<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission File Number 1-11512
______________________
SATCON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
______________________
State of Incorporation: Delaware I.R.S. Employer ID. No. 04-2857552
161 First Street
Cambridge, MA 02142-1221
(Address of principal executive offices)
(617) 661-0540
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 Par Value, 7,336,125 shares outstanding as of March 31,
1996.
* The registrant became subject to section 15(d) of the Securities Exchange Act
of 1934 upon the consummation of its initial public offering on November 12,
1992.
______________________________________________________________________________
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TABLE OF CONTENTS
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Page
----
Balance Sheets........................................................... 1
Statements of Operations................................................. 2
Statements of Cash Flows................................................. 3
Notes to Financial Statements............................................ 4
ITEM 2:
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 4
PART II: OTHER INFORMATION
Items No. 1 through 6.................................................... 8
Signatures............................................................... 9
<PAGE>
SATCON TECHNOLOGY CORPORATION
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $782,725 $2,187,987
Marketable securities............................................. 6,636,406 10,386,288
Accounts receivable, net of allowance of $130,919................. 5,138,460 2,076,002
Unbilled contract costs, net of allowance of $66,500.............. 2,158,426 1,396,367
Prepaid expenses and other assets................................. 696,478 609,252
----------- -----------
Total current assets.............................. 15,412,495 16,655,896
----------- -----------
Property and equipment, net........................................... 3,520,825 2,772,018
Other assets.......................................................... 465,785 365,052
----------- -----------
Total assets...................................... $19,399,105 $19,792,966
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. 458,272 624,955
Accrued payroll and payroll taxes................................. 117,945 6,326
Accrued vacation.................................................. 151,298 147,663
Other accrued expenses............................................ 62,073 88,025
Deferred income taxes............................................. (20,624) 173,282
----------- -----------
Total current liabilities......................... 768,964 1,040,251
----------- -----------
Commitments...........................................................
STOCKHOLDERS' EQUITY
Preferred stock; $.01 par value, 1,000,000 shares authorized;
none issued......................................................... -- --
Common stock; $.01 par value, 10,000,000 shares authorized;
7,336,125 and 7,166,601 shares at March 31, 1996 and
and September 30, 1995, respectively, issued and outstanding........ 73,361 71,666
Additional paid-in capital............................................ 18,451,776 18,284,486
Retained earnings..................................................... 154,343 443,139
Unrealized losses on marketable securities, net of tax effect......... (49,339) (46,576)
----------- -----------
Total stockholders' equity........................ 18,630,141 18,752,715
----------- -----------
Total liabilities and stockholders' equity........ $19,399,105 $19,792,966
=========== ===========
</TABLE>
The accompanying notes are integral part of the financial statements.
1
<PAGE>
SATCON TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue........................................ $3,187,897 $4,591,973 $5,595,859 $8,752,537
---------- ---------- ---------- ----------
Cost of sales.................................. 1,605,722 2,907,284 2,480,448 4,966,371
Selling, general and administrative expenses... 1,811,202 1,127,016 3,774,621 2,615,250
Research and development expenses.............. 37,973 186,850 78,111 303,642
---------- ---------- ---------- ----------
Total operating expenses....................... 3,454,897 4,221,150 6,333,180 7,885,263
---------- ---------- ---------- ----------
Operating income/(loss)........................ (267,000) 370,823 (737,321) 867,274
Interest income, net........................... 119,029 147,719 256,524 194,200
---------- ---------- ---------- ----------
Income/(loss) before income taxes.............. (147,971) 518,542 (480,797) 1,061,474
Provision/(benefit) for income taxes........... (58,841) 207,417 (192,001) 424,589
---------- ---------- ---------- ----------
Net income/(loss).............................. (89,130) 311,125 (288,796) 636,885
========== ========== ========== ==========
Earnings/(loss) per common and common
equivalent share.............................. ($0.01) $0.04 ($0.04) $0.08
========== ========== ========== ==========
Weighted average shares outstanding............ 7,276,933 7,599,408 7,223,542 7,605,955
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
SATCON TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss).......................................... ($288,796) $636,885
---------- ----------
Adjustments to reconcile net income/(loss) to net
cash (used in)/provided by operating activities:
Depreciation and amortization.......................... 354,574 225,095
Changes in operating assets and liabilities:
Accounts receivable.................................. (3,162,458) (4,408,881)
Prepaid expenses..................................... (87,225) (31,033)
Unbilled contract costs.............................. (762,058) 4,328,298
Other assets......................................... (102,458) (74,586)
Accounts payable..................................... (166,684) (654,952)
Accrued expenses and payroll......................... 89,302 (129,757)
Income taxes payable................................. -- 421,490
Deferred income taxes................................ (193,906) --
---------- ----------
Total adjustments.............................................. (4,030,913) (324,326)
---------- ----------
Net cash (used in) provided by operating activities............ (4,319,709) 312,559
Cash flows from investing activities:
Sales and maturities of marketable securities.............. 3,747,119 2,845,287
Capital expenditures....................................... (1,001,658) (1,272,233)
---------- ----------
Net cash provided by investing activities...................... 2,745,461 1,573,054
Cash flows from financing activities:
Proceeds from exercise of stock options.................... 168,986 43,777
Financing Fees Paid........................................ -- (209,896)
---------- ----------
Net cash provided by financing activities...................... 168,986 (166,119
---------- ----------
Net (decrease)/increase in cash and cash equivalents........... (1,405,262) 1,719,494
Cash and cash equivalents at beginning of period............... 2,187,987 908,011
---------- ----------
Cash and cash equivalents at end of period..................... $ 782,725 $2,627,505
========== ==========
Supplemental Disclosure
- - -----------------------
Cash Paid for Interest......................................... $0 $217
Cash Paid for Income Taxes..................................... 34,600 3,099
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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SatCon Technology Corporation
Notes to Financial Statements
Note A. Basis of Presentation
- - ------------------------------
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
These financial statements, which in the opinion of management reflect all
adjustments (including normal recurring adjustments) necessary for a fair
presentation, should be read in conjunction with the financial statements and
notes thereto included in the Company's Report on Form 10-K for the year ended
September 30, 1995. Operating results for the three and six month periods ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for any future interim period or for the entire fiscal year.
Note B. Significant Events
- - ---------------------------
Line of Credit
In January 1995 the Company established a $3,000,000 line of credit with First
NH Bank. The line of credit was renewed March 18, 1996. Borrowings under the
line will be unsecured and charged interest at prime rate. The line of credit
expires January 31, 1997. No funds have been as yet advanced under this
facility.
Item 2. Management's Discussion and Analysis of Financial Condition and
- - -------------------------------------------------------------------------
Results of Operations
- - ---------------------
Results of Operations
The following table sets forth, for the periods indicated, the percentage of
revenues for certain items in the Company's Statement of Operations for each
period:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues............................. 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 50.3 63.3 44.3 56.7
Selling, general and administrative.. 56.8 24.5 67.4 29.9
Research and development............. 1.2 4.1 1.4 3.5
Total operating expenses
(excluding cost of sales)............ 58.0 28.6 68.8 33.4
Operating income/(loss).............. (8.3) 8.1 (13.1) 9.9
Interest income (expense net)........ 3.7 3.2 4.6 2.2
Income/(loss) before taxes........... (4.6) 11.3 (8.5) 12.1
Provision/(benefit) for income taxes. (1.8) 4.5 (3.4) 4.9
Net income/(loss).................... (2.8) 6.8 (5.1) 7.3
</TABLE>
4
<PAGE>
Three Months Ended March 31, 1996 (Q2 1996) Compared to the Three Months Ended
- - ------------------------------------------------------------------------------
March 31, 1995 (Q2 1995)
- - ------------------------
Revenues. The Company's revenues for Q2 1996 decreased $1,404,076 or 30.6% from
Q2 1995. The decrease is primarily due to a decrease in revenue of approximately
$1,135,000 from contracts with Chrysler Corporation for the development of drive
train components as part of the Patriot Hybrid Vehicle Program, and a decrease
of approximately $368,000 primarily related to completion of contracts with
other commercial customers. The decrease in Chrysler revenue is the result of
the transition in the program from the manufacture to performance testing of
first generation drive train components. The decrease in revenue was partially
offset by an increase in revenue of approximately $100,000 related to work on
government development contracts.
Cost of Sales. Cost of sales for Q2 1996 decreased $1,301,562 or 44.7%, from Q2
1995. The decrease is primarily due to a decrease in work on contracts with
Chrysler Corporation for the development of drive train components as part of
the Patriot Hybrid Vehicle Program. The decrease in cost of sales, as a percent
of revenue, is primarily due to a decrease in direct material and subcontract
costs as a percentage of cost of sales related to a shift in efforts on the
Patriot Program from material procurement and subcontract production to assembly
and test of first generation drive train components.
Selling, General and Administrative. Selling, general and administrative
expenses for Q2 1996 increased $684,186 or 60.7%, from Q2 1995. The increase is
primarily the result of business support personnel (marketing, engineering, and
administrative) added to support the Company's transition from a contract
research and development company to a supplier of products for commercial
markets. In addition, depreciation expense increased primarily due to the
purchases of computer, laboratory, inspection and test and manufacturing
equipment during fiscal years 1995 and 1996.
Research and Development. Internally funded research and development expenses
for Q2 1996 were $37,973, compared to $186,850 for Q2 1995. The decrease in
research and development spending is primarily the result of a reallocation of
engineering resources from internally funded research and development to
development efforts on contracts from U.S. Government and commercial customers.
The Company continues to pursue commercial product opportunities capitalizing on
the Company's Active Motion Control technology base. As a result, the Company
may elect to internally fund product development efforts to retain ownership of
proprietary technology through its commercial and U.S. Government development
contracts. The Company expects to continue its efforts to develop technology
through a combination of internally funded research and development and the
award of development contracts from the U.S. Government and commercial
customers.
Six Months Ended March 31, 1996 (Q2 1996 YTD) Compared to the Six Months Ended
- - ------------------------------------------------------------------------------
March 31, 1995 (Q2 1995 YTD)
- - ----------------------------
Revenues. The Company's revenues for Q2 1996 YTD were $5,595,859 a decrease of
$3,156,678 or 36.1%, from Q2 1995 YTD. The decrease is primarily due to a
decrease in revenue of $3,451,000 from contracts with Chrysler Corporation for
the development of drive train components as part of the Patriot Hybrid Vehicle
Program. The decrease in Chrysler revenue is the result of the transition in
the program from the manufacture to performance testing of first generation
drive train components. This decrease
5
<PAGE>
in revenue from the Patriot program was partially offset by an increase in
revenue of approximately $400,000 related to work on government development
contracts.
Cost of Sales. Cost of sales for Q2 1996 YTD were $2,480,448, a decrease of
$2,485,923 or 50.1%, from Q2 1995 YTD. The decrease is primarily due to a
decrease in work on contracts with Chrysler Corporation for the development of
drive train components as part of the Patriot Hybrid Vehicle Program. The
decrease in cost of sales, as a percent of revenue, is primarily due to a
decrease in direct material and subcontract costs as a percentage of cost of
sales related to a shift in efforts on the Patriot Program from material
procurement and subcontract production to assembly and test of first generation
drive train components.
Selling, General and Administrative. Selling, general and administrative
expenses for Q2 1996 YTD were $3,774,621, an increase of $1,159,371 or 44.3%,
from Q2 1995 YTD. The increase is primarily the result of business support
personnel (marketing, engineering, and administrative) added to support the
Company's transition from a contract research and development company to a
supplier of products for commercial markets. In addition, depreciation expense
increased primarily due to the purchases of computer, laboratory, inspection and
test and manufacturing equipment during fiscal years 1995 and 1996.
Research and Development. Internally funded research and development expenses
for Q2 1996 YTD decreased $225,531 or 74.3% from Q2 YTD 1995. The decrease in
research and development spending is primarily the result of a reallocation of
engineering resources from internally funded research and development to
development efforts on contracts from U.S. Government and commercial customers.
The Company continues to pursue commercial product opportunities capitalizing on
the Company's Active Motion Control technology base. As a result, the Company
may elect to internally fund product development efforts to retain ownership of
proprietary technology through its commercial and U.S. Government development
contracts. The Company expects to continue its efforts to develop technology
through a combination of internally funded research and development and the
award of development contracts from the U.S. Government and commercial
customers.
Liquidity and Capital Resources
Cash used by operating activities was $4,319,709 as of March 31, 1996. This is
primarily attributable to the increase in accounts receivable and unbilled
contract costs from $3,472,369 as of September 30, 1995, to $7,296,886 as of
March 31, 1996, primarily due to extended billing and payment terms with a
commercial customer. As of April 18, 1996, approximately $2,500,000 of
outstanding accounts receivable were collected related to this increase. The
Company expects to collect the remaining balances related to the increase during
the next few months. The remainder of the cash used for operating activities is
primarily a result of an increase in prepaid expenses and other assets, a
decrease in accounts payable, and the net loss net of income tax benefit for the
period.
Cash provided by investing activities as of March 31, 1996, was $2,745,461. The
cash provided relates primarily to the sale and maturity of approximately
$3,747,000 of marketable securities to fund operations prior to the collection
of invoices outstanding. The cash provided was partially offset by capital
expenditures of approximately $1,000,000. The capital expenditures primarily
relate to the purchase of incoming inspection equipment, leasehold improvements,
and computer equipment.
In January 1995 the Company established a $3,000,000 line of credit with First
NH Bank. The line of credit was renewed March 18, 1996. Borrowings under the
line will be unsecured and charged interest at prime rate. The line of credit
expires January 31, 1997. No funds have been as yet advanced under this
6
<PAGE>
facility. The Company believes that the combination of existing cash,
anticipated results of operations, and the Company's line of credit will provide
adequate sources of cash flow to meet the Company's anticipated capital
requirements through September 30, 1996.
Factors Affecting Future Results
The Company's future results remain difficult to predict and may be affected by
a number of factors including business conditions within the automotive,
telecommunications, industrial machinery and semiconductor industries and the
world economies as a whole, and competitive pressures that may impact research
and development spending. The Company's revenue growth is dependent on
technology developments and contract R&D for both the government and commercial
sectors and no assurance can be given that such investments will continue or
that the Company can successfully obtain such funds. In addition, the Company's
future growth opportunities are dependent on the introduction of new products
that must penetrate automotive, telecommunications, industrial and computer
market segments. No assurance can be given that new products can be developed,
or if developed, will be successful; that market demand or customer acceptance
will be realized; that demand if achieved will be sustained; that competitors
will not force prices to an unacceptably low level or take market share from the
Company; or that the Company can achieve or maintain profits in these markets.
Because of these and other factors, past financial performance should not be
considered an indicator of future performance. Investors should not use
historical trends to anticipate future results and should be aware that the
Company's stock price frequently experiences significant volatility.
Effect of Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." This standard is effective for financial statements for Fiscal
years beginning after December 15, 1995. The Company's analysis of this new
standard indicates that it will not have a material effect on the Company's
financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which encourages companies to
recognize compensation expense in the income statement based on the fair value
of the underlying common stock at the date the awards are granted. However, it
will permit continued accounting under APB Opinion 25, "Accounting for Stock
Issued to Employees," accompanied by a disclosure of the pro forma effects on
net income and earnings per share had the new accounting rules been applied.
The statement is effective for fiscal year 1997. The Company plans to account
for stock based compensation in accordance with APB Opinion 25.
Effects of Inflation
The Company believes that inflation over the past three years has not had a
significant impact on the Company's sales or operating results.
7
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
Not applicable.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other Information:
Not applicable.
Item 6 Exhibits and Reports on Form 8-K:
A) Exhibit 27 - Financial Data Schedule (for EDGAR filing purposes only)
B) The Company has filed no reports on Form 8-K during the quarter for which
this report is filed.
8
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Signature
- - ---------
Pursuant to the requirements 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.
SatCon Technology Corporation
Date: ______________ By: /s/ David B. Eisenhaure
----------------------------------------
David B. Eisenhaure, President and Chief
Executive Officer
Date: ______________ By: /s/ Michael C. Turmelle
-----------------------------------
Michael C. Turmelle, Vice President,
Chief Financial Officer and Treasurer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 782,725
<SECURITIES> 6,636,406
<RECEIVABLES> 5,269,379
<ALLOWANCES> 130,919
<INVENTORY> 0
<CURRENT-ASSETS> 15,412,495
<PP&E> 3,520,825<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,399,105
<CURRENT-LIABILITIES> 768,964
<BONDS> 0
0
0
<COMMON> 73,361
<OTHER-SE> 18,556,780
<TOTAL-LIABILITY-AND-EQUITY> 19,399,105
<SALES> 0
<TOTAL-REVENUES> 3,187,897
<CGS> 0
<TOTAL-COSTS> 1,605,722
<OTHER-EXPENSES> 1,849,175
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (147,971)
<INCOME-TAX> 0
<INCOME-CONTINUING> (89,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,130)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
<FN>
<F1>PP&E is shown net of accumulated depreciation as reported within the Form
10-Q on the Balance Sheet
</TABLE>
