or cap based upon
an agreed-upon formula) of any future payments received by the Company under the
three consumer battery agreements.
In December 1994, the Company entered into a licensing agreement
with Hirano in connection with the Company's vapor barrier coating
technology. Pursuant to this agreement, the Company received an up-front
licensing fee in the form of the transfer of ownership to the Company of a vapor
barrier coating machine. The Company will receive additional consideration in
the form of fees paid upon the sale of clear coat equipment by Hirano. In
addition, Hirano is required to pay the Company approximately $50,000
semiannually to maintain exclusivity for this license in Japan and to pay the
Company for future experiments and sample preparation for Hirano and its
customers. Also in December 1994, the Company entered into a sale-and-leaseback
transaction with FSI whereby the Company received $1,250,000 on the sale of the
vapor barrier coating machine to FSI.
In September 1994, Micron and the Company entered into a
licensing agreement. Under this agreement, Micron has the rights to use
the Company's patents applicable to non-volatile thin-film memory technology.
The principal subsidiary of Micron, Micron Semiconductor, Inc., is one of the
largest DRAM manufacturing company in the United States and manufactures and
markets DRAM and SRAM semiconductor memory devices and other semiconductor
products. Micron made an initial payment of $250,000 to the Company in September
1994, and is making additional payments during the term of the agreement of
$125,000 per month or royalties on sales of licensed products, whichever are
greater. Royalties have not yet been recorded.
In addition to the aforementioned consumer battery agreements,
Ovonic Battery has entered into royalty-bearing license agreements with
Sanoh, Sylva, a major Japanese
-26-
<PAGE> 27
battery manufacturer, Hitachi Maxell, Sovlux, Eveready, Varta, Hyundai,
Harding, Daido and Samsung. Sylva, Harding, Varta and the three consumer
battery manufacturers are currently in production of Ovonic nickel metal hydride
("Ni-MH") consumer batteries, and Sylva and Harding are currently purchasing
battery materials from Ovonic Battery. In connection with the financing
arrangements with FSI, Ovonic Battery has assigned all receivables from Sylva
purchase orders as additional collateral. After the monthly lease payments are
made to FSI, Ovonic Battery receives the balance of the Sylva funds deposited in
the FSI account for the month.
A number of business agreements related to research and development
contracts have been entered into by the Company with U.S. government
agencies and with industry to develop the Company's products and production
technology. The technology developed, together with the applicable patents, are
generally owned by the Company. Generally, the agreed-upon fees for these
research and development contracts reimburse the Company for its direct costs
associated with these projects, together with a portion of indirect costs
(patents, operating, general and administrative expenses and depreciation)
associated with these projects.
In May 1992, Ovonic Battery was awarded a contract by USABC
for development of a "mid-term" Ni-MH battery for electric vehicles.
The three-year, $18,500,000 cost-sharing contract is being funded by USABC. In
June 1994, this contract was amended to cover additional work to be performed by
Ovonic Battery under a sixteen-month program. This amendment increased the
contract amount by $5,500,000, subject to cost-sharing, for the period from
August 1994 through November 30, 1995. Currently, Ovonic Battery receives
approximately $280,000 per month from USABC under the August 1994 program.
Ovonic Battery is also discussing with USABC an extension to the original
contract.
In April 1992, the Company was awarded a three-year, $8,000,000
cost-sharing contract by NREL to further its development of advanced
photovoltaic manufacturing technologies. The Company was subsequently notified
that this contract was increased from $8,000,000 to $10,800,000.
In July 1994, the Company was awarded a three-year, approximately
$3,000,000 cost-sharing contract by NREL for development of high,
efficiency triple junction amorphous silicon solar cells. At the present time,
NREL has funded $600,000 out of its total share of $945,000 this above contract.
In September 1993, ECD was awarded a three-year, approximately
$9,200,000 cost-sharing contract by the DOE for development and
demonstration of photovoltaic systems to be used in roof-top construction in
lieu of shingles and other roofing materials. The award is part of the DOE's
PV:BONUS Program to develop solar cells that do double duty as building
components. As of June 30, 1995, the Company had recognized revenue of
$2,143,171 for the DOE's portion of Phases I and II. A portion of Phase III of
this program had been approved for a $1,337,000 cost-sharing agreement for the
period from June 1,
-27-
<PAGE> 28
1995 through December 31, 1995. The Company is currently discussing
with DOE further funding for Phase III of this program.
Since October 1992, the Company has entered into third-party
leasing transactions with FSI for a total of approximately $7,000,000.
This financing has been used for the acquisition of certain equipment to be used
in connection with the USABC contract, for Ovonic Battery's expansion and other
equipment including the vapor barrier coating machine sold to and leased back
from FSI. The terms of the agreement require repayment over three to five years
at interest rates ranging between 5% and 13%. These agreements are secured by a
security interest in the USABC and NREL contracts and by Ovonic Battery's
equipment.
For certain leases, the Company typically provides a cash
security reserve to FSI in an amount equal to 10% of the acquisition
cost of the equipment. These security reserves accrue interest at the rate of
5% which is payable annually to the Company.
The Company has agreed to purchase certain equipment leased
from FSI upon expiration of the lease for 10% of its acquisition cost.
For other equipment, the Company has an option to purchase the equipment for its
then fair market value (but no less than 10% nor more than 20% of its
acquisition cost), plus any applicable sales, excise or other taxes imposed as a
result of such sale.
While certain USABC, NREL and DOE programs have up to two
years remaining, the equipment being utilized for these programs has
alternative future uses for other programs if, in fact, the USABC, NREL and DOE
or other pending programs are not continued beyond the aforementioned periods.
Results of Operations
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
The Company had net income in the year ended June 30, 1995 of
approximately $5,606,000 compared to a net loss of approximately
$3,893,000 for the year ended June 30, 1994. Net income for the year was due
principally to the payments received by the Company during the period under
three consumer battery agreements entered into in the year ended June 30, 1995,
plus agreements with Walsin, Eveready and Micron, and amended agreements with
Hitachi Maxell, Varta and Sylva.
Product sales increased 40% from $7,367,000 in the year ended
June 30, 1994 to $10,298,000 for the year ended June 30, 1995 due to
increased machine-building revenues for both the Company and for Ovonic Battery
and increased sales by Ovonic Battery of battery packs to GM Ovonic.
Royalties increased 426% from $229,000 in the year ended June 30,
1994 to $1,205,000 in the year ended June 30, 1995, primarily due to
royalties received from the three consumer battery manufacturers and from Varta.
-28-
<PAGE> 29
Revenues from business agreements increased 154% from $11,533,000
in the year ended June 30, 1994 to $29,298,000 in the year ended June
30, 1995 due to the agreements with Micron, Walsin, Hitachi Maxell, Eveready,
the three consumer battery manufacturers and increased revenues recognized under
agreements with DOE and USABC. (See NOTE B - Notes to Consolidated Financial
Statements.)
The increase in other revenues was due to increased billings
in 1995 for services performed by the Company's Machine Division, as
well as miscellaneous work performed for Ovonic Battery licensees.
The increase in cost of revenues from business agreements in
the year ended June 30, 1995 compared to the year ended June 30, 1994
was principally due to the payment of the contingent fee made to the law firm
representing the Company in the ITC action as well as increased activities in
1995 under the aforementioned agreements with DOE and USABC.
The increase in cost of product sales from $6,621,000 in the
year ended June 30, 1994 to $10,391,000 in the year ended June 30, 1995
was principally due to increased machine-building costs for both the Company and
Ovonic Battery, increased cost of sales by Ovonic Battery of battery packs to GM
Ovonic and a seven-week plant shutdown due to upgrades in alloy processing
equipment at Ovonic Battery which is now completed.
The increase in product development and research expenses from
$2,671,000 in the year ended June 30, 1994 to $4,636,000 in the year
ended June 30, 1995 was due to non-cash stock option expense of $500,000 in 1995
and an increase in work performed in the Company's microelectronics research
program. This program currently receives $1,500,000 per year from Micron in
connection with the September 1994 agreement.
Patent expenses increased from $173,000 in the year ended June 30,
1994 to $408,000 in the year ended June 30, 1995 as a result of
increased patent and maintenance costs in 1995.
The increase in operating, general and administrative expenses
from $5,250,000 in the year ended June 30, 1994 to $6,474,000 in the year ended
June 30, 1995 was caused by non-cash stock option expense of $1,100,000 in 1995
and increased legal expenses in 1995 (some of which were associated with the ITC
action), an accrual in 1995 for the value of non-cash compensation in connection
with Ovonic Battery's option agreement with its Chief Executive Officer,
together with costs associated with the transfer of technology and other work
for GM Ovonic, partially offset by reductions in other operating, general and
administrative expenses.
Year Ended June 30, 1994 Compared to Year Ended June 30, 1993
The Company had a net loss in the year ended June 30, 1994 of
approximately $3,893,000 compared to a net loss of approximately
$5,521,000 for the year ended June
-29-
<PAGE> 30
30, 1993. The net loss in the year ended June 30, 1994 was the result
of a loss from operations of approximately $4,058,000, partially offset by other
income of approximately $165,000, compared to a loss from operations of
approximately $5,652,000, partially offset by other income of $131,000, in the
year ended June 30, 1993.
Product sales increased 170% from $2,731,000 in the year ended
June 30, 1993 to $7,367,000 for the year ended June 30, 1994 due to
increased sales of Ovonic electrodes and battery packs in 1994.
The 25% increase in revenues from business agreements from
$9,248,000 in the year ended June 30, 1993 to $11,533,000 in the year
ended June 30, 1994 was due to increased revenues recognized under agreements in
1994 with USABC, NREL (PV Manufacturing and Hydride), DOE (PV Bonus), a license
agreement with Sylva, Sanoh, and an auto manufacturer, partially offset by
decreases in revenue under agreements with Hitachi Maxell, a major Japanese
battery manufacturer, Daido and Hirano. (See NOTE B - Notes to Consolidated
Financial Statements.)
The decrease in other revenues was due to decreased billings
in 1994 for services performed for third parties by the Company's
Central Analytical Laboratory and other service departments.
The increase in cost of revenues from business agreements in
the year ended June 30, 1994 compared to the year ended June 30, 1993
was principally a consequence of increases in research and development in 1994
under the USABC, DOE and NREL contracts. A number of the aforementioned license
agreements in 1993 did not have applicable cost of revenues from business
agreements in the year ended June 30, 1993 since all applicable costs had been
expensed in previous periods.
The increase in cost of product sales from $3,732,000 in the
year ended June 30, 1993 to $6,621,000 in the year ended June 30, 1994
was principally due to increased production and sales of Ovonic electrodes and
battery packs in 1994.
The decrease in product development and research expenses from
$3,514,000 in the year ended June 30, 1993 to $2,671,000 in the year
ended June 30, 1994 was a result of increased funding of research in 1994 by
USABC, DOE and NREL. Thus, greater amounts of research and development expenses
have been allocated to cost of revenue from business agreements.
Patent expenses decreased from $319,000 in the year ended June 30,
1993 to $173,000 in the year ended June 30, 1994 as a result of
increases in the allocation of patent costs to costs of revenue from business
agreements.
-30-
<PAGE> 31
The increase in operating, general and administrative expenses
from $3,918,000 in the year ended June 30, 1993 to $5,250,000 in the
year ended June 30, 1994 was caused by increased corporate expenses, including
an accrual for the value of non-cash compensation in connection with Ovonic
Battery's option agreement with its Chief Executive Officer, increased state
taxes, increased legal expenses and increased depreciation expenses in 1994.
-31-
<PAGE> 32
ITEM 8: CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors
Energy Conversion Devices, Inc.
Troy, Michigan
We have audited the accompanying consolidated balance sheets of
Energy Conversion Devices, Inc. and subsidiary (the "Company") as
of June 30, 1995 and June 30, 1994, and the related consolidated
statements of operations, stockholders equity (deficit), and cash
flows for each of the three years in the period ended June 30,
1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Energy
Conversion Devices, Inc. and subsidiary as of June 30, 1995 and
June 30, 1994, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1995
in conformity with generally accepted accounting principles.
As discussed in Note L to the consolidated financial statements,
the accompanying 1995 financial statements have been
restated.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Detroit, Michigan
September 28, 1995 (September 25, 1996, as to Note L)
-32-
<PAGE> 33
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash, including cash equivalents of
$6,254,000 as of June 30, 1995 and
$2,112,000 as of June 30, 1994 $ 6,259,451 $ 2,115,622
Accounts receivable (net of allowance for
uncollectible accounts of approximately
$29,000 as of June 30, 1995 and
$97,000 as of June 30, 1994) (NOTE A) 7,431,835 2,122,142
Amounts due from related parties (NOTE A) 728,374 318,590
Inventories (NOTE A) 2,054,750 424,110
Prepaid expenses and other current assets 208,160 185,444
------------ ------------
TOTAL CURRENT ASSETS 16,682,570 5,165,908
PROPERTY, PLANT AND EQUIPMENT (NOTE E)
Land and land improvements 312,588 312,588
Buildings and improvements 3,432,603 3,389,536
Machinery and other equipment 16,768,046 15,698,348
Capitalized lease equipment 5,731,936 4,481,936
------------ ------------
26,245,173 23,882,408
Less accumulated depreciation
and amortization (20,482,363) (19,137,382)
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 5,762,810 4,745,026
JOINT VENTURES (NOTE D)
United Solar -- --
GM Ovonic -- --
Sovlux -- --
OTHER ASSETS 885,639 583,429
------------ ------------
TOTAL ASSETS $ 23,331,019 $ 10,494,363
============ ============
</TABLE>
See notes to consolidated financial statements.
-33-
<PAGE> 34
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30,
----------------------------
1995 1994
------------- -------------
(Restated)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,912,338 $ 4,192,578
Amounts due to related parties 106,130
Salaries, wages and amounts withheld
from employees 986,420 881,359
Deferred revenues under business
agreements (NOTE A) 884,151 618,149
Current installments on long-term debt,
capitalized lease obligations and short-term
debt (NOTE E) 1,482,846 1,804,031
------------- -------------
TOTAL CURRENT LIABILITIES 7,371,885 7,496,117
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS (NOTE E) 3,012,079 3,484,234
DEFERRED GAIN (NOTE E) 1,149,011 153,340
NON-REFUNDABLE ADVANCE ROYALTIES
(NOTE C) 3,898,377 4,290,807
------------- -------------
TOTAL LIABILITIES 15,431,352 15,424,498
STOCKHOLDERS' EQUITY (DEFICIT)
Capital Stock (NOTES F and G)
Class A Convertible Common Stock,
par value $0.01 per share:
Authorized - 500,000 shares
Issued & outstanding - 219,913 shares 2,199 2,199
Common Stock, par value $0.01 per share:
Authorized - 15,000,000 shares
Issued & outstanding - 8,078,667
shares at June 30, 1995 and
7,563,224 shares at June 30, 1994 80,787 75,632
Additional paid-in capital 166,001,702 158,782,719
Accumulated deficit (158,185,021) (163,790,685)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 7,899,667 (4,930,135)
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIT) $ 23,331,019 $ 10,494,363
============= =============
</TABLE>
See notes to consolidated financial statements.
-34-
<PAGE> 35
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended June 30,
---------------------------------------
1995 1994 1993
----------- ------------ ------------
(Restated)
<S> <C> <C> <C>
REVENUES
Product sales (NOTE A) $10,298,019 $ 7,366,668 $ 2,731,342
Royalties (NOTES A and B) 1,205,036 228,630 103,224
Revenues from business agreements
(NOTES A and B) 29,297,560 11,533,224 9,248,192
Other (NOTE A) 543,143 228,853 315,620
----------- ------------ ------------
TOTAL REVENUES 41,343,758 19,357,375 12,398,378
EXPENSES
Cost of product sales 10,390,794 6,621,096 3,732,141
Cost of revenues from business
agreements 13,638,975 8,700,109 6,567,929
Product development and
research (NOTE A) 4,636,158 2,670,842 3,514,128
Patents (NOTE A) 407,583 173,221 318,946
Operating, general and administrative 6,474,064 5,249,861 3,917,656
----------- ------------ ------------
TOTAL EXPENSES 35,547,574 23,415,129 18,050,800
----------- ------------ ------------
NET INCOME (LOSS) FROM OPERATIONS 5,796,184 (4,057,754) (5,652,422)
OTHER INCOME (EXPENSE):
Interest expense (545,738) (536,059) (302,876)
Interest income 244,722 61,489 109,776
Gain on disposition of investment in OIS -- 536,530 282,861
Other nonoperating income - net 110,496 103,138 42,055
----------- ------------ ------------
TOTAL OTHER INCOME (EXPENSE) (190,520) 165,098 131,816
----------- ------------ ------------
NET INCOME (LOSS) $ 5,605,664 $ (3,892,656) $ (5,520,606)
=========== ============ ============
NET INCOME (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (NOTE H) $ .63 $ (.51) $ (.75)
=========== ============ ============
NET INCOME (LOSS) PER COMMON
SHARE ASSUMING FULL DILUTION
(NOTE H) $ .56 $ (.51) $ (.75)
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
-35-
<PAGE> 36
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (NOTES F and G)
Three years ended June 30, 1995
<TABLE>
<CAPTION>
Class A Convertible
Common Stock Common Stock
------------------- ------------------
Number Number Additional Total
of of Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity (Deficit)
---------- ------- --------- ------- ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992 219,913 $2,199 6,983,999 $69,840 $151,012,768 $(154,377,423) $ (3,292,616)
Net loss for year ended June 30, 1993 (5,520,606) (5,520,606)
Common stock issued in connection with
exercise of Stock Options 32,190 322 176,775 177,097
Issuance of stock to directors & consultants 6,216 62 43,340 43,402
Private placement of common stock
and warrants 125,000 1,250 933,750 935,000
Common stock issued in connection with
conversion of OSMC Preferred Stock
and CICs 37,854 378 (378)
Common stock issued in connection with
conversion of 1991 and 1992 Private
Placement Warrants 41,277 413 (413)
Warrants issued in connection with
services rendered 157,400 157,400
---------- ------- --------- ------- ------------ -------------- -------------
Balance at June 30, 1993 219,913 2,199 7,226,536 72,265 152,323,242 (159,898,029) (7,500,323)
Net loss for year ended June 30, 1994 (3,892,656) (3,892,656)
Canceled stock (8,484) (84) 84
Issuance of stock to directors & consultants 31,148 311 195,973 196,284
Private placement of common stock
and warrants 308,500 3,085 6,263,475 6,266,560
Common stock issued in connection with
conversion of OSMC Preferred Stock
and CICs 5,524 55 (55)
---------- ------- --------- ------- ------------ -------------- -------------
Balance at June 30, 1994 219,913 2,199 7,563,224 75,632 158,782,719 (163,790,685) (4,930,135)
</TABLE>
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<PAGE> 37
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES F and G)
Three years ended June 30, 1995
<TABLE>
<CAPTION>
Class A Convertible
Common Stock Common Stock
------------------- ---------------------
Number Number Additional Total
of of Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
-------- --------- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income for year ended June 30,
1995 (Restated) 5,605,664 5,605,664
Issuance of stock to directors & consultants 3,733 38 87,275 87,313
Private placement of common stock
and warrants 175,000 1,750 2,667,425 2,669,175
Common stock issued in connection with
exercise of stock options 325,799 3,258 2,864,392 2,867,650
Compensation expense in connection with
extension of stock options 1,600,000 1,600,000
Common stock issued in connection with
conversion of OSMC preferred stock
and CICs 10,911 109 (109)
-------- --------- --------- --------- ------------ ------------- ----------
Balance at June 30, 1995 (Restated) 219,913 $ 2,199 8,078,667 $ 80,787 $166,001,702 $(158,185,021) $7,899,667
======== ========= ========= ========= ============ ============= ==========
</TABLE>
See notes to consolidated financial statements.
-37-
<PAGE> 38
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30,
---------------------------------------
1995 1994 1993
----------- ------------ ------------
(Restated)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 5,605,664 $ (3,892,656) $(5,520,606)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 1,159,537 941,307 774,702
Provision (Credit )for uncollectible accounts
receivable (388,000) 200,000
Non-cash revenue (330,000)
Creditable royalties (392,430) (70,077) (49,972)
Warrants issued to consultants for services rendered
and employee stock options 2,053,000 318,350 157,400
Stock issued for services rendered 193,838 47,804 43,402
Loss on sale of equipment 2,062 1,683 12,000
Granting of license under option agreement (1,000,000)
Amortization of deferred gain (45,996) (46,660) (30,000)
Gain on disposition of investment in OIS (536,530) (282,861)
Other (2,996)
Changes in working capital:
Accounts receivable and amounts due from
related parties (5,719,477) (529,666) 946,706
Inventories (1,630,640) (846) 224,485
Prepaid expenses and other current assets 5,074 (173,361) 43,772
Accounts payable and accrued expenses (69,049) 1,882,509 456,104
Deferred revenues under business agreements 266,002 (819,533) (159,329)
----------- ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATIONS 1,097,585 (4,265,676) (3,187,193)
----------- ------------ ------------
INVESTING ACTIVITIES:
Purchases of capital equipment (1,138,972) (247,070) (670,739)
Proceeds from sale of capital equipment 1,256 568 4,336
Proceeds from disposition of investment in OIS 548,699 282,861
----------- ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,137,716) 302,197 (383,542)
----------- ------------ ------------
FINANCING ACTIVITIES:
Principal payments under short-term and long-term debt
obligations and capitalized lease obligations (2,043,340) (1,687,397) (1,620,843)
Proceeds from issuance of long-term debt and capitalized
leases 1,250,000 3,600,000
Proceeds from sale of stock and exercise of stock options
and warrants 4,977,300 4,913,835 1,112,097
Proceeds from non-refundable advance royalties 225,000 1,141,876
Proceeds from option agreement 1,000,000
----------- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,183,960 3,451,438 5,233,130
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 4,143,829 (512,041) 1,662,395
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,115,622 2,627,663 965,268
----------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,259,451 $ 2,115,622 $ 2,627,663
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
-38-
<PAGE> 39
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $612,094 $536,811 $292,037
The Company's non-cash investing and financing
activities were as follows:
<CAPTION>
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Capitalized leased equipment and
deferred gain $1,250,000
Accumulated amortization and
deferred gain 208,333
Capitalized leased equipment and
capitalized lease obligations $1,646,741 $974,086
Deposits on capitalized lease obligations 263,614
Common stock issued for future services 182,855
Conversion of debt for sale of Ovonic Battery stock 1,000,000
</TABLE>
See notes to consolidated financial statements.
-39-
<PAGE> 40
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies
Nature of Business
Energy Conversion Devices, Inc. ("ECD") is engaged in the
synthesis of new materials and the development of advanced
production technology and innovative products with an emphasis on
alternative energy and advanced information processing
technologies.
Financial Statement Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of
ECD, its 97%-owned subsidiary Ovonic Battery Company, Inc. ("Ovonic
Battery"), a company formed to develop and commercialize ECD's
Ovonic Ni-MH battery technology (collectively, the "Company"). Due
to cumulative losses incurred by Ovonic Battery, no minority
interest is recorded in the consolidated financial statements.
ECD also has three investments accounted for by the equity
method: (I) United Solar Systems Corp. ("United Solar") (49.98%),
ECD's photovoltaic (solar energy) joint venture with Canon Inc. of
Japan ("Canon"); (ii) Sovlux Co. Ltd. ("Sovlux") (50%); ECD's
Russian joint venture with Scientific and Industrial Enterprise
Kvant ("Kvant"); and (iii) GM Ovonic L.L.C. ("GM Ovonic") (40%),
Ovonic Battery's joint venture with General Motors Corporation ("General
Motors") to manufacture and sell the Company s proprietary
Ni-MH batteries for electric vehicle applications worldwide. See
Note D for a discussion of these ventures.
Upon consolidation, all intercompany accounts and transactions
are eliminated.
Certain items for the years ended June 30, 1994 and 1993 have
been reclassified to be consistent with the classification of items
in the year ended June 30, 1995.
Cash Equivalents
Cash equivalents consist of investments in short-term, highly
liquid securities having a maturity of three months or less from
the date of acquisition.
-40-
<PAGE> 41
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (continued)
Translation Gains and Losses
Since all of the Company's contracts and transactions are
denominated and settled in U.S. dollars, there are no foreign
currency gains or losses.
Accounts Receivable
The following tabulation shows the component elements of
accounts receivable from long-term contracts and other programs:
<TABLE>
<CAPTION>
June 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
U.S. Government:
Amounts billed $ 420,126 $ 213,240
Unbilled 778,513 774,507
---------- ----------
Total 1,198,639 987,747
---------- ----------
Commercial Customers:
Amounts billed 951,931 1,080,034
Unbilled 5,973,430 455,482
---------- ----------
Total 6,925,361 1,535,516
---------- ----------
Other 65,414 14,469
Allowance for Uncollectible Accounts (29,205) (97,000)
---------- ----------
TOTAL $8,160,209 $2,440,732
========== ==========
</TABLE>
Unbilled receivables represent revenues recognized for the
present value of license payments to be received in future periods
and on the percentage-of-completion method of accounting related to
machine-building contracts and amounts earned under certain
contracts and billed in subsequent months.
Certain contracts with the U.S. government require a retention
that is paid upon completion of audit of the Company s indirect
rates. There are no material retentions at June 30, 1995 and 1994.
Inventories
Inventories of raw materials, work in process and finished
goods for the manufacture of negative electrodes, hydride
materials, battery packs and other products,
-41-
<PAGE> 42
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
together with supplies, are valued at the lower of cost (moving
average) or market. Cost elements included in inventory are
materials, direct labor and manufacturing overhead.
Inventories (principally those of Ovonic Battery) are as
follows:
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Finished products $ 315,276 $ 2,631
Work in process 910,582 172,929
Raw materials 793,569 205,030
Supplies 35,323 43,520
---------- --------
$2,054,750 $424,110
========== ========
</TABLE>
Property, Plant and Equipment
All properties are recorded at cost. Plant and equipment are
depreciated on the straight-line method over the estimated useful
lives of the individual assets. The estimated lives of the
principal classes of assets are as follows:
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Buildings and improvements 5 to 20
Machinery and other equipment 3 to 10
Capitalized lease equipment and
leasehold improvements 3 to 5
</TABLE>
Capitalized lease equipment and leasehold improvements are
amortized over the shorter of the term of the lease or the life of
the equipment or improvement, usually three to five years.
Accumulated amortization on capitalized lease equipment as of June
30, 1995 and June 30, 1994 was $1,461,000 and $693,000,
respectively.
Costs of machinery and other equipment acquired or constructed
for a particular research and development project, which have no
alternative future use (in other research and development projects
or otherwise), are charged to product development and research
costs as incurred.
Expenditures for maintenance and repairs are charged to
operations. Expenditures for betterments or major renewals are
capitalized and are depreciated over their estimated useful lives.
-42-
<PAGE> 43
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Product Development and Research
Total product development and research costs, most of which
are included in cost of revenues from business agreements, were
$11,962,000, $8,285,000 and $7,264,000 for the three years ended
June 30, 1995, 1994 and 1993, respectively.
Patents
Patent expenditures are charged directly to expense. Total
patent expenditures, most of which are allocated for financial
statement purposes to cost of revenues from business agreements and
product development and research, were $933,000, $1,010,000 and
$878,000 for the three years ended June 30, 1995, 1994 and 1993,
respectively.
Product Sales
Product sales include battery-related materials (hyride
materials and Ovonic electrodes), contract revenues related to
building of battery packs, and revenues related to machine-building
contracts. Revenues related to machine-building contracts are
recognized on the percentage-of-completion method of accounting.
All other product sales are recognized when the product is shipped.
Royalties
Most license agreements provide for the Company to receive
royalties from the sale of products which utilize the licensed
technology. Typically, the royalties are incremental to and
distinct from the license fee and are recognized as revenue upon
the sale of the respective licensed product. In several instances,
the Company has received cash payments for non-refundable advance
royalty payments which are creditable against future royalties
under the licenses. Advance royalty payments are deferred and
recognized in revenues as the creditable sales occur, the
underlying agreement expires, or when the Company has demonstrative
evidence that no additional royalties will be creditable and,
accordingly, the earnings process is completed.
Business Agreements
A substantial portion of revenues are derived through business
agreements seeking to develop and/or commercialize products based
upon the Company's proprietary technologies. Such agreements are
of two types.
-43-
<PAGE> 44
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
The first type of business agreement relates to licensing the
Company's proprietary technology. Licensing activities are tailored to
provide each licensee with the right to use the Company's technology, most
of which is patented, for a specific product application or, in some
instances, for further exploration of new product applications of such
technologies. The terms of such licenses, accordingly, are tailored to
address a number of circumstances relating to the use of such technology
which have been negotiated between the Company and the licensee. Such
terms generally address whether the license will be exclusive or
nonexclusive, whether the licensee is limited to very narrowly defined
applications or to broader-based product manufacture or sale of products
using such technologies, whether the license will provide royalties for
products sold which employ such licensed technology and how such royalties
will be measured, as well as other factors specific to each negotiated
arrangement. In some cases, licenses relate directly to research and
development that the Company has undertaken pursuant to R&D contracts; in
other cases, they relate to product development and commercialization
efforts of the licensee and other agreements combine the efforts of the
Company with those of the licensee.
License agreement fees are generally recognized as revenue at
the time the agreements are consummated, which is the
completion-of-the-earnings process. Typically, such fees are
non-refundable, do not obligate the Company to incur any future
costs or require future performance by the Company and are not
related to future production or earnings of the licensee. License
fees payable in installments are recorded at the present value of
the amounts to be received taking into account the collectibility
of the license fee. In some instances, a portion of such license
fees is contingent upon the commencement of production or other
uncertainties. In these cases, license fee revenues are not
recognized until commencement of production or the resolution of
uncertainties.
In the second type of business agreement, the Company conducts
specified research and development projects related to one of its
principal technology specializations for an agreed-upon fee ("R&D
contracts"). Some of these projects have stipulated performance
criteria and deliverables whereas others require "best efforts"
with no specified performance criteria. Revenues from R&D
contracts that contain specific performance criteria are recognized
on a percentage-of-completion basis which matches the contract
revenues to the costs incurred on a project based on the
relationship of costs incurred to estimated total project costs.
Revenue from R&D contracts, where there are no specific performance
terms, are recognized in amounts equal to the amounts expended on
the programs. Generally, the agreed-upon fees for R&D contracts
contemplate reimbursing the Company for costs considered associated
with project activities including
-44-
<PAGE> 45
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
expenses for direct product development and research, patents,
operating, general and administrative expenses and depreciation.
Accordingly, expenses related to R&D contracts are recorded as cost of
revenues from business agreements.
Other Operating Revenues
Other operating revenues consist principally of third-party service
revenue realized by certain of the Company's service departments,
including the Machine Division and Central Analytical Laboratory.
Other Non-operating Income
Other non-operating income-net consists of rental income, insurance
proceeds and gains and losses on sale of fixed assets.
-45-
<PAGE> 46
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE B - Royalties and Revenues from Business Agreements
The Company has business agreements with third parties for
which royalties and revenues are included in the consolidated statements of
operations. A summary of the royalties and revenue from such agreements follows:
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Royalties:
Battery technology $ 1,158,623 $ 158,553 $ 34,323
Optical Memory 46,413 70,077 49,972
Microelectronics 12,500
Hydrogen 6,429
----------- ----------- ----------
Royalties $ 1,205,036 $ 228,630 $ 103,224
=========== =========== ==========
Revenues from business agreements:
Photovoltaics
National Renewable Energy Laboratory ("NREL") - R&D $ 1,550,171 $ 1,801,582 $1,629,701
Department Of Energy ("DOE") - R&D 1,948,317 298,149
U.S. Trade & Development Agency 510,000
DOE - PV Wire - R&D 76,887
Department of Defense ("DOD") - PV Case 100,000
DOD - PV Injection Molded - R&D 99,989
Battery technology
Three consumer battery manufacturers 10,500,000
Eveready Battery Co. ("Eveready") - License 1,000,000
Walsin Technology Corp. ("Walsin") - License 3,500,000
NASA/SBIR - R&D 410,111 209,889 50,000
Hitachi-Maxell, Ltd. ("Hitachi Maxell") - R&D 140,000 240,000
Hitachi Maxell - License 330,000
Sylva Industries Ltd. ("Sylva") - License 767,176 1,425,000
Automobile Manufacturer - R&D 157,610 1,050,000 435,000
Samsung Electronics Co. Ltd. ("Samsung") - License 209,676
United States Advanced Battery Consortium ("USABC")-R&D 6,082,822 5,324,660 3,723,124
Japanese battery manufacturer - License 1,575,000
Daido Steel Co. Ltd. Of Japan ("Daido") - License 900,000
Sanoh Industrial Co., Ltd. Of Japan ("Sanoh") - License 500,000
Varta Batterie AG ("Varta") - Licenses 250,000
Microelectronics
Micron Technology , Inc. ("Micron") - Fees 1,375,000
Other 181,000 308,438
Hydrogen
NREL 76,736 173,264
U.S. Army Missile Command - R&D 86,239 13,761
Other 266,826 415,919 386,929
----------- ----------- ----------
Revenues from business agreements $29,297,560 $11,533,224 $9,248,192
=========== =========== ==========
</TABLE>
-46-
<PAGE> 47
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE B - Royalties and Revenues from Business Agreements - (continued)
The Company historically has entered into agreements with a
relatively small number of major customers throughout the world.
Revenues from unaffiliated foreign customers represent
approximately 53%, 45% and 50% for the years ended June 30, 1995,
1994 and 1993, respectively. There are two major consumer battery
manufacturers which represent 12% each, Sylva which represents 11%
and USABC which represents 15% of total revenue for the year ended
June 30, 1995. There are two major customers which represent 34%
(USABC) and 31% (Sylva) of total revenue for the year ended June
30, 1994. Three major customers represent 30% (USABC), 13% (Honda
R&D Co., Ltd. ["Honda"]) and 13% (NREL) of the total revenues for
the year ended June 30, 1993.
NOTE C - Non-Refundable Advance Royalties
At June 30, 1995 and 1994, the Company deferred recognition of
revenues relating to non-refundable advance royalty payments.
Non-refundable advance royalties consist of the following:
<TABLE>
<CAPTION>
June 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Battery:
Japanese battery manufacturer $1,125,000 $1,125,000
Hitachi Maxell 355,189 360,000
Varta -- 350,000
Daido 225,000 225,000
Optical Memory:
Matsushita Electric Ind'l Co. Ltd. ("Matsushita") 1,061,862 1,076,981
Hitachi, Ltd. ("Hitachi") 685,700 685,700
Sony Corporation ("Sony") 360,000 360,000
Polaroid Corporation ("Polaroid") 50,000 50,000
Asahi Chemical Ind'l. Co. Ltd. ("Asahi") -- 22,500
Plasmon PLC ("Plasmon") 18,750 18,750
Toshiba Corporation ("Toshiba") 16,876 16,876
---------- ----------
$3,898,377 $4,290,807
========== ==========
</TABLE>
During the years ended June 30, 1995 and 1994, $392,430 and
$70,077, respectively, of creditable royalties earned were
recognized as revenue. During the year ended June 30, 1994,
$225,000 of advance royalties were received. There are no
obligations in connection with any of the advance royalty
agreements which require the Company to incur any additional costs.
-47-
<PAGE> 48
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures
United Solar
On June 27, 1990, ECD and Canon Inc. of Japan ("Canon"), which
at that time owned approximately 6% of the common stock of ECD,
entered into a joint venture agreement (the "United Solar Joint
Venture Agreement") for the formation of United Solar. The United
Solar Joint Venture Agreement provided that United Solar would be
owned 49.98% by ECD, 49.98% by Canon, with the balance held by Mrs.
Haru Reischauer, a member of the Board of Directors of ECD. ECD
has contributed to United Solar a license in the field of
photovoltaics more fully described below, its solar cell
manufacturing equipment, its photovoltaic research and development
equipment, certain leasehold improvements, furniture and fixtures,
inventory and supplies. In return for the contribution of these
assets, ECD received 49.98% equity interest in United Solar. In
return for its 49.98% equity interest in United Solar, Canon has
invested $50,000,000 which, as of June 30, 1995, consists of a
credit of $8,022,000 in connection with a term loan to the Company
made in 1990 and used to fund a portion of the Company's pre-joint
venture photovoltaic activities, and $41,978,000 of cash capital
contributions directly to United Solar to fund its operations.
Under the United Solar Joint Venture Agreement, ECD entered
into a license agreement whereby ECD granted to United Solar under
all of its photovoltaic technology a fully paid-up and
royalty-free, irrevocable, worldwide (except as noted below)
license to make, use and sell products incorporating ECD's
photovoltaic technology including the right to grant sublicenses.
The license excludes licenses granted by ECD to entities in the
former U.S.S.R., India and Japan. ECD retains the right to conduct
photovoltaic research and development which may be licensed to
United Solar as well as to the extent necessary to satisfy
obligations under the Sovlux and certain Indian agreements.
The United Solar Joint Venture Agreement also provides for a
know-how cross license related to know-how among Canon, ECD and
United Solar. In addition, ECD, United Solar and Canon have agreed
to the terms of certain licenses related to future photovoltaic
technology developed. Accordingly, the license described above is
subject to Canon's right to acquire both United Solar's and ECD's
future-developed photovoltaic technology.
In July 1992, a memorandum of understanding was signed by
Canon and ECD stating that should United Solar require additional
funding beyond what Canon has already
-48-
<PAGE> 49
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
agreed to invest, Canon would assist United Solar in finding means
of raising funds to continue the expansion of United Solar's
operations to profitability which would not result in the dilution
of ECD's interest in United Solar.
United Solar's Board of Directors has four representatives
designated by Canon, four representatives designated by ECD, and
Mrs. Haru Reischauer, who is also a member of ECD's Board of
Directors. In connection with the United Solar Investment
Agreement dated July 9, 1993, the parties have agreed that Mrs.
Reischauer will maintain her existing percentage equity interest in
United Solar. Canon, ECD and Mrs. Reischauer have agreed that if
Mrs. Reischauer decides to sell her shares, Canon may purchase such
shares at the greater of principal plus interest or appraised
value.
In 1990, ECD recorded the cancellation of the aforementioned
$8,022,000 term loan from Canon, after deducting $1,734,478 which
represented the net book value of ECD's assets transferred to
United Solar, as a contribution to ECD's capital. Accordingly,
ECD's investment in United Solar is recorded at zero. ECD will
continue to carry its investment at zero until the venture becomes
profitable, at which time ECD will start to recognize over a period
of years its share, if any, of the then equity of United Solar and
will recognize its share of the venture's profits or losses on the
equity method of accounting.
ECD performed laboratory, shop, patent and research services
for the benefit of United Solar for which ECD received
approximately $68,000, $39,000 and $75,000 in the years ended 1995,
1994 and 1993, respectively. ECD also performed administrative
services for the benefit of United Solar for which ECD received
approximately $23,000, $44,000 and $42,000 in the years ended 1995,
1994 and 1993, respectively. These amounts are included in other
revenues. In addition, in the year ended June 30, 1995, United
Solar billed ECD for approximately $404,000 for work performed in
accordance with the DOE PV Bonus contract.
In January 1995, ECD received a $7,565,000 order (amended to
$7,996,000 in September 1995) from United Solar for solar cell
manufacturing equipment to provide production capacity of solar
cells capable of producing 5MW of electricity. As of June 30,
1995, ECD received payments of $3,510,000 relative to this order
and commenced design work and construction on this equipment. At
June 30, 1995, the Company recognized revenue of $2,847,000 and had
deferred revenue of $663,000.
-49-
<PAGE> 50
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
The following sets forth certain selected financial data
regarding United Solar that are derived from United Solar's financial
statements.
UNITED SOLAR STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
-------------- ---------------------------
1995 1994 1993
-------------- ------------- ------------
(Unaudited) (Audited) (Audited)
<S> <C> <C> <C>
Revenues
Product sales $ 2,357,520 $ 4,777,112 $ 2,893,492
------------ ------------- ------------
Operating Expenses
Cost of sales 3,242,074 4,784,750 4,515,614
Research and development 973,692 2,023,619 2,002,883
General and administrative 1,161,465 2,604,646 2,590,348
Sales and marketing 777,363 1,683,038 1,460,363
------------ ------------- ------------
Total 6,154,594 11,096,053 10,569,208
------------ ------------- ------------
Other Income (Expense) 198,840 (3,879,541) 160,745
------------ ------------- ------------
Net Loss $(3,598,234) $(10,198,482) $(7,514,971)
============ ============= ============
</TABLE>
UNITED SOLAR BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
----------- ------------
1995 1994
----------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,076,787 $ 9,007,811
Accounts Receivable - Trade 498,668 323,770
Accounts Receivable - NREL 197,818 134,253
Accounts Receivable - Stockholders 246,771 376,416
Inventory 1,027,841 875,803
Other Current Assets 226,298 139,556
----------- ------------
Total Current Assets 3,274,183 10,857,609
Property, Plant and Equipment (Net) 5,251,306 1,580,564
Other Assets 117,842 116,853
----------- ------------
Total Assets $ 8,643,331 $ 12,555,026
=========== ============
Current Liabilities:
Accounts Payable - Trade $ 703,779 $ 1,009,507
Accrued Expenses and Other 328,305 336,036
----------- ------------
Total Current Liabilities 1,032,084 1,345,543
----------- ------------
Total Stockholders' Equity 7,611,247 11,209,483
----------- ------------
Total Liabilities and
Stockholders' Equity $ 8,643,331 $ 12,555,026
=========== ============
</TABLE>
-50-
<PAGE> 51
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
Based upon the opinion of legal counsel, ECD believes that it
has no obligation to fund any losses that United Solar incurs
beyond ECD's original investment. Additionally, ECD has no
financial or other guarantees with respect to liabilities incurred
by United Solar.
Sovlux
In April 1990, ECD established Sovlux, a joint venture with
Kvant in Russia, to manufacture photovoltaic and battery products
and systems in the countries comprising the former U.S.S.R. and
sell them worldwide (except for Japan and India). Sovlux is owned
50% by ECD and 50% by Kvant. In 1990, Kvant entered into
machine-building contracts with ECD for the construction of
photovoltaic manufacturing equipment and battery equipment. Kvant
paid ECD a total of $10,450,000 for these machine-building
contracts. At June 30, 1993, ECD had completed these machines and
shipped them to Kvant.
The joint venture arrangements provide that Kvant contribute
such equipment in an installed and operational condition to the
joint venture in exchange for its 50% interest. ECD's contribution
to the venture consists solely of the technology necessary to
support Sovlux's operations. No tangible assets have been
contributed to Sovlux by ECD. Through June 30, 1995, the
activities related to Sovlux have been limited to facility
preparation at certain Kvant facilities from which Sovlux will
operate, the cost of which Kvant has also assumed as part of its
commitment to the venture, the training of employees and other
pre-production activities.
-51-
<PAGE> 52
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
The following sets forth certain financial data regarding
Sovlux that are derived from Sovlux's unaudited financial statements:
SOVLUX STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(000's)
<TABLE>
<CAPTION>
1993
-----------
(Unaudited)
<S> <C>
Revenues:
Net sales $ 4
Commissions 183
----
Total Revenues 187
Cost of goods sold 3
Operating expenses 86
----
Gross Margin 98
Selling, general and administrative expenses 17
----
Profit from operations 81
Interest expenses 4
----
Net income before realized translation loss 77
Realized translation loss (14)
----
NET INCOME $ 63
====
</TABLE>
SOVLUX BALANCE SHEET
(000's)
<TABLE>
<CAPTION>
Year Ended
December 31, 1993
-----------------
(Unaudited)
<S> <C>
Current Assets:
Cash and cash equivalents $ 80
Accounts receivable:
Trade accounts 2
Employees 20
Other 144
Inventories 5
Advances to suppliers and contractors 157
Prepaid and other assets 3
-------
Total Current Assets 411
Property, Plant and Equipment (net) 10,595
Intangible Assets 62
-------
TOTAL ASSETS $11,068
=======
</TABLE>
-52-
<PAGE> 53
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
SOVLUX BALANCE SHEET (continued)
(000's)
<TABLE>
<CAPTION>
1993
-----------
(Unaudited)
<S> <C>
Current Liabilities:
Accounts payable:
Trade accounts $ 1
Employees 2
Taxes payable 2
Others 119
Customer advances 71
Short-term loans 203
-------
Total Current Liabilities 398
Long-Term Debt 15
Shareholders Equity:
Capital 8,500
Earnings during the development stage 51
Translation gain 2,104
-------
Total Shareholders' Equity 10,655
-------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $11,068
=======
</TABLE>
ECD has recorded its investment in Sovlux at zero, which
represents the net book value of ECD's assets transferred to
Sovlux. Based upon the opinion of legal counsel, ECD believes that
it has no obligation to fund any losses that Sovlux incurs.
Additionally, ECD has made no financial or other guarantees with
respect to liabilities incurred by Sovlux. ECD will continue to
carry its investment at zero until the venture becomes profitable
on a sustainable basis, at which time ECD will start to recognize
over a period of years its share, if any, of the then equity of
Sovlux and will recognize its share of the venture's profits or
losses on the equity method of accounting.
There are no financial statements available for Sovlux since
the December 31, 1993 financial statements.
GM Ovonic
In June 1994, Ovonic Battery and General Motors formed a joint
venture for the manufacture and commercialization of Ovonic Ni-MH
batteries for electric vehicles. General Mottors has a 60%
interest and Ovonic Battery has a 40% interest in this joint
venture. Ovonic Battery has contributed intellectual property,
licenses, production
-53-
<PAGE> 54
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
processes, know-how, personnel and engineering services pertaining
to Ovonic Ni-MH battery technology to the joint venture. General
Motors' contribution consists of operating capital, plant,
equipment and management personnel necessary for the volume
production of batteries. GM Ovonic's management team has been
formed. Facility design and preparation and equipment procurement
are currently under way.
The following sets forth certain financial data regarding GM
Ovonic derived from GM Ovonic's unaudited financial statements:
GM OVONIC STATEMENTS OF OPERATIONS
AS OF JUNE 30, 1995
(000's)
<TABLE>
<CAPTION>
1995
-----------
(Unaudited)
<S> <C>
Revenues:
Sales $ 610
Operating expenses
Cost of sales 606
Experimental testing 1,527
General and administrative expenses 1,074
--------
Total 3,207
--------
OPERATING (LOSS) $ (2,597)
========
</TABLE>
GM OVONIC BALANCE SHEET
(000's)
<TABLE>
<CAPTION>
Year Ended
June 30, 1995
-------------
(Unaudited)
<S> <C>
Current Assets:
Accounts receivable $ 18
Property, plant and equipment 862
-------
TOTAL ASSETS $ 880
=======
Current Liabilities:
Accounts payable $ 313
-------
Total Current Liabilities 313
Notes Payable - Stockholders 3,536
Stockholders' (Deficit) (2,969)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 880
=======
</TABLE>
The Company has recorded its investment in GM Ovonic at zero,
which represents the net book value of the Company's assets
transferred to GM Ovonic. Based upon the opinion of legal counsel,
the Company believes that it has no obligation to fund any losses
-54-
<PAGE> 55
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
that GM Ovonic incurs. Additionally, the Company has made no
financial or other guarantees with respect to liabilities incurred
by GM Ovonic. The Company will continue to carry its investment at
zero and will recognize over a period of years its share, if any,
of the then equity of GM Ovonic and will recognize its share of the
venture's profits or losses on the equity method of accounting.
NOTE E- Long-Term Debt and Lease Agreements
A summary of the Company's short-term borrowings, long-term
debt and capitalized lease agreements is as follows:
<TABLE>
<CAPTION>
June 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Financing Lease for headquarters building with interest at
8.2% and monthly payments of $19,250 $ 886,507 $1,032,004
Capitalized leases with Financing for Science International
(with interest ranging between 5% and 13%) 3,489,462 3,306,294
Notes payable-short-term borrowing:
Jenner & Block with interest at prime plus 4% - 683,378
Rothwell, Figg, Ernst, Kurz with interest at prime plus 1/2% - 142,618
Loan from U.S. Trade Development Program, 0% interest with
entire amount due March 1996 115,000 115,000
Other capitalized leases 3,956 8,971
---------- ----------
4,494,925 5,288,265
Less amounts included in current liabilities 1,482,846 1,804,031
---------- ----------
$3,012,079 $3,484,234
========== ==========
</TABLE>
Financing Lease
In June 1990, the Company entered into a 10-year financing
lease transaction relating to certain buildings and land. The
terms of the transaction included an option for the Company to
purchase the buildings and land in the sixth year of the lease for
$2,150,000, increasing 5% each year thereafter.
Leases
In October 1992, the Company entered into a third-party
leasing arrangement with Financing for Science International
("FSI") for the financing of certain equipment to be used in
connection with the USABC contract. Ovonic Battery has financed
equipment
-55-
<PAGE> 56
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE E - Long-Term Debt and Lease Agreements - (Continued)
purchases for a total of $7,000,000 through June 30, 1995. The
terms of the agreement require repayment over five years at an
interest rate ranging between 5% and 13%.
The October 1992 FSI agreement is secured by a security interest in
the Company's USABC contract and by Ovonic Battery's plant and
equipment. In addition, the Company has guaranteed Ovonic
Battery's obligations under this agreement and has provided a first
security interest to FSI in the Company's unencumbered plant and
equipment.
In the year ended June 30, 1993, Ovonic Battery received
$1,000,000 under a leasing arrangement for equipment which had a
net book value of approximately $770,000. Ovonic Battery
recognized a deferred gain of approximately $230,000 on this sale
and lease-back and is amortizing this deferred gain over the term
of the lease. Amortization of this deferred gain in fiscal 1995,
1994 and 1993 was approximately $46,000, $47,000 and $30,000. The
balance of the deferred gain of approximately $107,000 and $153,000
as of June 30, 1995 and 1994, respectively, will be amortized over
the remaining lease term.
In April 1993, the Company entered into an additional sale and
lease-back transaction with FSI for a total of $1,000,000 for the
financing of certain equipment to be used in connection with the
Company's contracts with NREL. This amount is repayable over three
years at an interest rate of approximately 5%. The April 1993
agreement is secured by the Company's assignment of payments under
its contracts with NREL.
In February 1994, the Company entered into an additional
leasing arrangement with FSI. Through June 30, 1995, Ovonic
Battery financed $1,785,930. In connection with this agreement,
Ovonic Battery has assigned all receivables from the Sylva purchase
orders as additional collateral for this financing. After the
monthly lease payments are made to FSI, Ovonic Battery receives the
balance of the funds deposited in the FSI account for that month.
In December 1994, the Company entered into a $1,250,000 sale
and lease-back transaction with FSI for a vapor barrier coating
machine, with a net book value of zero, at an interest rate of
approximately 13%. The Company recorded a deferred gain of
$1,250,000 in the six months ended December 31, 1994 and is
amortizing this deferred gain over the term of the lease. During
the year ended June 30, 1995, the Company amortized approximately
$208,000 of this deferred gain.
-56-
<PAGE> 57
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE E - Long-Term Debt and Lease Agreements - (Continued)
For certain leases, the Company provides a cash security
reserve to FSI in an amount equal to 10% of the acquisition cost of
the equipment. These security reserves accrue interest at the rate
of 5% which is payable annually to the Company.
The Company agreed to purchase certain equipment leased from
FSI upon expiration of the lease for 10% of its acquisition cost.
For other equipment, the Company has an option to purchase the
equipment for its then fair market value (but no less than 10% nor
more than 20% of its acquisition cost), plus any applicable sales,
excise or other taxes imposed as a result of such sale.
Other
The Company has operating lease agreements, principally for
office and research facilities and equipment. These leases, in
some instances, include renewal provisions at the option of the
Company. Rent expense under such lease agreements for the years
ended June 30, 1995, 1994 and 1993 was approximately $941,000,
$431,000 and $269,000, respectively.
Future minimum payments on obligations under capital leases,
other long-term debt and noncancellable operating leases expiring
in each of the five years subsequent to June 30, 1995 are as
follows:
<TABLE>
<CAPTION>
Capital Leases Long-Term Debt Operating Leases
-------------- -------------- ----------------
<S> <C> <C> <C>
1996 $1,606,624 $166,221 $1,086,453
1997 1,303,922 180,335 1,008,386
1998 868,870 195,647 427,634
1999 -- 212,257 142,241
2000 -- 132,047 144,420
Remainder -- -- 84,245
------------ -------- ----------
TOTAL 3,779,416 $886,507 $2,893,379
======== ==========
Less interest & taxes
included above 285,998
------------
Present value of
minimum payments $3,493,418
============
</TABLE>
NOTE F - Capital Stock
The voting rights of ECD's two classes of stock are as follows:
-57-
<PAGE> 58
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE F - Capital Stock - (Continued)
Class A Convertible Common Stock - 25 votes per share
Common Stock - one vote per share
The Class A Convertible Common Stock is automatically
convertible into Common Stock on a share-for-share basis on
September 14, 1999 and is convertible at the option of the holder
any time prior to that date.
On September 2, 1993, ECD and Ovonic Battery entered into
agreements, which had been approved by ECD's and Ovonic Battery's
Boards of Directors, to formalize the various business and legal
relationships between ECD and Ovonic Battery in contemplation of
certain financing activities. The agreements include an
intercompany services agreement which provides an option,
exercisable in the event of a change in control of ECD (as
described below), to permit Ovonic Battery to purchase at net book
value certain laboratory, machine-building and advanced research
assets of ECD. Additionally, as part of an employment agreement
with Ovonic Battery, Mr. Ovshinsky was granted stock options,
exercisable at a price of $16,216 per share, to purchase 185 shares
(adjusted from a price of $50,000 per share to purchase 60 shares
pursuant to the anti-dilution provisions of the option agreement)
of Ovonic Battery's common stock, representing approximately 6% of
Ovonic Battery's outstanding common stock. The Ovonic Battery
stock options will vest on a quarterly basis over six years
commencing with the quarter beginning October 1, 1993, subject to
Mr. Ovshinsky's continued performance of his obligations to Ovonic
Battery under his employment agreement. Vesting of the stock
options will accelerate in the event of Mr. Ovshinsky's death,
mental or physical disability or termination of employment without
cause and in the event of a change in control of ECD.
As part of an employment agreement among ECD, Ovonic Battery
and Mr. Ovshinsky, ECD granted Mr. Ovshinsky the right to vote the
shares of Ovonic Battery held by ECD following a change in control
of ECD. For purposes of the agreement, change in control shall
mean (1) any sale, lease, exchange or other transfer of all or
substantially all of ECD's assets; (2) the approval by ECD
stockholders of any plan or proposal of liquidation or dissolution
of ECD; (3) the consummation of any consolidation or merger of ECD
in which ECD is not the surviving or continuing corporation; (4)
the acquisition by any person of 30% or more of the combined voting
power of the then outstanding securities having the right to vote
for the election of directors; (5) changes in the constitution of
the majority of the Board of Directors; (6) the holders of the
Class A Convertible Common Stock ceasing to be entitled to exercise
their preferential voting
-58-
<PAGE> 59
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE F - Capital Stock - (Continued)
rights other than as provided in ECD's charter and (7) bankruptcy.
In the event of mental or physical disability or death of Mr.
Ovshinsky, the foregoing power of attorney and proxy shall be
exercised by Mr. Ovshinsky's wife, Dr. Iris Ovshinsky, a Vice
President of ECD. The initial term of the employment agreement is
six years and shall be automatically renewed every year thereafter.
During the year ended June 30, 1993, ECD issued 6,216
restricted shares of Common Stock as compensation to employees,
consultants and directors for services rendered. ECD recorded
compensation expense for the year ended June 30, 1993 of $43,000
for the issuance of stock to employees, consultants and directors.
During the years ended June 30, 1994 and 1995, ECD issued
31,148 restricted shares, of which 28,518 shares were issued for
future services, and 3,733 shares issued as compensation to
employees, consultants, contractors and directors. ECD recorded
compensation expense for the years ended June 30, 1994 and 1995 of
$48,000 and $48,000, respectively, relating to the issuance of
these restricted shares.
NOTE G - Warrants and Options to Purchase Stock
The Company has Common Stock reserved for issuance as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------------------
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Conversion of Class A Convertible Common Stock 219,913 219,913
Stock options 3,859,802 1,989,731
1999 Private Placement Warrants 272,466 315,909
Warrants issued in connection with services rendered 200,000 100,000
CIC Conversion Rights 6,308 17,219
--------- ---------
TOTAL RESERVED SHARES 4,558,489 2,642,772
========= =========
</TABLE>
Stock Option Plans
The Company's 1976 Amended and Restated Stock Option Plan (the
"Amended Plan"), 1987 Stock Option and Incentive Plan ("1987 Stock
Option Plan") and the 1995 Non-Qualified Stock Option Plan ("1995
Stock Option Plan") authorize the granting of stock options at such
exercise prices and to such employees, consultants and other
persons as the Compensation Committee appointed by the Board of
Directors (the
-59-
<PAGE> 60
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
"Compensation Committee") shall determine. All three stock option
plans are administered by the Compensation Committee.
Options under the Amended Plan and the 1987 Stock Option Plan
expire six years from the date of grant (five years in the case of
Incentive Stock Options as defined under Section 422A of the
Internal Revenue Code granted to persons owning stock possessing
more than 10% of the total combined voting power of all classes of
stock of the Company). Options under the 1995 Stock Option Plan
expire no later than 10 years from the date of grant. Stock
options under all three plans may not be exercised during the first
six months of the grant. Thereafter, options may be exercised
cumulatively each year, starting at the end of six months after
grant of the option, at a predetermined rate of the number of
shares of the Common Stock subject to the option. The exercise
price of all options granted has been equal to the fair market
value of the Common Stock at the time of grant.
The purchase price and number of shares covered by the options
are subject to adjustment under certain circumstances to protect
the option holders against dilution.
A summary of the transactions during the years ended June 30,
1995, 1994 and 1993 with respect to the Company's Amended Plan,
1987 Stock Option Plan and 1995 Stock Option Plan follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- -----------------------
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
--------- ----------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding July 1 1,043,311 $ 6.68 1,101,938 $ 8.05 825,265 $8.57
Granted 1,646,535 12.23 94,630 7.76 597,750 7.20
Exercised 264,299 6.96 - - 32,190 5.50
Canceled 2,901 6.31 153,257 17.22 288,887 8.07
--------- ------ --------- ----- --------- -----
Outstanding June 30 2,422,646 $10.42 1,043,311 $6.68 1,101,938 $8.05
========= ====== ========= ===== ========= =====
Exercisable June 30 872,812 $ 8.02 669,981 $6.38 604,140 $8.86
========= ====== ========= ===== ========= =====
</TABLE>
In November 1993, stock options to purchase 94,367 shares of
Common Stock held by Stanford R. Ovshinsky, and stock options to
purchase 49,630 shares of Common Stock held by Dr. Iris M.
Ovshinsky, issued under the aforementioned Amended Plan, were
canceled and new stock options, covering 150,000 (adjusted to
163,791 as of June 30, 1995) shares of Common Stock in the case of
Mr. Ovshinsky and 100,000 shares (adjusted to 109,194 as of June
30, 1995) of Common Stock in the case of Dr. Ovshinsky, were
granted by ECD. The stock options canceled had an average exercise
price of
-60-
<PAGE> 61
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
approximately $18.00 per share. The exercise price of the new
stock options is $7.00 per share.
Warrants
ECD has outstanding unregistered warrants to purchase 272,466
shares of Common Stock in connection with private placements of
unregistered Common Stock as well as unregistered warrants to
purchase 200,000 shares of Common Stock in connection with services
rendered. The warrants are exercisable at a weighted average price
of $9.53 per share. The exercise price of certain of the warrants
may be reduced in the future pursuant to certain antidilution
provisions.
The Company obtained an independent appraisal of the fair
value of both the ECD and the Ovonic Battery warrants and options.
The Company recognized expenses and additional paid-in capital of
$318,350 and $157,400 for the years ended June 30,1994 and 1993,
based on this independent appraisal.
NOTE H - Net Income (Loss) Per Share
The Company uses the treasury stock method to calculate
primary and fully-diluted earnings per share. Weighted average
number of shares outstanding and primary earnings per share for the
three years ended June 30 are computed as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(Restated)
<S> <C> <C> <C>
Weighted average number of shares outstanding 8,003,742 7,637,660 7,339,835
Pro Forma weighted average shares for Common
Stock Equivalents 886,020 0 0
------------ ------------ ------------
AVERAGE NUMBER OF SHARES OUTSTANDING
AND EQUIVALENTS 8,889,762 7,637,660 7,339,835
============ ============ ============
Net income (loss) $ 5,605,664 $ (3,892,656) $ (5,520,606)
EARNINGS (LOSS) PER SHARE $ .63 $ (.51) $ (.75)
============ ============ ============
</TABLE>
The difference between the primary earnings per share and the
fully-diluted earnings per share for fiscal 1995 is the result of
using the ending market value of $16.375 per share versus the
average market value. This results in Pro Forma weighted average
shares of 1,938,977 and a fully-diluted earnings per share of $.56.
-61-
<PAGE> 62
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE I - Federal Taxes on Income
At June 30, 1995 and 1994, the Company has approximately
$34,821,000 and $35,326,000, respectively, of net deferred tax
assets, consisting primarily of $32,772,000 and $33,159,000,
respectively, due to net operating loss carryforwards, $2,049,000
and $2,167,000, respectively, due to tax credit carryforwards.
However, a valuation reserve of the same amount is required due to
the Company's operating history and uncertainty regarding the
future realizability of the net operating loss carryforwards.
The Company's valuation reserve was decreased by $505,000 in
1995 and by $650,000 in 1994 for the impact of the 1995 and 1994
net operating income (losses) and temporary differences, the
expiration of tax credits and the deconsolidation of OSMC in 1994
for tax purposes.
At June 30, 1995, the Company's remaining net tax operating
loss carryforwards and tax credit carryforwards expire as follows:
<TABLE>
<CAPTION>
Net Tax Operating Investment Tax R & D Credit
Loss Carryforward Credit Total Carryforward
----------------- -------------- ----------------
<S> <C> <C> <C>
1996 2,459,000 192,000
1997 1,805,000 88,000 69,000
1998 3,360,000 10,000 436,000
1999 5,395,000 40,000 202,000
2000 8,767,000 172,000 813,000
2001 23,828,000 27,000
2002 15,900,000
2003 17,460,000
2004 1,378,000
2005
2006 7,075,000
2007 2,854,000
2008 1,802,000
2009 4,304,000
----------- -------- ----------
$96,387,000 $529,000 $1,520,000
=========== ======== ==========
</TABLE>
-62-
<PAGE> 63
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE J - Related Party Transactions
For the three years ended June 30, 1995, 1994 and 1993, ECD
incurred expenses of $36,440, $135,865 and $212,881, respectively,
for services rendered by its directors (and/or their related
companies).
During the year ended June 30, 1995, the Company had product
sales of $2,372,000 and other income of $226,000, related to sales
of products to GM Ovonic, General Motors and related companies and
for reimbursement of services performed for General Motors and
related companies.
For related party transactions involving United Solar see Note D.
-63-
<PAGE> 64
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE K - Business Segments
The Company has two business segments, its subsidiary, Ovonic
Battery, and the parent company, ECD. Ovonic Battery is primarily
involved in developing and commercializing battery technology. ECD
is primarily involved in photovoltaics, microelectronics and
machine building. General corporate expenses, interest expense and
interest income are classified in the ECD business segment.
The Company's operations by business segment were as follows:
Financial Data by Business Segment
(in thousands)
<TABLE>
<CAPTION>
Ovonic Battery ECD Consolidated
-------------- -------- ------------
<S> <C> <C> <C>
Revenues
Year ended June 30, 1995 $31,945 $9,399 $41,344
Year ended June 30, 1994 16,185 3,172 19,357
Year ended June 30, 1993 8,961 3,437 12,398
Operating Income(Loss)
Year ended June 30, 1995* $9,257 $(3,651) $ 5,606
Year ended June 30, 1994 849 (4,742) (3,893)
Year ended June 30, 1993 (1,432) (4,089) (5,521)
Depreciation and Amortization Expense
Year ended June 30, 1995 $640 $ 520 $ 1,160
Year ended June 30, 1994 690 251 941
Year ended June 30, 1993 439 336 775
Capital Expenditures
Year ended June 30, 1995 $859 $ 280 $ 1,139
Year ended June 30, 1994 48 199 247
Year ended June 30, 1993 29 642 671
Identifiable Assets
Year ended June 30, 1995 $13,056 $10,275 $23,331
Year ended June 30, 1994 5,566 4,929 10,495
Year ended June 30, 1993 3,795 4,952 8,747
</TABLE>
-64-
* Restated - See Note L.
<PAGE> 65
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE L - Restatement
In February 1995, the Compensation Committee of the Board of Directors
extended the exercise period of certain stock options granted in March 1989.
These options were extended on the same terms and conditions, including
continuation of the exercise price at fair market value. The Committee
extended the options in order to afford the holders of said options the
six-year exercise period which had previously been interrupted for a period
of time due to the Company's inability to issue registered shares upon
exercise of options.
Subsequent to the issuance of the Company's 1995 financial statements, it was
determined that, in accordance with generally accepted accounting principles,
the difference between the aggregate exercise price and the fair market value of
the Company's stock at February 1995, totalling $1,600,000, should be recorded
as a non-cash charge to operations.
The effects of the restatement are summarized as follows:
<TABLE>
<CAPTION>
Year Ended June 30, 1955
-----------------------------
As previously
Reported As Restated
-------------- --------------
<S> <C> <C>
Product Development and Research
Expense $ 4,136,158 $ 4,636,158
Operating, General and Administrative
Expense 5,374,064 6,474,064
Total Expenses 33,947,574 35,547,574
Net Income from Operations 7,396,184 5,796,184
Net Income 7,205,664 5,605,664
Net Income per Common Share and
Common Equivalent .81 .63
Net Income per Common Share
Assuming Full Dilution .73 .56
Additional Paid-In Capital 164,401,702 166,001,702
Accumulated Deficit (156,585,021) (158,185,021)
Operating Income (Loss) for Year
Ended June 30, 1995
- Ovonic Battery 9,357,000 9,257,000
- ECD (2,151,000) (3,651,000)
- Consolidated 7,206,000 5,606,000
</TABLE>
-65-
<PAGE> 66
ITEM 9: CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-66-
<PAGE> 67
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The composition of the Board of Directors of the Company is as follows:
<TABLE>
<CAPTION>
Director
of the
Company Principal Occupation and
Name Since Office Business Experience
---- -------- ------ ------------------------
<S> <C> <C> <C>
Stanford R. Ovshinsky 1960 President, Chief Mr. Ovshinsky, 72, the founder and Chief
Executive Officer Executive Officer of the Company, has
and Director ociated with the Company as an executive and
Director since its inception in 1960. Mr.
Ovshinsky is the primary inventor of the
Company's technology. Mr. Ovshinsky also
serves as: the Chairman of the Board and Chief
Executive Officer of Ovonic Battery; a member
of the Board of Managers of GM Ovonic; a
director of United Solar; and Co-Chairman of
the Board of Directors of Sovlux. Mr.
Ovshinsky is the husband of Dr. Iris M.
Ovshinsky.
Iris M. Ovshinsky 1960 Vice President Dr. Ovshinsky, 68, co-founder and Vice
and Director President of the Company, has been
associated with the Company as an executive
officer and Director since its inception in
1960. Dr. Ovshinsky also serves as a director
of Ovonic Battery. Dr. Ovshinsky is the wife
of Stanford R. Ovshinsky.
Ralph F. Leach 1977 Chairman of the Mr. Leach, 78, until his retirement in
Board and Director December 1977, was for more than five years
Chairman of the Executive Committee of J.P.
Morgan & Co. and Morgan Guaranty Trust Company
of New York, institutional bankers, and is
presently a member of that company's
Directors' Advisory Council. Mr. Leach is a
member of the Audit and Compensation
Committees of the Board.
Nancy M. Bacon 1977 Senior Vice Mrs. Bacon, 49, joined the Company in
President 1976 as its Vice President of Finance and
Government Treasurer. Mrs. Bacon became the Senior Vice
Contracts and President Government Contracts and
International International Projects of the Company in
Projects and August 1993. Mrs. Bacon also serves on the
Director Boards of Directors of Sovlux and United
Solar.
</TABLE>
-67-
<PAGE> 68
<TABLE>
<S> <C> <C> <C>
Umberto Colombo 1995 Director Prof. Colombo, 67, is currently the Chairman
of the Scientific Councils of the ENI Enrico
Mattei Foundation and of the Instituto Per
l'Ambiente in Italy. He was Chairman of the
Italian National Agency for New Technology,
Energy and the Environment until April 1993
and then served as Minister for Universities,
Science and Technology in the Italian
Government until May, 1994. Prof. Colombo is
also active in international science policy
institutions as a consultant.
Jack T. Conway 1980 Director Mr. Conway, 76, is President and Chief
Executive Officer of the Community Housing
Corporation of Sarasota. From 1985 to 1990,
Mr. Conway was a trustee of the Aspen
Institute. Mr. Conway was also formerly a
management consultant to the Company. Mr.
Conway serves on the Audit and Compensation
Committees of the Board.
Hellmut Fritzsche 1969 Vice President Dr. Fritzsche, 68, is a professor of Physics
and Director at the University of Chicago, where he has
taught since 1957, and was Chairman of the
Department of Physics until September 30,
1986. Dr. Fritzsche has been a Vice President
of the Company since 1965, acting on a
part-time basis, chiefly in the Company's
research and product development activities.
Dr. Fritzsche also serves on the Board of
Directors of United Solar.
Joichi Ito 1995 Director Mr. Ito, 29, is presently President of
Eccosys, Ltd., a Japanese corporation, and
Transoceanic Ventures, Inc., a U.S.
corporation. Mr. Ito is an expert on new
computer technology and networked information
systems. He writes and lectures extensively
in the United States, Japan and Europe and
serves as a director of and consultant to many
international companies in the field of
information technology.
Walter J. McCarthy, Jr. 1995 Director Mr. McCarthy, 70, until his retirement in
April, 1990, was the Chairman and Chief
Executive Officer of Detroit Edison Company.
Mr. McCarthy has served as a consultant to the
Company since October, 1990. Until April,
1995, Mr. McCarthy also served on the Boards
of Comerica Bank, Detroit Edison Company and
Federal-Mogul Corporation. He serves on the
Audit and Compensation Committees of the
Board. He is a member of the National Academy
of Engineering.
</TABLE>
-68-
<PAGE> 69
<TABLE>
<S> <C> <C> <C>
Florence I. Metz 1995 Director Dr. Metz, 65, for the past five years has
held various executive positions with Inland
Steel Company: General Manager, New Ventures,
Inland Steel Company (1989-1991); General
Manager, New Ventures, Inland Steel
Industries (1991-1992) and Advanced Graphite
Technologies (1992-1993). Dr. Metz is
presently Program Manager for Business and
Strategic Planning at Inland Steel. Dr. Metz
also serves on the Board of Directors of
Ovonic Battery.
Haru Reischauer 1990 Director Mrs. Reischauer, 80, was initially appointed
as a Director to fill the unexpired term of
Edwin O. Reischauer (former U.S. Ambassador to
Japan) after his death in September 1990, and
was re-elected to the Board of Directors in
1992. Mrs. Reischauer also serves on the Board
of Directors of United Solar. She is an author
and lecturer.
Nathan J. Robfogel 1990 Director Mr. Robfogel, 60, is presently a partner with
the law firm of Harter, Secrest & Emery, which
he joined in 1959. Mr. Robfogel concentrates
his legal practice in the corporate and
securities fields, and has also been engaged
in his firm's Governmental Affairs practice.
In 1989, Mr. Robfogel was appointed Chairman
of the Board of Directors of the New York
State Facilities Development Corporation, a
public benefit corporation.
Stanley K. Stynes 1977 Director Dr. Stynes, 63, was Dean of the College of
Engineering at Wayne State University from
1970 to August 1985, and a Professor of
Engineering at Wayne State University from
1985 until his retirement in 1992. He has
been involved in various administrative,
teaching, research and related activities. Dr.
Stynes serves as Chairman of the Audit
Committee of the Board.
</TABLE>
* * *
Dr. Robert R. Wilson, served as a director to the Company from 1978 to
1993 and was appointed Director Emeritus in January 1994. Until his retirement
in July 1978, Dr. Wilson was the founder and the director for more than ten
years of the Fermi National Accelerator Laboratory. Since retirement, Dr.
Wilson has been a Professor Emeritus of physics at both Cornell and Columbia
universities and was formerly President of the American Physical Society.
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<PAGE> 70
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Served As An Executive
Name Age Office Officer or Director Since
---- --- ------ -------------------------
<S> <C> <C> <C>
Stanford R. Ovshinsky 72 President, Chief Executive Officer 1960(1)
and Director
Iris M. Ovshinsky 68 Vice President and Director 1960(1)
Nancy M. Bacon 49 Senior Vice President--Government 1976
Contracts and International Projects
and Director
Hellmut Fritzsche 68 Vice President and Director 1969
Subhash K. Dhar 44 President and Chief Operating Officer 1986
of Ovonic Battery
Kenneth A. Pullis 54 Acting Chief Financial Officer and 1993
Treasurer
</TABLE>
- ----------------
(1) The predecessor of the Company was originally founded in 1960. The
present corporation was incorporated in 1964 and is the successor by
merger of the predecessor corporation.
See above for information relating to Stanford R. Ovshinsky, Iris M.
Ovshinsky, Nancy M. Bacon and Hellmut Fritzsche.
Subhash K. Dhar joined the Company in 1981 and has held various positions
with Ovonic Battery since its inception in October 1982. Mr. Dhar has served
as Chief Operating Officer of Ovonic Battery since 1986 and President since
1987.
Kenneth A. Pullis joined the Company in 1982 as Controller. Mr. Pullis
was elected Acting Chief Financial Officer and Treasurer of the Company in
August 1993.
SIGNIFICANT ADVISOR TO THE COMPANY
Robert C. Stempel, Senior Business and Technical Advisor to Stanford R.
Ovshinsky, is the retired Chairman and Chief Executive Officer of General
Motors. Mr. Stempel is a member of the Society of Automotive Engineers, the
American Society of Mechanical Engineers, the Engineering Society of Detroit,
and he has been elected to the National Academy of Engineering, one of the
highest honors to be accorded an engineer. Mr. Stempel serves, along with Mr.
Ovshinsky, as Ovonic Battery's representative on the five-member Board of
Managers of GM Ovonic. Mr. Stempel is also actively involved in all aspects of
the Company's business. Mr. Stempel is a technical consultant to General
Motors for EVs and batteries and has been invaluable to the Company as well as
the entire emerging EV industry.
-70-
<PAGE> 71
ITEM 11: EXECUTIVE COMPENSATION
The following tables set forth the compensation paid by the Company during
its last three fiscal years to its Chief Executive Officer and each of its
other executive officers earning in excess of $100,000 per year in the fiscal
year ended June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
------------ -----------
Name and Principal Fiscal
Position Year(1) Salary(2) Options
- ------------------ ------- --------- -------
<S> <C> <C> <C>
Stanford R. Ovshinsky, 1995 $256,567 294,957(4)
President and Chief Executive Officer (3) 1994 $229,615 153,369(4)
1993 $150,000
Iris M. Ovshinsky, 1995 $153,846 196,888
Vice President 1994 $134,712 102,246
1993 (5)
Nancy M. Bacon, 1995 $225,000 160,200
Senior Vice President -- Government 1994 $156,884
Contracts and International Projects 1993 $148,000 50,000
Subhash K. Dhar, 1995 $165,769 7,960
President and Chief Operating Officer of 1994 $123,461 30,000
Ovonic Battery 1993 $120,000 22,600
</TABLE>
- --------------
(1) The Company's fiscal year is July 1 to June 30.
(2) Does not include taxable income resulting from exercise of stock options.
(3) In September 1993, Mr. Ovshinsky entered into separate employment
agreements with the Company and Ovonic Battery. See "Employment
Agreements." The amounts indicated include compensation received by Mr.
Ovshinsky pursuant to the Employment Agreements with the Company and
Ovonic Battery.
(4) Does not include option to purchase shares of Ovonic Battery. See
"Employment Agreements."
(5) Less than $100,000.
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<PAGE> 72
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the named executive
officers during the fiscal year ended June 30, 1995.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(1)
----------------- --------------------
% of Total
Options
Options Granted Exercise
Granted to Employees Price Expiration
Name (#) in Fiscal Year ($/Sh) Date 0% 5% 10%
---- ------- ------------- ----- ---------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanford R. 100,000 11.60% $11.75 9/1/2000 - $ 399,612 $ 906,584
Ovshinsky 194,957 22.62% $11.875 2/23/2005 - $1,455,963 $3,689,696
Iris M. Ovshinsky 50,000 5.80% $11.75 9/1/2000 - $ 199,806 $ 453,292
146,888 17.04% $11.875 2/23/2005 $1,096,978 $2,779,957
Nancy M. Bacon 35,000 4.06% $11.75 9/1/2000 - $ 139,864 $ 317,304
125,200 14.52% $11.875 2/23/2005 - $ 935,009 $2,369,497
Subhash K. Dhar 7,960 0.92% $11.875 2/23/2005 - $ 59,446 $ 150,649
</TABLE>
- ------------------------
(1) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using 5% and 10% appreciation rates as required to be used in
this table by the Securities and Exchange Commission, compounded annually,
and are not intended to forecast possible future appreciation, if any, of
the Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for
nontransferability or termination of the options following termination of
employment.
-72-
<PAGE> 73
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 1995 and the number and value
of unexercised options held by the named executive officers at fiscal year end.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Acquired on Options at Fiscal in-the-Money Options
Exercise Value Realized Year End at Fiscal Year End
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stanford R.
Ovshinsky(1)(5) 750 3,281 203,791/254,957 $1,695,067/$1,122,937
Iris M. Ovshinsky(2)(5) 750 3,281 129,194/176,888 $1,100,045/$777,635
Nancy M. Bacon(3)(5) 6,000 39,000 91,800/158,200 $ 831,775/$756,250
Subhash K. Dhar (4) - - 33,340/31,660 $ 307,445/$241,975
</TABLE>
(1) Mr. Ovshinsky's exercisable and unexercisable options are exercisable at
a weighted average price of $7.93 per share and $11.85 per share,
respectively.
(2) Dr. Ovshinsky's exercisable and unexercisable options are exercisable at
a weighted average price of $7.74 per share and $11.85 per share,
respectively.
(3) Mrs. Bacon's exercisable and unexercisable options are exercisable at a
weighted average price of $7.19 per share and $11.47 per share,
respectively.
(4) Mr. Dhar's exercisable and unexercisable options are exercisable at a
weighted average price of $7.03 per share and $8.61 per share,
respectively.
(5) In connection with their exercise of stock options, Mr. Ovshinsky, Dr.
Ovshinsky and Mrs. Bacon received unregistered shares of Common Stock and
a warrant to purchase an equivalent number of unregistered shares of
Common Stock at $11.00 per share.
EMPLOYMENT AGREEMENTS
On September 2, 1993, Stanford R. Ovshinsky entered into separate
employment agreements with each of the Company and Ovonic Battery in order to
define clearly his duties and compensation arrangements and to provide to each
company the benefits of his management efforts and future inventions. The
initial term of each employment agreement is six years. Mr. Ovshinsky's
employment agreement with the Company provides for an annual salary of not less
than $100,000, while his agreement with Ovonic Battery provides for an annual
salary of not less than $150,000. Both agreements provide for annual increases
to reflect increases in the cost of living, discretionary annual
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<PAGE> 74
increases as determined by the Board of Directors of the Company and an annual
bonus equal to 1% of the pre-tax profits of the Company (excluding Ovonic
Battery) or Ovonic Battery.
Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
provides for a right to vote the shares of Ovonic Battery held by the Company
following a change in control of the Company. For purposes of the agreement,
change in control means (i) any sale, lease, exchange or other transfer of all
or substantially all of the Company's assets; (ii) the approval by the
Company's stockholders of any plan or proposal of liquidation or dissolution of
the Company; (iii) the consummation of any consolidation or merger of the
Company in which the Company is not the surviving or continuing corporation;
(iv) the acquisition by any person of 30 percent or more of the combined voting
power of the then outstanding securities having the right to vote for the
election of directors; (v) changes in the constitution of the majority of the
Board of Directors; (vi) the holders of the Class A Common Stock ceasing to be
entitled to exercise their preferential voting rights other than as provided in
the Company's charter and (vii) bankruptcy. In the event of mental or physical
disability or death of Mr. Ovshinsky, the foregoing power of attorney and proxy
will be exercised by Dr. Iris M. Ovshinsky.
Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky
was granted stock options, exercisable at a price of $16,216 per share to
purchase 185 shares (adjusted from a price of $50,000 per share to purchase 60
shares pursuant to the anti-dilution provisions of the option agreement) of
Ovonic Battery's Common Stock, representing approximately 6% of Ovonic
Battery's outstanding Common Stock. The Ovonic Battery stock options will vest
on a quarterly basis over six years commencing with quarter beginning October
1, 1993, subject to Mr. Ovshinsky's continued performance of his obligations to
Ovonic Battery under his employment agreement. Vesting of the stock options
will accelerate in the event of Mr. Ovshinsky's death, mental or physical
disability or termination of employment without cause and in the event of a
change in control of the Company.
COMPENSATION OF DIRECTORS
Directors who are neither employees of the Company nor otherwise
compensated by the Company are issued approximately $5,000 per year in the
Company's Common Stock based on the closing bid price of Common Stock on the
first business day of each year. In addition, directors are reimbursed for all
expenses incurred for the purpose of attending board of directors and committee
meetings, including airfare, mileage, parking, transportation and hotel.
In October 1994, prior to his appointment as a director to the Company,
Mr. Joseph L. Parkinson was granted a warrant to purchase 100,000 unregistered
shares of Common
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<PAGE> 75
Stock at an exercise price of $9.75 per share, the fair market value of the
Common Stock on the date of the grant of the warrant.
In September 1994, the Company's directors who are not employees of the
Company were granted stock options to purchase an aggregate of 75,000 shares of
Common Stock at an exercise price of $11.75 per share. In February 1995,
certain directors who are not employees of the Company were granted stock
options to purchase an aggregate of 13,800 shares of Common Stock at an
exercise price of $11.875 per share. In addition, in February 1995, Mr. Leach
and Mr. Conway, members of the Compensation Committee, were awarded stock
options under individual stock option agreements to purchase 100,000 and 17,000
shares of Common Stock, respectively, at an exercise price of $12.00 per share,
the fair market value of the Common Stock on the date of the award.
In connection with the exercise of stock options, and in the case of Mr.
Leach, the exercise of previously issued warrants, Messrs. Leach and Conway and
Dr. Fritzsche received unregistered shares of Common Stock and a warrant to
purchase an equivalent number of unregistered shares of Common Stock at an
exercise price of $11.00 per share.
COMPENSATION COMMITTEE REPORT
ORGANIZATION AND COMPENSATION COMMITTEE.
During the fiscal year ended June 30, 1995, the Compensation Committee was
composed of Mr. Leach and Mr. Conway. In August 1995, Mr. McCarthy was added
to the Compensation Committee. None of the Compensation Committee members are
or were during the last fiscal year an officer or employee of the Company or
any of its subsidiaries, or had any business relationship with the Company or
any of its subsidiaries.
The Compensation Committee is responsible for administering the policies
which govern both annual compensation of executive officers and the Company's
stock option plans. The Compensation Committee meets several times during the
year to review recommendations from management regarding stock options and
compensation. Compensation and stock option recommendations are based upon
performance, current compensation, stock option ownership, and years of service
to the Company. The Company does not have a formal bonus program for
executives, although it has awarded bonuses to its executives from time to
time.
BASE SALARY.
The Committee considers the Company's financial position and other factors
in determining the compensation of its executive officers. These factors
include remaining competitive within the relevant hiring market whether
scientific, managerial or
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<PAGE> 76
otherwise so as to enable the Company to attract and retain high quality
employees, and, where appropriate, linking a component of compensation to the
performance of the Company's common stock such as by a granting of stock option
or similar equity-based compensation to instill ownership thinking and align the
employees' and stockholders' objectives.
STOCK OPTIONS.
Stock option grants to Mr. Ovshinsky, Dr. Ovshinsky, Mrs. Bacon and Mr.
Dhar were made by the Compensation Committee in accordance with the
Compensation Committee's evaluation of their contributions to the Company and
years of service. See "Option Grants in Last Fiscal Year." While Mr.
Ovshinsky participates in formulating the recommendation of management
regarding the grant of stock options, he does not participate in the
deliberations of the Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION.
During the Company's fiscal year ended June 30, 1994, several changes were
made in the compensation arrangements between the Company and its Chief
Executive Officer, Stanford R. Ovshinsky. The principal purpose of these
changes was to recognize Mr. Ovshinsky's significant past and current
contributions to the Company. The Compensation Committee believes these
changes were appropriate in light of Mr. Ovshinsky's primary role in
implementing the Company's strategic plan and the absence of any material
increases in Mr. Ovshinsky's cash or other compensation during the Company's
preceding six fiscal years.
In September 1993, Mr. Ovshinsky entered into separate employment
agreements with each of the Company and Ovonic Battery. The purpose of these
agreements, which provide for the payment to Mr. Ovshinsky of an annual salary
of not less than $100,000 by the Company and not less than $150,000 by Ovonic
Battery, was to define clearly Mr. Ovshinsky's duties and compensation
arrangements and to provide to each company the benefits of his management
efforts and future inventions. See "Employment Agreements."
In November 1993, stock options to purchase 94,367 shares of Common Stock
at an exercise price of $17.75 per share held by Mr. Ovshinsky were cancelled
and new stock options, covering 150,000 shares of Common Stock (adjusted to
166,022 shares of Common Stock as of August 31, 1995 in accordance with the
anti-dilution provisions of such stock options) at an exercise price of $7.00
per share, were issued to Mr. Ovshinsky by the Company. See "Employment
Agreements." In September 1994 and February 1995, Mr. Ovshinsky was granted
options to purchase shares of Common Stock under the Company's stock option
plans. (See "Option Grants in Last Fiscal Year".) Mr. Ovshinsky's option
grants were made at the same time as option grants to other executive officers,
certain directors (excluding members of the Compensation Committee), employees
and
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<PAGE> 77
certain consultants and advisors. The Compensation Committee believes that the
grant of the foregoing stock options to Mr. Ovshinsky was appropriate in light
of the level of Mr. Ovshinsky's cash compensation and his significant
contributions to the Company. The grant additionally was consistent with the
practice of the Compensation Committee of providing and maintaining meaningful
incentives to the Company's management in the form of stock option grants.
COMPENSATION COMMITTEE
Ralph F. Leach
Jack T. Conway
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<PAGE> 78
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
THE COMPANY, THE NASDAQ - UNITED STATES ISSUERS AND
THE NASDAQ - ELECTRONIC COMPONENTS STOCK
THE PERFORMANCE GRAPH REMAINS UNCHANGED FROM THE ONE FILED ON OCTOBER 6, 1995
WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR ENDED JUNE 30,
1995
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
ECD STOCK 100 60.5 93.7 111.9 132.3 168.4
NASDAQ Stock Market (US) 100 105.9 127.2 160.0 161.6 215.4
NASDAQ ELEC COMPONENT 100 96.2 117.0 201.6 222.2 460.6
</TABLE>
The total return with respect to NASDAQ - United States Issues and NASDAQ
- - Electronic Component Stocks assumes that dividends were re-invested quarterly
and is based on a $100 investment on June 29, 1990.
ECD has paid no cash dividends in the past and no cash dividends are
expected to be paid in the near future.
-78-
<PAGE> 79
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CLASS A COMMON STOCK
Mr. Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky (executive
officers, Directors and founders of the Company), own of record 153,420 shares
and 65,601 shares, respectively (or approximately 69.8% and 29.8%,
respectively), of the outstanding shares of Class A Common Stock. Common Stock
is entitled to one vote per share and each share of Class A Common Stock is
entitled to 25 votes per share. Class A Common Stock is convertible into
Common Stock on a share-for-share basis at any time and from time to time at
the option of the holders, and will be deemed to be converted into Common Stock
on a share-for-share basis on September 14, 1999. As of August 31, 1995, Mr.
Ovshinsky also had the right to vote 126,500 shares of Common Stock (the "Sanoh
Shares") owned by Sanoh Industrial Co., Ltd. ("Sanoh") under the terms of an
agreement dated as of November 3, 1992 between the Company and Sanoh which,
together with the Class A Common Stock and 9,584 shares of Common Stock Mr. and
Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky voting control over shares
representing approximately 41% of the combined voting power of the Company.
The following table sets forth, as of June 30, 1995, information
concerning the beneficial ownership of Class A Common Stock by each Director
and all executive officers and Directors of the Company as a group. All shares
are owned directly except as otherwise indicated. Under the rules of the
Securities and Exchange Commission, Stanford R. Ovshinsky and Iris M. Ovshinsky
may each be considered to beneficially own the shares held by the other.
<TABLE>
<CAPTION>
Class A
Common Stock
Name of Beneficially Total Number of Shares
Beneficial Owner Owned(1) Beneficially Owned Percentage of Class
- ---------------- -------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Stanford R. Ovshinsky 153,420 153,420 69.8%
Iris M. Ovshinsky 65,601 65,601 29.8%
All other executive
officers and
directors as a group
(13 persons) -- -- --
Total 219,021 219,021 99.6%
</TABLE>
- ----------------------
(1) The balance of the 219,913 shares of Class A Common Stock outstanding,
892 shares, or approximately 0.4%, are owned by other members of Mr. and
Mrs. Ovshinsky's family. Neither Mr. nor Mrs. Ovshinsky has voting or
investment power with respect to such shares.
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<PAGE> 80
COMMON STOCK
DIRECTORS AND EXECUTIVE OFFICERS. The following table sets forth, as of
August 31, 1995, information concerning the beneficial ownership of Common
Stock by each director and executive officer and for all directors and
executive officers of the Company as a group. All shares are owned directly
except as otherwise indicated.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) % of Class(2)
- ------------------------ ----------------------- ------------
<S> <C> <C>
Nancy M. Bacon 154,460 (3) 1.9%
Umberto Colombo - -
Jack T. Conway 45,286 (4) *
Subhash K. Dhar 48,024 (5) *
Hellmut Fritzsche 34,222 (6) *
Joichi Ito 3,500 (7) *
Ralph F. Leach 366,287 (8) 4.4%
Walter J. McCarthy, Jr. 14,000 (9) *
Florence I. Metz 3,000(10) *
Iris M. Ovshinsky 257,772(11) 3.1%
Stanford R. Ovshinsky 572,275(12) 6.6%
Kenneth A. Pullis 5,800(13) *
Haru Reischauer 40,049(14) *
Nathan J. Robfogel 8,430(15) *
Stanley K. Stynes 23,049(16) *
All executive officers
and directors as a
group (15 persons) 1,576,154 16.9%
</TABLE>
- ------------------
*Less than 1%.
(1) Under the rules and regulations of the Securities and Exchange
Commission, a person is deemed to be the beneficial owner of a security
if that person has the right to acquire beneficial ownership of such
security within sixty days, whether through the exercise of options or
warrants or through the conversion of another security.
(2) Under the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock issuable upon exercise of options
and warrants or upon conversion of securities which are deemed to be
beneficially owned by the holder thereof (see Note (1) above) are
deemed to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person but are
not deemed to be outstanding for the purpose of computing the
percentage of the class owned by any other person.
(3) Includes 141,880 shares represented by options exercisable within 60
days and 6,000 shares represented by warrants exercisable within 60
days.
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<PAGE> 81
(4) Includes 33,800 shares represented by options exercisable within
60 days and 4,000 shares represented by warrants exercisable within 60
days.
(5) Includes 45,524 shares represented by options exercisable within 60
days.
(6) Includes 28,612 shares represented by options exercisable within 60 days
and 1,980 shares represented by warrants exercisable within 60 days.
(7) Includes 3,500 shares represented by options exercisable within 60
days.
(8) Includes 50,000 shares represented by options exercisable within 60
days and 32,000 shares represented by warrants exercisable within 60
days.
(9) Includes 9,000 shares represented by options exercisable within 60 days
and 2,000 shares of Common Stock owned by Mr. McCarthy's wife.
(10) Includes 2,000 shares represented by options exercisable within 60
days.
(11) Includes 189,437 shares (adjusted as of August 31, 1995) represented by
options exercisable within 60 days, 65,601 shares of Class A Common
Stock which are convertible into Common Stock and 750 shares
represented by warrants exercisable within 60 days. Under the rules
and regulations of the Securities and Exchange Commission, Dr.
Ovshinsky may be deemed a beneficial owner of the shares of Common
Stock and Class A Common Stock owned by her husband, Stanford R.
Ovshinsky. Such shares are not reflected in Dr. Ovshinsky's share
ownership in this table.
(12) Includes 284,005 shares (adjusted as of August 31, 1995) represented by
options exercisable within 60 days, the 126,500 Sanoh Shares over which
Mr. Ovshinsky has voting power, 153,420 shares of Class A Common Stock
which are convertible into Common Stock, and 750 shares represented by
warrants exercisable within 60 days . Under the rules and regulations
of the Securities and Exchange Commission, Mr. Ovshinsky may be deemed
a beneficial owner of the shares of Common Stock and Class A Common
Stock owned by his wife, Iris M. Ovshinsky. Such shares are not
reflected in Mr. Ovshinsky's share ownership in this table.
(13) Includes 5,800 shares represented by options exercisable within 60 days.
(14) Includes 34,000 shares represented by options exercisable within 60
days, and 2,885 shares of Common Stock held in a trust of which Mrs.
Reischauer is trustee.
(15) Includes 7,500 shares represented by options exercisable within 60
days.
(16) Includes 17,000 shares represented by options exercisable within
60 days.
PRINCIPAL SHAREHOLDERS. The following table sets forth, as of August 31,
1995, to the knowledge of the Company, the beneficial holders of more than 5%
of the Company's Common Stock (see footnotes for calculation used to determine
"percentage of class" category):
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Holder Beneficial Ownership Percentage of Class(1)
- ----------------- ---------------------- ----------------------
<S> <C> <C>
Stanford R. and Iris M. Ovshinsky 830,047 (2) 9.3 %
1675 West Maple Road
Troy, Michigan 48084
</TABLE>
- --------------------
(1) Under the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock issuable upon exercise of options and
warrants or upon conversion of securities which are deemed to be
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<PAGE> 82
beneficially owned by the holder thereof are deemed to be outstanding
for the purpose of computing the percentage of outstanding securities
of the class owned by such person but are not deemed to be outstanding
for the purpose of computing the percentage of the class owned by any
other person.
(2) Includes 219,021 shares of Class A Common Stock owned by Mr. and Dr.
Ovshinsky (which shares are convertible at any time into Common Stock
and will be deemed to be converted into Common Stock on September 14,
1999), 9,584 shares of Common Stock owned by Mr. and Dr. Ovshinsky,
126,500 shares of Sanoh Shares over which Mr. Ovshinsky has voting
rights, 473,442 shares represented by options exercisable within 60
days and 1,500 shares represented by warrants exercisable within 60
days held by Mr. and Dr. Ovshinsky.
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<PAGE> 83
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CANON/UNITED SOLAR. In June, 1990, the Company formed United Solar, a
joint venture with Canon, in which Canon and the Company each own 49.98% of the
outstanding shares, with the balance held by Mrs. Haru Reischauer, a member of
the Company's Board of Directors. Mrs. Reischauer is also a director of United
Solar. In February 1995, United Solar placed an $8 million order with the
Company for new machinery and equipment to upgrade and expand its photovoltaic
production capacity. In the year ended June 30, 1995, the Company performed
various administrative, analytical and shop services for United Solar for which
United Solar was charged approximately $91,000. In July 1993, the Company,
Canon and United Solar entered into an investment agreement pursuant to which
Canon agreed to invest an additional $20 million in United Solar (without any
change in the equity ownership of the Company or Canon), and the Company
granted United Solar and Canon a license to certain photovoltaic technology.
The parties have agreed that Mrs. Reischauer will maintain her existing
percentage equity ownership in United Solar.
MISCELLANEOUS. Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is
employed by the Company as Director of its Machine Design Division working
principally in the design of manufacturing equipment. He received $107,538 in
salary during the year ended June 30, 1995.
<PAGE> 84
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
(a) 1. Financial statements: Page
----
The following financial statements are included in Part II, Item 8:
Independent Auditors' Report ................................ 32
Consolidated balance sheets - June 30, 1995 and 1994 ........ 33
Consolidated statements of operations - years ended
June 30, 1995, 1994 and 1993 ......................... 35
Consolidated statements of stockholders' equity (deficit)
years ended June 30, 1995, 1994 and 1993 ............. 36
Consolidated statements of cash flows - years ended
June 30, 1995, 1994 and 1993 ......................... 38
Notes to consolidated financial statements .................. 40
Individual financial statements and schedules of the Company have been
omitted as permitted by the instructions.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
(c) Exhibits
<TABLE>
<CAPTION>
Page or
Reference
---------
<S> <C> <C>
3.1 Restated Certificate of Incorporation filed
September 29, 1967 (a)
3.2 Certificate of Amendment to Certificate of Incorporation
filed May 22, 1972 increasing authorized shares of the
Company's Common Stock from 2,000,000 shares to 5,000,000
shares (b)
</TABLE>
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<PAGE> 85
<TABLE>
<S> <C> <C>
3.3 Certificate of Amendment to Certificate of Incorporation
filed September 15, 1978 increasing and extending voting
rights of the Company's Class A Common Stock and
establishing class voting with respect to other matters (c)
3.4 Certificate of Amendment to Certificate of Incorporation
filed January 7, 1982 increasing and extending voting rights
to the Company's Class A Common Stock (d)
3.5 Certificate of Amendment to Certificate of Incorporation
filed July 23, 1982 increasing authorized shares of the
Company's Common Stock from 5,000,000 shares to 10,000,000
shares (e)
3.6 Bylaws in effect on May 18, 1982 (f)
3.7 Amendment to Article XIII of By-Laws (g)
3.8 Certificate of Amendment to Certificate of Incorporation
filed May 9, 1988 including various amendments, including
increasing authorized shares of the Company's Common Stock
from 10,000,000 shares to 15,000,000 shares (h)
3.9 Certificate of Incorporation of United Solar Systems Corp. (i)
3.10 Bylaws of United Solar Systems Corp. (j)
3.11 Certificate of Amendment to Certificate of Incorporation
filed September 13, 1993 extending voting rights of the
Company's Class A Common Stock (k)
4.1 Agreement among the Company, Stanford R. Ovshinsky and Iris
M. Ovshinsky, relating to the automatic conversion of
Class A Common Stock into the Company's Common Stock upon
the occurrence of certain events, dated September 15, 1964 (l)
10.1 Patent License Agreement between the Company and Hitachi,
Ltd. dated October 29, 1984 (m)
10.2 Patent License Agreement dated September 10, 1985 between
the Company and Sony Corporation relating to optical
memory technology (n)
10.3 License Agreement effective as of June 18, 1985 between the
Company and Canon Inc., as restated on September 20, 1985 (o)
10.4 Memorandum of Understanding dated as of April 17, 1986 among
Sovonics Solar Technology, the Company and certain Indian
Investors relating to a photovoltaic joint venture (p)
10.5 Non-Assertion Agreement dated June 16, 1986 between the
Company and Canon Inc. (q)
</TABLE>
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10.6 Amendment to the Patent License Agreement dated December 5,
1986 between the Company and Matsushita Electric Industrial
Co., Ltd. (r)
10.7 Joint Venture Agreement effective as of June 1, 1987 between
the Company and Canon Inc. (s)
10.8 License Agreement dated as of June 29, 1987 between the
Company and Ovonic Battery (t)
10.9 Energy Conversion Devices, Inc. 1987 Stock Option and
Incentive Plan (u)
10.10 Agreement dated October 24, 1983 between the Company and
Asahi Chemical Industry Co. Ltd. (v)
10.10 License Agreement and Supplemental Understanding dated
February 10, 1989 between Varta Batterie AG and the Company
and Ovonic Battery Company (w)
10.12 Charter of the Soviet-American Joint Venture, SOVLUX, dated
January 11, 1990 (x)
10.13 Agreement on the Establishment and Activity of the
Soviet-American Joint Venture, SOVLUX, dated
January 11, 1990 (y)
10.14 License and Joint R&D Agreement entered into as of February
20, 1990 by and between Hitachi Maxell, Ltd., the Company and
Ovonic Battery Company, Inc. (z)
10.15 Joint Venture Agreement dated as of June 27, 1990 by and
between Canon Inc. and the Company filed confidentially
pursuant to Rule 24b-2 (aa)
10.16 Asset Acquisition Agreement by and between the Company and
United Solar Systems Corp. dated as of July 3, 1990 (bb)
10.17 Exclusive License Agreement dated July 6, 1990 made by and
between the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2 (cc)
10.18 Know-How Cross-License Agreement dated July 6, 1990 made by
and between Canon Inc., the Company and United Solar Systems
Corp. filed confidentially pursuant to Rule 24b-2 (dd)
10.19 Option License Agreement dated July 6, 1990 made by and
between the Company and Canon Inc. filed confidentially
pursuant to Rule 24b-2 (ee)
</TABLE>
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10.20 Option License Agreement dated July 6, 1990 made by and
between the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2 (ff)
10.21 Basic Understanding between Canon and United Solar filed
confidentially pursuant to Rule 24b-2 (gg)
10.22 Basic Understanding between United Solar and Canon filed
confidentially pursuant to Rule 24b-2 (hh)
10.23 License agreement by and between the Company, Ovonic Battery
and Gates Energy Products dated October 25, 1990 (ii)
10.24 Amended Master Agreement made and entered into by and between
the Company and Matsushita Electric Industrial Co., Ltd.
dated January 24, 1991 (jj)
10.25 Memory Patent License Agreement made and entered into by and
between the Company and Matsushita Electric Industrial Co.,
Ltd. dated January 24, 1991 (kk)
10.26 Memory Patent License Agreement by and between the Company
and Asahi Chemical Industry Co., Ltd. dated April 26, 1991 (ll)
10.27 License Agreement by and between the Company, Ovonic Battery
and Samsung Electronics Co., Ltd. dated June 10, 1991 (mm)
10.28 License Agreement between the Company, Ovonic Battery and
Sylva Industries Limited dated June 14, 1991 (nn)
10.29 License Agreement by and between the Company and Ovonic
Battery and Harding Energy Systems, Inc. dated August 28,
1991 (oo)
10.30 Agreement Supplement entered into as of October 31, 1991 by
and between Hitachi Maxell, Ltd., the Company and Ovonic
Battery (pp)
10.31 License Agreement made as of November 20, 1991 by and between
the Company, Ovonic Battery and Hyundai Motor Company (qq)
10.32 Agreement effective as of March 9, 1992 by and between the
Company, Ovonic Battery and Mitsubishi Materials Corporation (rr)
10.33 Memory Patent License Agreement effective as of April 1, 1992
by and between the Company and Plasmon Limited (ss)
10.34 Amended and Restated Agreement between the Company and OIS
Optical Imaging Systems, Inc. dated April 14, 1992 (tt)
</TABLE>
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10.35 Amorphous Silicon Sensor License Agreement between the
Company and OIS Optical Imaging Systems, Inc. dated
April 14, 1992 (uu)
10.36 Development Agreement between United States Advanced Battery
Consortium (USABC), the Company and Ovonic Battery dated
May 4, 1992 filed confidentially pursuant to Rule 24b-2 (vv)
10.37 Option License Agreement effective as of September 8, 1992 by
and between the Company, Ovonic Battery and Sylva Industries
Limited (ww)
10.38 Definitized Subcontract No. ZM-2-11040-7 under Prime Contract
No. DE-AC02-83CH10093 between Midwest Research
Institute/National Renewable Energy Laboratory Division and
the Company dated September 29, 1992 (xx)
10.39 Master Equipment Lease Agreement dated as of September 28,
1992 between Financing for Science and Industry, Inc. and
Ovonic Battery Company, Inc. (yy)
10.40 ECD/Sanoh Collaboration Agreement dated as of November 11,
1992 between the Company and Sanoh Industrial Co., Ltd. (zz)
10.41 Memorandum Agreement dated as of April 22, 1993 between the
Company and Sanoh Industrial Co., Ltd. filed confidentially
pursuant to Rule 24b-2 (aaa)
10.42 Memory Patent License Agreement dated as of February 3, 1993
between the Company and Toshiba Corporation (bbb)
10.43 Master Equipment Lease Agreement dated as of March 31, 1993
between Ovonic Battery Company, Inc. and the Company (ccc)
10.44 Joint Business Agreement dated as of May 20, 1993 among the
Company, Ovonic Synthetic Materials Company and Sanoh
Industrial Co., Ltd. (ddd)
10.45 Investment Agreement dated as of July 9, 1993 among the
Company, United Solar Systems Corp. and Canon, Inc. (eee)
10.46 Amendment to Exclusive License Agreement dated as of July 22,
1993 between the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2 (fff)
10.47 License Agreement dated as of July 22, 1993 between the
Company and United Solar System Corp. filed confidentially
pursuant to Rule 24b-2 (ggg)
10.48 Amendment to Option License Agreement dated as of July 22,
1993 between the Company and United Solar Systems Corp. (hhh)
</TABLE>
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10.49 License Agreement between the Company and a Japanese Battery
Manufacturer filed confidentially pursuant to Rule 24b-2 (iii)
10.50 Financial Assistance Award dated September 1, 1993 granted to
the Company by the Department of Energy (jjj)
10.51 Intercompany Services Agreement dated as of September 2, 1993
between the Company and Ovonic Battery Company, Inc. (kkk)
10.52 Amended and Restated License Agreement and Assignment dated
as of September 2, 1993 between the Company and Ovonic
Battery Company, Inc. (lll)
10.53 Intercompany Agreement Concerning Battery License dated as of
September 2, 1993 between the Company and Ovonic Battery
Company, Inc. (mmm)
10.54 Subordinated Promissory Note dated as of September 2, 1993 (nnn)
10.55 Executive Employment Agreement dated as of September 2, 1993
between the Company, Ovonic Battery Company, Inc. and
Stanford R. Ovshinsky (ooo)
10.56 Executive Employment Agreement dated as of September 2, 1993
between the Company and Stanford R. Ovshinsky (ppp)
10.57 License Agreement dated as of May 10, 1993 between the
Company, Ovonic Battery Company, Inc. and Daido Steel Co.,
Ltd. (qqq)
10.58 Stock Option Agreement by and between Ovonic Battery Company,
Inc. and Stanford R. Ovshinsky dated as of November 18, 1993 (rrr)
10.59 Stock Option Agreement by and between the Company and
Stanford R. Ovshinsky dated as of November 18, 1993 (sss)
10.60 Stock Option Agreement by and between the Company and Iris M.
Ovshinsky dated as of November 18, 1993 (ttt)
10.61 Subcontract No. ZAR-4-13294-01 under Prime Contract No.
DE-AC02-83CH10093 between Midwest Research Institute/National
Renewable Energy Laboratory Division and the Company dated
November 11, 1993 (uuu)
10.62 Battery Purchase and Engineering Development Agreements
between a Japanese Automobile Manufacturer and the Company
dated December 8, 1993 filed confidentially pursuant to Rule
24b-2 (vvv)
</TABLE>
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10.63 Stock Purchase Agreement by and between Sanoh Industrial Co.,
Ltd., the Company and Ovonic Battery dated December 31, 1993 (www)
10.64 Stakeholder Agreement between Ovonic Battery Company, Inc.
and General Motors Corporation for the organization of GM
Ovonic L.L.C. dated June 14, 1994 filed confidentially
pursuant to Rule 24b-2 (xxx)
10.65 Letter Agreement dated June 20, 1994 between Sanoh Industrial
Co., Ltd. and the Company (yyy)
10.66 Amendment No. 1 to Development Agreement between United
Stated Advanced Battery Consortium (USABC), the Company and
Ovonic Battery Company, Inc. dated June 24, 1994 filed
confidentially pursuant to Rule 24b-2 (zzz)
10.67 Amendment AOO2 to United States Department of Energy
Cooperative Agreement No. DE-FC36-93CH10571, Rooftop PV
System, dated July 5, 1994 (aaaa)
10.68 Subcontract No. ZAN-4-13318-11 under Prime Contract No.
DE-AC36-83CH10093 between Midwest Research Institute/National
Renewable Energy Laboratory Division and the Company dated
July 19, 1994 (bbbb)
10.69 License Agreement effective as of September 5, 1994 between
Micron Technology, Inc. and the Company (cccc)
10.70 Consumer Battery License Agreement effective as of December
15, 1994 by and between the Company, Ovonic Battery Company,
Inc. and Sanyo Electric Co., Ltd., filed confidentially
pursuant to Rule 24b-2. (dddd)
10.71 Consumer Battery License Agreement effective as of December
20, 1994 by and between the Company, Ovonic Battery Company,
Inc. and Toshiba Battery Co., Ltd., filed confidentially
pursuant to Rule 24b-2. (eeee)
10.72 Second Amendment to Sylva/ECD/OBC License Agreement effective
as of January 1, 1995 by and between the Company, Ovonic
Battery Company, Inc. and Sylva Industries, Ltd., portions of
which have been filed confidentially pursuant to Rule 24b-2. (ffff)
10.73 Consumer battery agreement effective as of January 10, 1995
by and between the Company, Ovonic Battery Company, Inc. and
a consumer battery manufacturer, portions of which have been
filed confidentially pursuant to Rule 24b-2. (gggg)
</TABLE>
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10.74 Contracts dated February 8, 1995 by and between the Company
and United Solar Systems Corp. for purchase and sale of 5MW
a-Si Alloy Processor and Back-Reflector Machine, portions of
which have been filed confidentially pursuant to Rule 24b-2. (hhhh)
10.75 Battery License Agreement dated March 28, 1995 by and between
Ovonic Battery Company, Inc. and Walsin Technology Corp.,
portions of which have been filed confidentially pursuant to
Rule 24b-2. (iiii)
10.76 Amendment to License and Joint R&D Agreement effective as of
March 31, 1995 by and between Hitachi Maxell, Ltd., the
Company and Ovonic Battery Company, Inc., portions of which
have been filed confidentially pursuant to Rule 24b-2. (jjjj)
10.77 Energy Conversion Devices, Inc. 1995 Non-Qualified Stock
Option Plan (kkkk)
10.78 Memory Patent License Agreement by and between Toray
Industries, Inc. and the Company effective as of April 1,
1995 (llll)
10.79 Amendment Agreement by and between Varta Batterie A.G., the
Company and Ovonic Battery effective as of June 8, 1995,
portions of which have been filed confidentially pursuant to
Rule 24b-2 (mmmm)
10.80 Amendment to License Agreement by and between Samsung Display
Devices Co., Ltd., the Company and Ovonic Battery effective
as of June 23, 1995, portions of which have been filed
confidentially pursuant to Rule 24b-2 (nnnn)
10.81 Amendment Agreement by and between Eveready Battery Company,
Inc., the Company and Ovonic Battery effective as of June 23,
1995, portions of which have been filed confidentially
pursuant to Rule 24b-2 (oooo)
10.82 Subcontract Agreement between Micron Technology, Inc. and the
Company effective July 1, 1995, under Advanced Research
Projects Agency Contract MDA972-92-C-0054, portions of which
have been filed confidentially pursuant to Rule 24b-2 (pppp)
11.1 Computation of Earnings Per Share Attributable to Common Stock 103
22.1 List of all direct and indirect subsidiaries of the Company (qqqq)
23.1 Consent of Independent Auditors 104
28.1 Decision and Order dated May 25, 1993 (rrrr)
28.2 Order dated August 18, 1993 (ssss)
</TABLE>
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Notes to Exhibit List
(a) Filed as Exhibit 2-A to the Company's Form 8-A and incorporated herein
by reference.
(b) Filed as Exhibit 3-A-1 to Amendment No. 3 of the Company's
Registration Statement on Form S-1 (Registration No. 2-40597) and
incorporated herein by reference.
(c) Filed as Exhibit 3-A-2 to Post-Effective Amendment No. 1 to
the Company's Registration Statement on Form S-1 (Registration No.
2-61551) and incorporated herein by reference.
(d) Filed as Exhibit 1 to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1981 and incorporated herein
by reference.
(e) Filed as Exhibit 6 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1982 and incorporated herein
by reference.
(f) Filed as Exhibit 3.7 to the Company's original Annual Report
on Form 10-K for the fiscal year ended June 30, 1984 and
incorporated herein by reference.
(g) Filed as Exhibit 5 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1982 and incorporated herein
by reference.
(h) Filed as Exhibit 3.8 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1988 and incorporated herein
by reference.
(i) Filed as Exhibit 3.9 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(j) Filed as Exhibit 3.10 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(k) Filed as Exhibit 3.11 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated herein
by reference.
(l) Filed as Exhibit 13-D to the Company's Registration Statement
on Form S-1 (Registration No. 2-26772) and incorporated herein by
reference.
(m) Filed as Exhibit 28.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1984 and incorporated
herein by reference.
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(n) Filed as Exhibit 10.33 to the Company's Annual Report on Form
10-K for the fiscal year June 30, 1985 and incorporated herein by
reference.
(o) Filed as Exhibit 10.46 to the Company's Annual Report on Form
10-K for the fiscal June 30, 1986 and incorporated herein by
reference.
(p) Filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1986 and incorporated
herein by reference.
(q) Filed as Exhibit 10.6 to the Company's Current Report on Form
8-K (dated June 13, 1986) and incorporated herein by reference.
(r) Filed as Exhibit 10.8 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1986 and incorporated
herein by reference.
(s) Filed as Exhibit 10.7 to the Company's Form 8 Amendment No. 2
to Quarterly Report on Form 10-Q for the quarter ended March 31,
1987 and incorporated herein by reference.
(t) Filed as Exhibit 10.60 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(u) Filed as Exhibit 10.110 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1988 and incorporated
herein by reference.
(v) Filed as Exhibit 10.112 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1988 and incorporated
herein by reference.
(w) Filed as Exhibit 10.71 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1989, as amended, and
incorporated herein by reference.
(x) Filed as Exhibit 10.82 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(y) Filed as Exhibit 10.83 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(z) Filed as Exhibit 10.92 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
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(aa) Filed as Exhibit 10.94 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(bb) Filed as Exhibit 10.95 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(cc) Filed as Exhibit 10.96 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(dd) Filed as Exhibit 10.97 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(ee) Filed as Exhibit 10.98 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(ff) Filed as Exhibit 10.99 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(gg) Filed as Exhibit 10.100 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(hh) Filed as Exhibit 10.101 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(ii) Filed as Exhibit 28.1 to the Company's Current Report on Form
8-K dated October 25, 1990 and incorporated herein by reference.
(jj) Filed as Exhibit 28.1 to the Company's Current Report on Form
8-K dated February 6, 1991 and incorporated herein by reference.
(kk) Filed as Exhibit 28.2 to the Company's Current Report on Form
8-K dated February 6, 1991 and incorporated herein by reference.
(ll) Filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1991 and incorporated
herein by reference.
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<PAGE> 95
(mm) Filed as Exhibit 10.114 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(nn) Filed as Exhibit 10.115 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(oo) Filed as Exhibit 10.116 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(pp) Filed as Exhibit 10.71 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(qq) Filed as Exhibit 10.72 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992 , as amended, and
incorporated herein by reference.
(rr) Filed as Exhibit 10.73 to the Company's Annual Report on Form
10-K for the quarter ended June 30, 1992, as amended, and
incorporated herein by reference.
(ss) Filed as Exhibit 10.75 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(tt) Filed as Exhibit 10.77 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(uu) Filed as Exhibit 10.78 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(vv) Filed as Exhibit 10.79 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(ww) Filed as Exhibit 10.81 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
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<PAGE> 96
'
(xx) Filed as Exhibit 10.83 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(yy) Filed as Exhibit 10.84 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(zz) Filed as Exhibit 10.85 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(aaa) Filed as Exhibit 10.86 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(bbb) Filed as Exhibit 10.87 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(ccc) Filed as Exhibit 10.88 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(ddd) Filed as Exhibit 10.89 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(eee) Filed as Exhibit 10.90 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(fff) Filed as Exhibit 10.91 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(ggg) Filed as Exhibit 10.92 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(hhh) Filed as Exhibit 10.93 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(iii) Filed as Exhibit 10.94 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(jjj) Filed as Exhibit 10.95 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(kkk) Filed as Exhibit 10.96 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(lll) Filed as Exhibit 10.97 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
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<PAGE> 97
(mmm) Filed as Exhibit 10.98 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated
herein by reference.
(nnn) Filed as Exhibit 10.99 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ooo) Filed as Exhibit 10.100 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ppp) Filed as Exhibit 10.101 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(qqq) Filed as Exhibit 10.103 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(rrr) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993 and incorporated herein
by reference.
(sss) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993 and incorporated herein
by reference.
(ttt) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993 and incorporated herein
by reference.
(uuu) Filed as Exhibit 10.72 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(vvv) Filed as Exhibit 10.73 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(www) Filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1993 and incorporated
herein by reference.
(xxx) Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(yyy) Filed as Exhibit 10.76 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(zzz) Filed as Exhibit 10.77 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(aaaa) Filed as Exhibit 10.78 to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
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<PAGE> 98
(bbbb) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(cccc) Filed as Exhibit 10.80 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(dddd) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994 and incorporated herein by
reference.
(eeee) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1994 and incorporated
herein by reference.
(ffff) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995 and incorporated herein by reference.
(gggg) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995 and incorporated herein by reference.
(hhhh) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995 and incorporated herein by reference.
(iiii) Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995 and incorporated herein by reference.
(jjjj) Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995 and incorporated herein by reference.
(kkkk) Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
(llll) Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
(mmmm) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
(nnnn) Filed as Exhibit 10.80 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
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<PAGE> 99
(oooo) Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
(pppp) Filed as Exhibit 10.82 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1995, as amended, and incorporated
herein by reference.
(qqqq) Filed as Exhibit 22.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(rrrr) Filed as Exhibit 28.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ssss) Filed as Exhibit 28.4 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
-99-
<PAGE> 100
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ENERGY CONVERSION DEVICES, INC.
By: /s/ Stanford R. Ovshinsky
------------------------------------------
Stanford R. Ovshinsky,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: September 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Nancy M. Bacon
- -------------------------
Nancy M. Bacon Director September 25, 1996
------------------
/s/ Umberto Colombo
- -------------------------
Umberto Colombo Director September 25, 1996
------------------
/s/ Jack T. Conway
- ------------------
Jack T. Conway Director September 25, 1996
------------------
/s/ Hellmut Fritzsche
- ---------------------
Hellmut Fritzsche Director September 25, 1996
</TABLE>
------------------
-100-
<PAGE> 101
<TABLE>
<S> <C> <C>
- -------------------------
Joichi Ito Director
------------------
/s/ Walter J. McCarthy, Jr.
- -------------------------
Walter J. McCarthy, Jr. Director September 25, 1996
------------------
/s/ Florence I. Metz
- --------------------
Florence I. Metz Director September 25, 1996
------------------
/s/ Iris M. Ovshinsky
- -------------------------
Iris M. Ovshinsky Director September 25, 1996
------------------
/s/ Stanford R. Ovshinsky
- -------------------------
Stanford R. Ovshinsky President, Chief Executive September 25, 1996
Officer and Director ------------------
(Principal Executive Officer)
/s/ Kenneth A. Pullis
- ---------------------
Kenneth A. Pullis Acting Chief Financial September 25, 1996
Officer (Principal Financial ------------------
Officer)
/s/ Haru Reischauer
- -------------------
Haru Reischauer Director September 25, 1996
------------------
/s/ Nathan J. Robfogel
- ----------------------
Nathan J. Robfogel Director September 25, 1996
------------------
</TABLE>
-101-
<PAGE> 102
<TABLE>
<S> <C> <C>
/s/ Robert C. Stempel
- ---------------------
Robert C. Stempel Director September 25, 1996
------------------
/s/ Stanley K. Stynes
- ---------------------
Stanley K. Stynes Director September 25, 1996
</TABLE> ------------------
-102-
<PAGE> 103
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
11.1 Energy Conversion Devices, Inc. and Subsidiary
Computation of Earnings (Losses) Per Share
23.1 Independent Auditors' Consent
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11.1
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
COMPUTATION OF EARNINGS (LOSSES) PER SHARE
<TABLE>
<CAPTION>
1995 1994 1993
------------ ---------- -----------
(Restated)
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 8,003,742 7,637,660 7,339,835
Dilutive stock options--based upon
treasury stock method using average
market price 886,020 0 0
------------ ---------- -----------
Total 8,889,762 7,637,660 7,339,835
Net earnings (losses) as reported $5,605,664 $(3,892,656) $(5,520,606)
Per Share Amount $ .63 $ (.51) $ (.75)
============ =========== ===========
FULLY DILUTED
Average shares outstanding 8,003,742 7,637,660 7,339,835
Dilutive stock options--based upon
treasury stock method using ending
market price 1,938,977 0 0
------------ ---------- -----------
Total 9,942,719 7,637,660 7,339,835
Net earnings (losses) as reported $5,605,664 $(3,892,656) $(5,520,606)
Per Share Amount $ .56 $ (.51) $ (.75)
============ =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-18962 and 333-5709 on Form S-3 and Registration Statement Nos. 33-91340 and
33-92918 on Form S-8 of Energy Conversion Devices, Inc., of our report dated
September 28, 1995 (September 25, 1996 as to Note L), appearing in this Annual
Report on Form 10-K/A, Amendment No. 1, of Energy Conversion Devices, Inc. for
the year ended June 30, 1995.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Detroit, Michigan
September 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K FOR THE PERIOD ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,259,451
<SECURITIES> 0
<RECEIVABLES> 8,160,209
<ALLOWANCES> (29,000)
<INVENTORY> 2,054,750
<CURRENT-ASSETS> 16,682,570
<PP&E> 26,245,173
<DEPRECIATION> (20,482,363)
<TOTAL-ASSETS> 23,331,019
<CURRENT-LIABILITIES> 7,371,885
<BONDS> 3,012,079
0
0
<COMMON> 82,986
<OTHER-SE> 7,816,681
<TOTAL-LIABILITY-AND-EQUITY> 23,331,019
<SALES> 10,298,019
<TOTAL-REVENUES> 41,343,758
<CGS> 10,390,794
<TOTAL-COSTS> 13,638,975
<OTHER-EXPENSES> 11,517,805
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 545,738
<INCOME-PRETAX> 5,605,664
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,605,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,605,664
<EPS-PRIMARY> .63
<EPS-DILUTED> .56
</TABLE>
