SATC Satcon Technology Corp. (MM)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the Year Ended December 31, 2009

Commission file number 1-11512

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

(617) 897-2400
(Registrant's telephone number, including area code)

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

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

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o     No  ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  o     No  ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý     No  o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o     No  o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ý

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer, "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  o     No  ý

         The aggregate market value of the registrant's Common Stock, $.01 par value per share, held by non-affiliates of the registrant was $126,313,220 based on the last reported sale price of the registrant's Common Stock on the Nasdaq Capital Market as of the close of business on the last business day of the registrant's most recently completed second quarter ($1.80). There were 71,001,440 shares of Common Stock outstanding as of February 28, 2010.

          DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's Proxy Statement for its 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

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Satcon Technology Corporation

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PART I

        This Annual Report on Form 10-K contains or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. You can identify these forward-looking statements by our use of the words "believes," "anticipates," "plans," "expects," "may," "will," "intends," "estimates," and similar expressions, whether in the negative or in the affirmative. The forward-looking statements contained in this Annual Report are generally located in the material set forth under the headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," but may be found in other locations as well. Although we believe that these forward-looking statements reasonably reflect our plans, intentions and expectations disclosed in the forward-looking statements, our actual results could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements under the heading "Risk Factors" under Item 1A that we believe could cause our actual results to differ materially from the forward-looking statements that we make. Forward-looking statements contained in this Annual Report speak only as of the date of this report. Subsequent events or circumstances occurring after such date may render these statements incomplete or out of date. We undertake no obligation and expressly disclaim any duty to update such statements.

Item 1.    BUSINESS

Overview

        Satcon Technology Corporation ("Satcon" or "Company") is a world leading technology provider of utility grade power conversion solutions for the renewable energy market. Our products feature the widest range of power ratings in the industry, and are utilized by businesses and utility companies to efficiently convert renewable energy sources into stable and reliable electrical power.

        Our suite of photovoltaic and fuel cell power inverters offer rugged and reliable solutions that enhance the total output and power production of a solar installation. We also offer system design services and solutions for management, monitoring, and performance measurement to maximize capital investment and improve overall quality and performance over the entire lifespan of an installation.

Revenue Comparison with Prior Years

        Consolidated revenues for the years ended December 31, 2009, 2008 and 2007 were as follows:

        These numbers have been adjusted to reflect the January 2010 sale of our Satcon Applied Technology business unit and the September 2008 sales of our Electronics and Power Systems US business units. See Note D (Discontinued Operations) to the Consolidated Financial Statements.

Industry Background & Market Opportunity

        The worldwide demand for clean and renewable sources of energy, such as solar, is being driven globally by a variety of factors. These factors include increasing electricity usage, power grid capacity constraints, fossil fuel price volatility, and harmful levels of pollution and greenhouse gases. As a result of these and other challenges facing traditional energy sources, individuals, businesses, utilities and

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governments are seeking more reliable, efficient and cleaner solutions for their power needs through renewable portfolio standards (RPS), tax incentives, and international treaties.

        Within this renewable energy market we believe that the fastest growth area for Satcon involves large-scale, utility grade renewable energy and distributed power generation. These solutions require power quality control products to manage the performance of individual solar installations and monitor how it will interconnect with larger energy infrastructure (grid). In order to be commercially viable and operate effectively, these solutions must be highly reliable, efficient, and deliver the command and control performance required to profitably manage multi-megawatt solar power plants. Our intellectual property, in the form of technical expertise and innovative product offerings, uniquely positions the company to provide the next generation of large-scale, utility grade renewable energy projects with the energy storage, power quality, and distributed power systems they will require.

Products

        We deliver a full suite of power conversion solutions and services for large commercial and utility scale renewable energy installations through our Renewable Energy Solutions business.

Renewable Energy Solutions

        We produce a broad range of products to provide the critical bridge between clean energy sources and large-scale power grids, helping companies meet the rising demand for clean energy with unparalleled efficiency and profitability.

        Our solutions for renewable energy consist of two core product offerings:

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Utility Grade Inverters for Solar Photovoltaic and Fuel Cell Applications.   We develop modular inverters for use in connection with large, utility-scale, renewable energy power systems such as stationary fuel cell power plants, photovoltaic power plants, and distributed power generation systems. Our PowerGate® Plus inverters are designed to convert the DC power generated by a renewable energy source into useable AC power. They also provide the interface with the electric utility grid, an energy storage device, and end user applications. Our inverters are built on a proprietary technology framework that allows them to effectivly manage high-power requirements. We introduced our first inverter product in fiscal year 2002.

In 2009, we introduced the industry's first complete power harvesting and management solution for utility scale power plants, Satcon Solstice™. Solstice is an optimized end-to-end, panel-to-grid, solar PV electrical power generation system that focuses on improving total system performance, reducing overall balance of system costs and operation costs, and increasing system controllability, safety and uptime.

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Micro Grid Solutions.   Satcon's Micro Grid solutions supply stable, high quality renewable power locally, at the point of demand. Our utility grade Micro Grid solutions are developed to solve the renewable energy challenges of intermittancy and power storage and ensure the grid load is always powered. Built on an architecture of PowerGate Plus photolvoltaic, fuel cell and hybrid inverter systems, they provide uninterupted utility grade renewable energy to deliver the energy security, reliability, safety, sustainability and cost effectiveness required for large scale utility adoption.

        Our solutions have powered a number of North America's high profile micro- and island-grid projects including:

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Santa Rita Jail, Dublin, California



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Castle Rock, Utah

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La Ola Solar Farm, Island of Lana'i, Hawaii



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Other Legacy Power Products.   We also provide static transfer switches, static voltage regulators, frequency converters and AC arc furnace line controllers from 5 kilowatts to 100 megawatts.

        Revenues for the years ended December 31, 2009, 2008 and 2007 from our Renewable Energy Solutions business unit were as follows:

Financial Results by Business Segment

        In prior years we have included segment disclosures as it related to the operations of our business units. With the sale in 2008 of our Electronics and Power Systems US business units and the classification in 2009 of our Applied Technology business unit as part of discontinued operations, we view our operations as one segment and as one business unit. Accordingly, until such time as circumstances change and we determine that we have reportable segments, we will no longer report this information. See Note S to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Satcon Product Attributes

        We strive to meet our customers' needs by providing power conversion solutions and systems that encompass the following key attributes:

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Performance.   Our products use proprietary designs and technology to ensure that high-quality power is efficiently produced in all operating conditions.



•

Reliability.   We design and manufacture high-reliability, long-life power electronics for solar photovoltaic and fuel cell applications. We design, manufacture and test our systems for optimal performance over the entire lifespan of the photovoltaic system. We design our products to support the long-life, always-on requirements of the power quality markets through a comprehensive suite of programs including: support services, system design services, and warranty and preventative maintenance programs.



•

Efficiency.   We design and manufacture our products to meet the efficiency needs of our customers as defined by their specifications and the end use of the product. The overall efficiency of a renewable power system, or its ability to deliver power with minimum energy loss, is vital to its effective commercialization and overall profitability dynamic, and depends on the efficiency of all of its component parts. Our proprietary maximum power production tracking (Edge™ MPPT) technology ensures that the entire photovoltaic system delivers maximum throughput in the harshest environments. Our products also are compatible across all photovoltaic cell technologies, including thin film, monocrystalline, and polycrystalline photovoltaic panels.



•

Quality.   Our Renewable Energy Solutions division operates with Quality Management Systems and is ISO 9001:2000 certified. All of the high power level inverters manufactured in our Renewable Energy Solutions division are Underwriter Laboratory listed as meeting their requirements for safety.

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High Power Density.   We design our products to meet the market demand for high power density. High power density, or the ability to convert, condition and manage large amounts of energy within a compact design, is required for cost reduction and is critical in applications such as large commercial and utility-scale solar photovoltaic power systems where environmental conditions are stringent.



•

Flexibility.   We develop and manufacture our products for use in various renewable energy and power quality systems such as fuel cells, photovoltaics, wind turbines, micro-turbines and UPS systems. Our products are modular and scalable to meet a wide range of power requirements. Our engineers work closely with our customers to address overall systems design issues and to ensure that our products meet their system specifications. A close working relationship between the customers' engineers and our engineers is particularly important in the rapidly evolving renewable energy industry.

Sales, Marketing and Service

        We sell our products and services through direct sales personnel, distributor arrangements and sales agent arrangements which comprise a global market presence for Satcon. Our direct sales staff manages our key customer accounts, regional distributors and agents, as well as, provides customer support and identifies significant market opportunities in their respective markets.

        In order to maximize our customer's return on assets and investment profitability, we offer a suite of services focused on delivering optimized design and installation support. We also maintain localized customer service capabilities at sites throughout North America, Europe and Asia. Our services provide technical support throughout the entire lifespan of a product. We believe these factors are essential to building close, long-term value for our customers, and maintaining our competitive edge.

Strategy

        Our strategy is to drive revenue growth, expand our leadership position in key markets, and enhance operating results by increasing the adoption of our products in the large commercial and utility scale renewable energy market. Our focus continues to be:

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Leverage our diverse expertise and proprietary technology.   We apply our diverse expertise and proprietary technology in the fields of power electronics and power conversion design to offer the industry's largest selection of commercial and utility grade inverters. Our products' advanced capabilities are highly differentiated in the rapidly developing renewable energy market where we currently offer the widest range of photovoltaic utility grade power ratings ranging from 30kW to 1MW. Our success should be sustainable in the longer term because it depends on fundamental knowledge of key power technology. We are not critically dependent on the technology of a specific application or the success of a single product. We strive to create balance between breadth and focus.



•

Establish our products as industry standards.   We are a major developer and manufacturer of power electronics, power conversion and power conditioning solutions in renewable energy applications worldwide. We currently provide our solutions and services for the largest and most demanding solar installations in the world. We come from a history of innovation in large-scale, advanced solutions including introducing the world's first one box 100 kW photovoltaic inverter, the first 500 kW and 1MW photovoltaic inverters, as well as the first 2.4 megawatt fuel cell inverter. In 2009, we introduced the industry's first complete power harvesting and management solution for utility scale power plants, Satcon Solstice™. Our innovation and history of firsts position our products as industry standards in the large commercial and utility scale renewable energy market.

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Leverage our intellectual property.   Satcon is composed of industry leading experts in large-scale photovoltaic and fuel cell design, manufacturing and solution delivery.



•

Develop new technology.   We believe that new products, manufacturing capabilities and technologies will enhance our competitive position and growth opportunities.

In 2009, we received a competitive grant award by the Department of Energy and Sandia Laboratories to continue our work developing the next generation of distributed renewable energy solutions through the Solar Energy Grid Integration Systems (SEGIS) project. The SEGIS project is focused on developing advanced clean energy technologies required to increase the usage of photovoltaic systems in the energy network, and improving the power quality and reliability of the overall utility grid. Additionally in 2009, we received two awards from the Department of Energy under its high penetration initiative—one with the Sunshine State Solar Grid Initiative team (SUNGRIN) to study high penetration solar PV, and one with the National Renewable Energy Lab (NREL) and Southern California Edison on high penetration PV in congested grid environments.

The combination of our advanced technology, intellectual property and industry expertise provide us the opportunity to develop the industry's next generation of power conversion solutions.

•

Develop strategic alliances and relationships.   These alliances may take the form of marketing, sales, distribution or manufacturing agreements. We continue to expand and deepen our operations globally and we are committed to establishing a large, direct local presence in the European and Asian countries where we plan to compete, as well as maintain and build upon the strong relationships we have in North America.

Competition

        We believe that competitive performance in the marketplace for power conversion and control products depends upon several factors, including product price, technical innovation, product quality and reliability, range of products, customer service and technical support. Satcon remains focused on solving large-scale power production challenges and we have aligned all resources within our organization behind this focus. Our technical innovation emphasizing product performance and reliability, supported by our commitment to strong customer service and technical support, enables us to continue to compete successfully against our competitors. The following represent our main competitors:

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Advanced Energy Industries



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Markets:     Renewable Energy, Solar Equipment



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Products:     Solar Inverters, Power Systems



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PowerOne



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Markets:     Renewable Energy, Power Conversion



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Products:     Solar Inverters, Wind Inverters, Monitoring and Control



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PV Powered



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Markets:     Renewable Energy, Grid-Tied PV Inverters



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Products:     Residential Solar Inverters, Commercial Solar Inverters



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Schneider Electric



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Markets:     Renewable Energy, Energy Management

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Products:     Solar Inverters, Automation and Control, Electrical Distribution, Energy Efficiency



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Siemens



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Markets:     Industrial Plant Automation, Energy, Healthcare



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Products:     Solar Inverters, Communication Software, Wind Turbines, Gas Turbines, Steam Turbines, Generators, Compressors & Trains, Fans, Fuel Gasifier, Fuel Cells, Environmental Systems



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SMA Solar Technology



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Markets:     Renewable Energy, Solar Inverters, Energy Systems



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Products:     Residential Inverters, Commercial Inverters, Solar Plants



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Sungrow Power Supply



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Markets:     Renewable Energy, Solar and Wind Equipment



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Products:     Solar Inverters, Wind Inverters

        Our ability to continue to compete successfully with these companies depends on our ability to continue to innovate through our products and services.

Significant Customers

        There was one customer (SunPower Corporation) that was classified as a significant customer in 2009 due to sales to this customer exceeding 10% of our annual revenue (approximately 14%). In addition, there was one customer (Enfinity, NV) that was classified as a significant customer in 2009 due to its gross receivable balance at December 31, 2009 exceeding 10% of our total gross receivables at December 31, 2009 (approximately 10%).

        For 2008, two customers (SunPower Corporation and Fuel Cell Energy) were classified as significant customers due to sales to each customer exceeding 10% of our annual revenues (approximately 12% and 17%, respectively) and both customers' accounts receivable balance exceeded 10% of our total gross accounts receivable at December 31, 2008 (approximately 14% and 14%, respectively).

Backlog

        Our backlog consists primarily of orders for power control systems and product development contracts. At December 31, 2009, our backlog was approximately $11.9 million. Of this amount, approximately $11.9 million is scheduled to be shipped during 2010. Many of our contracts and sales orders may be canceled at any time with limited or no penalty. In addition, contract awards may be subject to funding approval from the U.S. government and commercial entities, which involves political, budgetary and other considerations over which we have no control.

Research and Development

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

        We expended approximately $8.4 million, $5.1 million and $2.3 million on internally-funded research and development during the years ended December 31, 2009, 2008 and 2007, respectively.

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Manufacturing Facilities

        We manufacture our products at our facilities located in Burlington, Ontario, Canada, Boston, Massachusetts and through our contract manufacturing partner in Asia. Our overall manufacturing process has a current production capacity of approximately 800MW per year.

        Reducing product cost is essential to our ability to further penetrate the market with our power conversion solutions and service offerings. We believe that most of the raw materials used in our products are readily available from a variety of vendors. Additionally, we design and develop our products to use commodity parts in order to simplify the manufacturing process. We have made and expect to continue to make technological improvements that reduce the costs to manufacture our products.

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

Intellectual Property

        Our success and competitiveness depend on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing on the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright law and contract restrictions to protect the proprietary aspects of our technologies. We seek to limit disclosure of our intellectual property by requiring employees, consultants and any third parties with access to our proprietary information to execute confidentiality agreements and by restricting access to that information.

        Innovation is at the core of our business. Satcon's success in transitioning its technology development programs to commercially successful solutions has been consistently recognized by governments and industry. A select list of awards and recognitions is included below:

SEGIS Project 2008

        Focused on developing the next generation of clean energy technologies required to increase the usage of photovoltaic (PV) systems into the energy network. The goal of the project is to create efficient and sustainable growth through advances in technology and expanding the usage of solar generated energy, while at the same time improving the power quality and reliability of the overall utility grid.

Tibbetts Award 1997

        Awarded for developing the 20C1000 Series Cable/Telecom, 2.0 kWh flywheel energy systems, which is specifically designed as a "plug-for-plug" replacement for lead-acid batteries in standby power supply applications

National Committee for the Partnership for Next Generation Vehicles 1996

        A cooperative research and development program between the federal government and the United States Council for Automotive Research (USCAR) focused on development of a vehicle to achieve up to three times the fuel efficiency of contemporary vehicles, while maintaining or improving current levels of performance, size, utility, and total cost of ownership and while meeting or exceeding federal safety and emissions requirements.

Discover Magazine Award for Technological Innovation 1995

        For work on the Advanced Hybrid Electric Patriot Race Car Drivetrain.

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        As of December 31, 2009, we held approximately 47 U.S. patents and had 2 patent applications pending with the U.S. Patent and Trademark Office. The expiration dates of our patents range from 2011 to 2027, with the majority expiring after 2015.

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

Foreign Operations

        We have foreign operations through our facility in Burlington, Ontario, Canada and our sales and service offices in Prague, Czech Republic, Shenzhen, China and Shanghai, China.

Government Regulation

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

Government Contracts

        On occasion we act as a prime contractor or major subcontractor for many different U.S. government programs that involve energy-related products. Over its lifetime, a program may be implemented by the award of many individual contracts and subcontracts, or contracts with option years, or partially funded contracts.

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

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

        Sales to the U.S. government may be affected by changes in research interests in the areas in which we engage, changing government department budgets, and changing procurement policies. With the sale of our Applied Technology business unit in January 2010 we have no significant revenues from continuing operations being derived from government contracts.

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Employees

        At December 31, 2009, we had a total of 226 full-time employees, 8 part-time employees and 34 contract employees. Of the total, 90 persons were employed in engineering, 115 in manufacturing, 44 in administration and 19 in sales and marketing. Our future success depends in large part on the continued service of our key technical and senior management personnel, and on our ability to attract, retain and motivate qualified employees, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and the development of new products and processes. The competition for such personnel is intense, and the loss of key employees could have a material adverse effect on us. None of our employees are represented by a union. We believe that relations with our employees are good.

Reports

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

Item 1A.    Risk Factors

         The risks described below may materially impact your investment in our company or may in the future, and, in some cases already do, materially affect us and our business, financial condition and results of operations. You should carefully consider these factors with respect to your investment in our securities. This section includes or refers to certain forward-looking statements; you should read the explanation of the qualifications and limitations on such forward-looking statements beginning on pages 4 of this report.

Risks Related to Our Company

         We have a history of operating losses, may not be able to achieve profitability and may require additional capital in order to sustain our businesses.

        For each of the past ten fiscal years, we have experienced losses from operating our businesses. As of December 31, 2009, we had an accumulated deficit of approximately $231.7 million. During the year ended December 31, 2009 we had a loss from continuing operations of approximately $30.0 million. If, however, we are unable to operate on a cash flow breakeven basis in the future, we may need to raise additional capital in order to sustain our operations. There can be no assurance that we will be able to achieve such results or to raise such funds if they are required.

         We could issue additional common stock, which might dilute the book value of our common stock.

        We have authorized 200,000,000 shares of our common stock, of which 70,567,781 shares were issued and outstanding as of December 31, 2009. Our board of directors has the authority, without action or vote of our stockholders in most cases, to issue all or a part of any authorized but unissued shares. Such stock issuances may be made at a price that reflects a discount from the then-current trading price of our common stock. In addition, in order to raise the capital that we may need at today's stock prices, we will need to issue securities that are convertible into or exercisable for a significant amount of our common stock. These issuances would dilute your percentage ownership interest, which will have the effect of reducing your influence on matters on which our stockholders vote, and might dilute the book value of our common stock. You may incur additional dilution of net tangible book value if holders of stock options, whether currently outstanding or subsequently granted, exercise their options or if warrant holders exercise their warrants to purchase shares of our common stock.

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         The sale or issuance of a large number of shares of our common stock could depress our stock price.

        As of February 28, 2010, we have reserved 35,636,364 shares of common stock for issuance upon exercise of stock options and warrants and 9,015,820 shares for future issuances under our stock plans. We have also reserved 251,678 shares of common stock for issuance upon conversion of the outstanding Series B Preferred Stock, which can be converted at any time. In addition, we have reserved 24,038,461 shares of common stock for issuance upon conversion of the outstanding Series C Preferred Stock, which can be converted at any time. As of March 1, 2010, holders of warrants and options to purchase an aggregate of 30,310,731 shares of our common stock may exercise those securities and transfer the underlying common stock at any time subject, in some cases, to Rule 144.

         The execution of our growth strategy is dependent upon the continued availability of third-party financing arrangements for our customers, and is affected by general economic conditions .

        The current recessionary condition of the general economy and limited availability of credit and liquidity could materially and adversely affect our business and results of operations. Many purchasers of our inverters and other products require financing from third-parties to finance their operations. Given the current recession and the restricted credit markets, certain of our customers may be unable or unwilling to finance the cost to purchase our products or may be forced to cancel previously submitted orders or delay taking shipment until suitable credit is again available. Collecting payment from customers facing liquidity challenges may also be difficult. These factors could materially and adversely affect our anticipated revenue and growth and, accordingly, our results of operations, cash flows and financial condition.

         If we are unable to maintain our technological expertise in design and manufacturing processes, we will not be able to successfully compete.

        We believe that our future success will depend upon our ability to develop and provide products that meet the changing needs of our customers. This requires that we successfully anticipate and respond to technological changes in design and manufacturing processes in a cost-effective and timely manner. As a result, we continually evaluate the advantages and feasibility of new product design and manufacturing processes. We cannot, however, assure you that our process improvement efforts will be successful. The introduction of new products embodying new technologies and the emergence of shifting customer demands or changing industry standards could render our existing products obsolete and unmarketable, which would have a significant impact on our ability to generate revenue. Our future success will depend upon our ability to continue to develop and introduce a variety of new products and product enhancements to address the increasingly sophisticated needs of our customers. We may experience delays in releasing new products and product enhancements in the future. Material delays in introducing new products or product enhancements may cause customers to forego purchases of our products and purchase those of our competitors.

         The U.S. government has certain rights relating to our intellectual property.

        Many of our patents are the result of inventions made under U.S. government-funded research and development programs. With respect to any invention made with government assistance, the government has a nonexclusive, nontransferable, irrevocable, paid-up license to use the technology or have the technology employed for or on behalf of the U.S. government throughout the world. Under certain conditions, the U.S. government also has "march-in rights," which enable the U.S. government to require us to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to responsible applicants, upon terms that are reasonable under the circumstances.

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         Our business could be adversely affected if we are unable to protect our patents and proprietary technology.

        As of February 28, 2010, we held approximately 47 U.S. patents and had 2 patent applications pending with the U.S. Patent and Trademark Office. The expiration dates of our patents range from 2011 to 2027, with the majority expiring after 2015. As a qualifying small business from our inception to date, we have retained commercial ownership rights to proprietary technology developed under various U.S. government contracts and grants.

        Our patent and trade secret rights are of significant importance to us and to our future prospects. Our ability to compete effectively against other companies in our industry will depend, in part, on our ability to protect our proprietary technology and systems designs relating to our products. Although we have attempted to safeguard and maintain our proprietary rights, we do not know whether we have been or will be successful in doing so. Further, our competitors may independently develop or patent technologies that are substantially equivalent or superior to ours. No assurance can be given as to the issuance of additional patents or, if so issued, as to their scope. Patents granted may not provide meaningful protection from competitors. Even if a competitor's products were to infringe patents owned by us, it would be costly for us to pursue our rights in an enforcement action and there can be no assurance that we would be successful in enforcing our intellectual property rights. Because we intend to enforce our patents, trademarks and copyrights and protect our trade secrets, we may be involved from time to time in litigation to determine the enforceability, scope and validity of these rights. This litigation could result in substantial costs to us and divert resources from operational goals. In addition, effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country where we operate or sell our products. In addition, certain of our customers may request that we provide them with assurances that elements of our intellectual property be available for their use in the event that we are prevented from satisfying our service and warranty obligations to them or their customers.

         We may not be able to maintain confidentiality of our proprietary knowledge.

        In addition to our patent rights, we also rely on treatment of our technology as trade secrets through confidentiality agreements, which all of our employees are required to sign, assigning to us all patent rights and other intellectual property developed by our employees during their employment with us. Our employees have also agreed not to disclose any trade secrets or confidential information without our prior written consent. We also rely on non-disclosure agreement to protect our trade secrets and proprietary knowledge. These agreements may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of these agreements or may be independently developed by competitors. Failure to maintain the proprietary nature of our technology and information could harm our results of operations and financial condition by reducing or eliminating our technological advantages in the marketplace.

         Others may assert that our technology infringes their intellectual property rights.

        We believe that we do not infringe the proprietary rights of others and, to date, no third parties have asserted an infringement claim against us, but we may be subject to infringement claims in the future. The defense of any claims of infringement made against us by third parties could involve significant legal costs and require our management to divert time from our business operations. If we are unsuccessful in defending any claims of infringement, we may be forced to obtain licenses or to pay royalties to continue to use our technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly, our operating results may suffer either from reductions in revenues through our inability to serve customers or from increases in costs to license third-party technologies.

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         Our success is dependent upon attracting and retaining highly qualified personnel and the loss of key personnel could significantly hurt our business.

        To achieve success, we must attract and retain highly qualified technical, operational and executive employees. The loss of the services of key employees or an inability to attract, train and retain qualified and skilled employees, specifically engineering, operations and business development personnel, could result in the loss of business or could otherwise negatively impact our ability to operate and grow our business successfully.

         We expect significant competition for our products and services.

        In the past, we have faced limited competition in providing research services, prototype development and custom and limited quantity manufacturing. We expect competition to intensify greatly as commercial applications increase for our products under development. Many of our competitors and potential competitors are well established and have substantially greater financial, research and development, technical, manufacturing and marketing resources than we do. Some of our competitors and potential competitors are much larger than we are. If these larger competitors decide to focus on the development of distributed power and power quality products, they have the manufacturing, marketing and sales capabilities to complete research, development and commercialization of these products more quickly and effectively than we can. There can also be no assurance that current and future competitors will not develop new or enhanced technologies perceived to be superior to those sold or developed by us. There can be no assurance that we will be successful in this competitive environment.

         We are dependent on third-party suppliers for the supply of key components for our products.

        We use third-party suppliers for components in many of our systems. From time to time, shipments can be delayed because of industry-wide or other shortages of necessary materials and components from third-party suppliers. A supplier's failure to supply components in a timely manner, or to supply components that meet our quality, quantity or cost requirements, or our inability to obtain substitute sources of these components on a timely basis or on terms acceptable to us, could impair our ability to deliver our products in accordance with contractual obligations.

         We are in the process of establishing a contract manufacturing relationship with a Chinese supplier for certain of our inverter products .

        We are in the process of commencing a contract manufacturing relationship with a supplier in Asia for the manufacture of certain of our inverters as a means of reducing our costs and increasing the quality for those products, thereby enabling us to maintain a competitive advantage in the marketplace for these products. Our Asian partner, working closely with us, will in turn be developing a common Asian supply chain for the components that are incorporated into our inverters. While we believe that our Asian contract manufacturer is qualified to manufacture these inverters for us, we may need to address short-term quality and delivery scheduling issues as we develop this new supply chain for these inverters. If we were to encounter significant quality or delivery schedule concerns it might materially and adversely affect our relationships with customers for these inverters and our results of operations.

         If we experience a period of significant growth or expansion, it could place a substantial strain on our resources.

        If our power control products are successful in achieving rapid market penetration, we may be required to deliver large volumes of technically complex products or components to our customers on a timely basis at reasonable costs to us. We have limited experience in ramping up our manufacturing capabilities to meet large-scale production requirements and delivering large volumes of our power

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control products. If we were to commit to deliver large volumes of our power control products, we cannot assure you that we will be able to satisfy large-scale commercial production on a timely and cost-effective basis or that such growth will not strain our operational, financial and technical resources.

         Our business could be subject to product liability claims.

        Our business exposes us to potential product liability claims, which are inherent in the manufacturing, marketing and sale of our products, and we may face substantial liability for damages resulting from the faulty design or manufacture of products or improper use of products by end users. We currently maintain a moderate level of product liability insurance, and there can be no assurance that this insurance will provide sufficient coverage in the event of a claim. Also, we cannot predict whether we will be able to maintain such coverage on acceptable terms, if at all, or that a product liability claim would not harm our business or financial condition. In addition, negative publicity in connection with the faulty design or manufacture of our products would adversely affect our ability to market and sell our products.

         We are subject to a variety of environmental laws that expose us to potential financial liability.

        Our operations are regulated under a number of federal, state and foreign environmental and safety laws and regulations that govern, among other things, the discharge or release of hazardous materials into the air and water as well as the handling, storage and disposal of these materials. These laws and regulations include the Clean Air Act, the Clean Water Act, the Resource, Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act, as well as analogous state and foreign laws. Because we use hazardous materials in certain of our manufacturing processes, we are required to comply with these environmental laws. In addition, because we generate hazardous wastes, we, along with any other person who arranges for the disposal of our wastes, may be subject to potential financial exposure for costs associated with an investigation and remediation of sites at which we have arranged for the disposal of hazardous wastes if those sites become contaminated and even if we fully comply with applicable environmental laws. If we were found to be a responsible party, we could be held jointly and severably liable for the costs of remedial actions. To date, we have not been cited for any improper discharge or release of hazardous materials.

         Businesses and consumers might not adopt alternative energy solutions as a means for obtaining their electricity and power needs.

        On-site distributed power generation solutions, such as fuel cell, photovoltaic and wind turbine systems, which utilize our products, provide an alternative means for obtaining electricity and are relatively new methods of obtaining electrical power that businesses may not adopt at levels sufficient to grow this part of our business. Traditional electricity distribution is based on the regulated industry model whereby businesses and consumers obtain their electricity from a government regulated utility. For alternative methods of distributed power to succeed, businesses and consumers must adopt new purchasing practices and must be willing to rely upon less traditional means of purchasing electricity. We cannot assure you that businesses and consumers will choose to utilize on-site distributed power at levels sufficient to sustain our business in this area. The development of a mass market for our products may be impacted by many factors which are out of our control, including:

•

market acceptance of fuel cell, photovoltaic and wind turbine systems that incorporate our products;



•

the cost competitiveness of these systems;



•

regulatory requirements; and



•

the emergence of newer, more competitive technologies and products.

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        If a mass market fails to develop or develops more slowly than we anticipate, we may be unable to recover the losses we will have incurred to develop these products.

         Our quarterly operating results are subject to fluctuations, and if we fail to meet the expectations of securities analysts or investors, our share price may decrease significantly.

        Our annual and quarterly results may vary significantly depending on various factors, many of which are beyond our control. Because our operating expenses are based on anticipated revenue levels, our sales cycle for development work is relatively long and a high percentage of our expenses are fixed for the short term, a small variation in the timing of recognition of revenue can cause significant variations in operating results from quarter to quarter. If our earnings do not meet the expectations of securities analysts or investors, the price of our stock could decline.

         Provisions in our charter documents and Delaware law may delay, deter or prevent the acquisition of Satcon, which could decrease the value of your shares.

        Some provisions of our certificate of incorporation and bylaws may delay, deter or prevent a change in control of Satcon or a change in our management that you, as a stockholder, may consider favorable. These provisions include:

•

authorizing the issuance of "blank check" preferred stock that could be issued by our board of directors to increase the number of outstanding shares and deter a takeover attempt;



•

a board of directors with staggered, three-year terms, which may lengthen the time required to gain control of our board of directors;



•

prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; and



•

limitations on who may call special meetings of stockholders.

        In addition, Section 203 of the Delaware General Corporation Law and provisions in some of our stock incentive plans may delay, deter or prevent a change in control of Satcon. Those provisions serve to limit the circumstances in which a premium may be paid for our common stock in proposed transactions, or where a proxy contest for control of our board may be initiated. If a change of control or change in management is delayed, deterred or prevented, the market price of our common stock could suffer.

         We are subject to stringent export laws and risks inherent in international operations.

        We market and sell our products and services both inside and outside the United States. We are currently selling our products and services throughout North America and in certain countries in South America, Asia and Europe. Certain of our products are subject to the International Traffic in Arms Regulations (ITAR) 22 U.S.C 2778, which restricts the export of information and material that may be used for military or intelligence applications by a foreign person. Additionally, certain products of ours are subject to export regulations administered by the Department of Commerce, Bureau of Industry Security, which require that we obtain an export license before we can export certain products or technology. Failure to comply with these laws could result in enforcement responses by the government, including substantial monetary penalties, denial of export privileges, debarment from government contracts and possible criminal sanctions.

        Revenue from sales to our international customers for the years ended December 31, 2009, 2008 and 2007 were approximately $13.0 million, $7.9 million and $6.6 million, respectively. Our success depends, in part, on our ability to expand our market for our products and services to foreign customers and our ability to manufacture products that meet foreign regulatory and commercial

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requirements. We have limited experience developing and manufacturing our products to comply with the commercial and legal requirements of international markets. We face numerous challenges in penetrating international markets, including unforeseen changes in regulatory requirements, export restrictions, fluctuations in currency exchange rates, longer accounts receivable cycles, difficulties in managing international operations, and the challenges of complying with a wide variety of foreign laws.

         We are exposed to credit risks with respect to some of our customers .

        To the extent our customers do not advance us sufficient funds to finance our costs during the execution phase of our contracts, we are exposed to the risk that they will be unable to accept delivery or that they will be unable to make payment at the time of delivery. Occasionally, we accept the risk of dealing with thinly financed entities. In addition, the parent of one of our customers has filed for bankruptcy. To date, we have never received any orders from this customer but there can be no assurance that the bankruptcy filing will not impact the availability of credit to that customer or the submission of potential orders to us. We attempt to mitigate this risk by seeking to negotiate more timely progress payments and utilizing other risk management procedures.

         Our loan agreement with Silicon Valley Bank subjects us to various restrictions, which may limit our ability to pursue business opportunities .

        Our loan agreement with Silicon Valley Bank subjects us to various restrictions on our ability to engage in certain activities without the prior written consent of the bank, including, among other things, our ability to:

•

dispose of or encumber assets, other than in the ordinary course of business,



•

incur additional indebtedness,



•

merge or consolidate with other entities, or acquire other businesses, and



•

make investments

        The agreement also subjects us to various financial and other covenants with which we must comply on an ongoing or periodic basis. The financial covenant requires us to maintain a minimum level of tangible net worth, as defined, which varies from month to month. If we violate this or any other covenant, any outstanding debt under this agreement could become immediately due and payable, the bank could proceed against any collateral securing indebtedness and our ability to borrow funds in the future may be restricted or eliminated. These restrictions may also limit our ability to pursue business opportunities or strategies that we would otherwise consider to be in the best interests of the Company.

         The holders of our certain of our outstanding warrants have the right to put those warrants to us for cash if we issue common stock or common stock equivalents at a price per share less than $1.65 .

        As of February 28, 2010, we had outstanding Warrant As to purchase up to an aggregate of 2,005,911 shares of common stock and Warrant Cs to purchase up to an aggregate of 946,971shares of common stock. The holder of those warrants may put those warrants to us for a cash amount equal to their Black-Scholes value if we issue common stock or common stock equivalents at a price per share less than $1.65, subject to certain exceptions. These rights are exercisable for the 45-day period following any such issuance. The existence of these rights could limit our ability to raise necessary capital in the future. Furthermore, the exercise of these rights could materially impact our capital resources and materially affect our ability to fund operations.

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Risks Related to Our Private Placement of Series C Preferred Stock and Related Warrants

         The holders of our Series C Preferred Stock are entitled to receive liquidation payments in preference to the holders of our common stock.

        As of February 28, 2010, 25,000 shares of our Series C Preferred Stock were outstanding. Upon a liquidation of our company, the holders of shares of Series C Preferred Stock are entitled to receive a liquidation payment prior to the payment of any amount with respect to the shares of our common stock. The amount of this preferential liquidation payment is the greater of (i) $1,000 per share of Series C Preferred Stock, plus the amount of any accrued but unpaid dividends on those shares, or (ii) the amount per share that a holder would have received if, immediately prior to the liquidation, that holder's share had been converted to our common stock. Dividends accrue on the shares of Series C Preferred Stock at a rate of 5% per annum. Because of the substantial liquidation preference to which the holders of the Series C Preferred Stock are entitled, the amount available to be distributed to the holders of our common stock upon a liquidation of our company could be substantially limited or reduced to zero.

         We are responsible for having the resale of shares of common stock underlying the Series C Preferred Stock and related warrants registered with the SEC within defined time periods and will incur liquidated damages if the shares are not registered with the SEC within those defined time periods .

        Pursuant to our agreement with the investors in the Series C Preferred Stock financing transaction, we were obligated to (i) file a registration statement covering the resale of the common stock underlying the Series C Preferred Stock and related warrants with the SEC by the earlier of (x) five business days after we filed our 2007 Annual Report on Form 10-K and (y) April 7, 2008 (which we satisfied), (ii) use our best efforts to cause the registration statement to be declared effective within 60 days following the required filing date (which we satisfied), and are required to (iii) use our best efforts to keep the registration statement effective until the earlier of (x) the date all of the securities covered by the registration statement have been publicly sold and (y) the date all of the securities covered by the registration statement may be sold without restriction under SEC Rule 144. If we fail to comply with these or certain other provisions, then we will be required to pay liquidated damages of one twentieth of a percent (.05%) of the aggregate purchase price paid by the investors for the securities that can be registered on the registration statement for each day the failure continues. The total liquidated damages under this provision are capped at 9.9% of the aggregate purchase price paid by the investors in the private placement. Any such payments could materially affect our ability to fund operations.

         The certificate of designation governing the Series C Preferred Stock contains various covenants and restrictions which may limit our ability to operate our business .

        Under the certificate of designation governing the Series C Preferred Stock we are not permitted, without the affirmative vote or written consent of the holders of 50% of the Series C Preferred Stock, directly or indirectly, to take any of the following actions or agree to take any of the following actions:

•

authorize, create or issue any shares of preferred stock or other equity securities ranking senior to or on a parity with the Series C Preferred Stock;



•

increase or decrease the total number of authorized shares of Series C Preferred Stock;



•

amend or modify our certificate of incorporation (including the certificate of designation governing the Series C Preferred Stock) or bylaws that would adversely affect the rights, preferences, powers and privileges of the Series C Preferred Stock;



•

incur any form of indebtedness for borrowed money in excess of $5,000,000 in the aggregate (other than indebtedness existing at November 8, 2007);

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•

repurchase or redeem any equity securities ranking junior to the Series C Preferred Stock, subject to certain exceptions;



•

effect any distribution or declare, pay or set aside any dividend with respect to any equity securities ranking junior to the Series C Preferred Stock;



•

effect a liquidation, consummate a reorganization event or dispose, transfer or license any material assets, technology or intellectual property, other than non-exclusive licenses in connection with sales of our products in the ordinary course of business;



•

change the size of our board of directors;



•

encumber or grant a security interest in all or substantially all or a material part of our assets except to secure indebtedness permitted above that is approved by our board of directors;



•

acquire a material amount of assets of another entity, through a merger, purchase of assets or purchase of capital stock or otherwise; or



•

enter into any agreement to do or cause to be done any of the foregoing.

These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities, any of which could have a material adverse impact on our business.

         The holders of the Series C Preferred Stock will have substantial voting power on matters submitted to a vote of stockholders .

        Generally, the holders of Series C Preferred Stock are entitled to vote on all matters on which the holders of our common stock are entitled to vote, voting together with the holders of our common stock as a single class. Each share of Series C Preferred Stock is entitled to 694 votes. Based on 71,001,440 shares of common stock outstanding as of February 28, 2010, the outstanding shares of Series C Preferred Stock represent, in the aggregate, 19.6% of the voting power of our stock. The voting percentage held by the investors would increase to the extent the shares of Series C Preferred Stock are converted or the warrants issued in the private placement are exercised. Because the investors will own a significant percentage of our voting power, they may have considerable influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including the election of directors and approval of merger, consolidations and the sale of all or substantially all of our assets.

        In addition, the ownership by the investors of a substantial percentage of our total voting power and the terms of the Series C convertible preferred stock could make it more difficult and expensive for a third party to pursue a change of control of our company, even if a change of control would generally be beneficial to our stockholders.

         The Series C Preferred Stock is redeemable at the option of the holders under certain circumstances .

        On or after November 8, 2011, the holders of two-thirds of the outstanding shares of Series C Preferred Stock may require us to redeem all or any portion of the outstanding shares of Series C Preferred Stock. The redemption price is equal to 120% of the stated liquidation preference amount, to the extent that the redemption is made in cash, or 140% of the stated liquidation preference amount to the extent that, at our election, the redemption is made in shares of our common stock. If the redemption is made in shares of common stock, the shares will be based on the fair market value of the common stock, based on a 10 day volume weighted average, as of the redemption date. Depending on our cash resources at the time that this redemption right is exercised, we may or may not be able to fund the redemption from our available cash resources. If we were unable to fund the redemption from available cash we would need to find an alternative source of financing to do so. The can be no

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assurances that we would be able to raise such funds if they are required. If we were not able to finance the redemption in cash, we would have to make the redemption payment in shares of our common stock which would be dilutive to our common stockholders.

         The investors in our private placement of Series C Preferred Stock will have the right to designate up to four individuals to be elected to our board of directors .

        In the purchase agreement, we agreed that for as long as each investor beneficially owns at least 25% of the Series C Preferred Stock and warrants issued to them in the private placement, each investor would be entitled to designate one individual to be nominated to our board of directors. We also agreed that as long as either investor or both investors beneficially owns at least 25% of the Series C Preferred Stock and warrants issued to them in the private placement, we would include one investor designee in the corporate governance and nominating committee and one investor designee on the compensation committee of our board of directors. Upon the first closing, our board of directors elected Philip J. Deutch, as the designee of NGP Energy Technology Partners, L.P., and David J. Prend, as the designee of RockPort Capital Partners II, L.P., to serve on our board.

        Upon the second closing, as required under the purchase agreement, our board of directors was reduced from nine directors to seven directors, and the investors jointly had the right to designate one additional director who is "independent" (as that term is defined in the regulations of the Nasdaq Stock Market) to serve as a director. Accordingly, effective as of the second closing, three existing directors resigned and the board duly appointed Robert G. Schoenberger, Chairman of the Board and Chief Executive Officer of Unitil Corporation, as the investors' additional independent designee. However, in the event the size of our board of directors is increased to nine members in order to comply with Nasdaq rules, the investors will be entitled to designate an additional independent director.

        The number of investor designees will be appropriately adjusted to the extent required by the applicable rules of Nasdaq.

        Because the holders of Series C Preferred Stock will have the right to designate these members to our board of directors, as well as designees to serve on our board committees, they will be able to exert considerable influence over the board level decision-making at our company.

         The Series C Preferred Stock private placement had a substantial dilutive effect on our common stock, and subsequent anti-dilution adjustments could increase the dilutive effect .

        Consummation of the private placement had a substantial dilutive effect on our common stockholders. The aggregate number of shares issued pursuant to the private placement substantially increased the number of shares of our capital stock outstanding on an as converted basis. As a result, the percentage ownership of our common stockholders significantly declined as a result of the private placement. As a result of the private placement, the investors own approximately 46.77% of the outstanding shares of our capital stock, on an as converted basis assuming conversion of all the shares of Series C Preferred Stock and exercise of all warrants (excluding the additional warrants that may be issued from time to time upon the exercise of certain existing warrants).

        Furthermore, the anti-dilution protection provided to both the Series C Preferred stock and the warrants could substantially increase the number of shares of our common stock currently outstanding. Upon a dilutive issuance, the conversion price or exercise price will be adjusted down and the number of shares issuable upon conversion or exercise of the Series C Preferred Stock and warrants will increase. Accordingly, if any shares of our capital stock are issued below the current conversion price, there will be additional dilution.

        Finally, sales in the public market of the common stock acquired upon conversion of the Series C Preferred Stock or exercise of the warrants, or the perception that such sales could occur, could

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adversely affect the prevailing market price of our common stock and impair our ability to raise funds in additional stock financings.

Item 1B.    UNRESOLVED STAFF COMMENTS

        None.

Item 2.    PROPERTIES

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

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

Item 3.    LEGAL PROCEEDINGS

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

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None

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PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock is publicly traded on the Nasdaq Capital Market under the symbol "SATC."

        The following table sets forth the range of high and low sales prices of our common stock as reported on the Nasdaq Capital Market for our years ended December 31, 2008 and 2009:

        On March 1, 2010, the last reported sale price of our common stock as reported on the Nasdaq Capital Market was $2.45 per share. As of March 1, 2010, there were 71,001,440 shares of our common stock outstanding held by approximately 225 holders of record. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

Dividend Policy

        We have never paid cash dividends on our common stock. We currently intend to retain earnings, if any, to fund the development and growth of our business and do not anticipate paying cash dividends for the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, under the terms of our Series B Preferred Stock, we may not pay dividends on our common stock without the consent of the holders of at least 75% of the outstanding shares of Series B Preferred Stock. Furthermore, under the terms of our Series C Preferred Stock, we may not pay dividends on our common stock without the consent of the holders of at least 67% of the outstanding Series C Preferred Stock. In addition, we may not pay dividends on our common stock, unless we have paid all dividends owing on the Series B Preferred Stock and Series C Preferred Stock. Finally, under our credit facility with Silicon Valley Bank, we may not pay dividends on our common stock without the consent of the Bank.

Recent Sales of Unregistered Securities

        None

Item 6.    SELECTED CONSOLIDATED FINANCIAL DATA

        You should read the data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated financial data set forth below for the years ended December 31, 2009, 2008 and 2007, and the consolidated balance sheet data as of December 31, 2009 and 2008 are derived from our audited

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consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for the year ended December 31, 2006, the three month transition period ended December 31, 2005 and our fiscal year ended September 30, 2005 and the consolidated balance sheet data as of December 31, 2007, 2006 and 2005 and September 30, 2005 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K. All data set forth below has been adjusted to reflect the classification of our Applied Technology business unit's assets as a discontinued operation, as the sale was finalized in the first quarter of 2010, along with the sale of our Electronics and Power Systems US business units, which were finalized in the third quarter of 2008. The results of operations for the Applied Technology, the Electronics and the Power Systems US business units are captured in the line item "Loss from discontinued operations" below. See Note D (Discontinued Operations) to the Consolidated Financial Statements.

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