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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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, 2010

Commission file number 1-11512



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

DELAWARE(State or other jurisdiction of
incorporation or organization)

04-2857552(I.R.S. Employer Identification Number)27 Drydock Avenue, Boston, Massachusetts(Address of principal executive offices)

02210(Zip Code)


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

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

Title of Class

Name of Exchange on Which RegisteredCommon Stock, $.01 Par Value

The NASDAQ Stock Market, LLCPreferred Stock Purchase Rights

The NASDAQ Stock Market, LLC


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):

Large accelerated filer o

Accelerated filer ý

Non-accelerated Filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


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 $205,765,352 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 $2.86. There were 118,908,772 shares of Common Stock outstanding as of March 1, 2011.

DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrant's Proxy Statement for its 2011 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.



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Table of Contents

Satcon Technology Corporation

TABLE OF CONTENTS



PAGEPart IItem 1.

Business


3Item 1A.

Risk Factors


12Item 1B.

Unresolved Staff Comments


20Item 2.

Properties


20Item 3.

Legal Proceedings


20Item 4.

[RESERVED]


21Part IIItem 5.

Market For Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities


22Item 6.

Selected Consolidated Financial Data


24Item 7.

Management's Discussion and Analysis of Financial Condition and Results of
Operations


25Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


37Item 8.

Consolidated Financial Statements and Supplementary Data


38Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure


98Item 9A.

Controls and Procedures


98Item 9B.

Other Information


99Part IIIItem 10.

Directors, Executive Officers and Corporate Governance


99Item 11.

Executive Compensation


99Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters


99Item 13.

Certain Relationships and Related Transactions, and Director
Independence


99Item 14.

Principal Accounting Fees and Services


99Part IVItem 15.

Exhibits, Financial Statement Schedules


100Signatures


101


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Statement Regarding Forward-Looking Statements

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. Forward-looking statements include statements
regarding our position as a leading provider of power conversion solutions; our ability to create innovative products in the markets we target; the expected demand for our products in the markets we
target; our ability to address our customers' needs; our ability to execute on our growth strategy; and our ability to compete in the markets we target. 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.

PART I

Item 1.    BUSINESS

Overview

Satcon Technology Corporation ("Satcon" or "Company") is a leading clean energy technology provider of utility-grade power conversion
solutions for the renewable energy market, primarily the large-scale commercial and utility-scale solar photovoltaic, or PV, markets. We design and deliver advanced power conversion solutions that
enable large-scale producers of renewable energy to convert clean energy into grid-connected, efficient and reliable electrical power.

Our
power conversion solutions boost total system power production through system intelligence, advanced command and control capabilities, industrial-grade engineering and total
lifecycle performance optimization. Our power conversion solutions feature the widest range of power ratings in the solar industry. 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 by geographic area for the years ended December 31, 2010, 2009 and 2008 were as follows:

Year Ended December 31,2010

2009

2008United States

$
76,079,866

$
39,734,485

$
46,371,717International


97,222,107


12,801,148


7,921,617Total

$
173,301,973

$
52,535,633

$
54,293,334


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

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business
units. See Note D (Discontinued Operations) to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

Industry Background & Market Opportunity

Inverters, which are the engines of power conversion solutions, are essential components for renewable energy systems. Their primary
function is to convert direct current (DC) power into alternating current (AC) power. Advanced solar Photovoltaic ("PV") inverters are emerging as the core enabling technology platform for the growth
of large-scale distributed power systems. Through a combination of increased capacity, improved output quality and advanced control features, these more powerful, efficient and intelligent inverters
are expected to enable a stepped improvement in both the controllability and the overall performance of solar PV production and distribution. We believe they will also be critical elements in
improving the performance of future solar PV systems.

As
our industry advances, we are committed to providing leadership and developing intellectual property in both the technology and the delivery model. In terms of the technology, our
value-driving innovation expands beyond a component focus into building a better system architecture for energy harvest, connecting the panel to the grid. Solstice is our first example of this
expanded architectural approach, and we are committed to further innovation in this category. This is what we see as our place in the smart gridas a provider of solutions and systems that
deliver smarter and faster performance on the supply side of the power grid. Our vision is to enable not only better integration of intermittent renewable resources onto the grid, but also to deliver
value-added capabilities that will improve the overall performance of the grid itself. We see a future in which the inverter evolves from the electromechanical device that it is now into the digital
device of the truly intelligent smart grid network. We are committed to a total systems approach for our customers, including a full range of design services and complete lifecycle management
services. Both our design and lifecycle management services are unique in that they are fully localized in geography and specialized in function.

The
growth in large-scale solar energy plants has created strong worldwide demand for large-scale solar PV power conversion solutions, and is driving significant innovation in the
technologies that are being deployed in order to maximize system performance and grid interoperability. Industry research estimates that the global PV inverter market will grow globally at an average
annual growth rate of about 10% from 2011 through 2014, with the majority of this growth expected to come from turn-key utility-scale PV inverters of 500 kW and above, which is a core
competency for us.

The
strong growth in our market is catalyzed by the interaction of several market trends:



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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. 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 efficiency and profitability.

Our
core solutions for renewable energy consist of utility-grade inverters for solar PV a applications. Inverters convert the DC power generated by these renewable energy sources into
useable AC power. They provide the interface with the electric utility grid, an energy storage device, and end user applications. Our inverters' advanced utility-ready features enable simplified grid
interconnection and can be easily integrated into supervisory control and data acquisition, or SCADA, systems through standardized communication interfaces. Our Renewable Energy Solutions product
family includes the following:



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Revenues
by product category for the years ended December 31, 2010, 2009 and 2008 were as follows:

Year Ended December 31,(Amounts in Millions)

2010

2009

2008Product RevenueRenewable Energy Solutions

$
173.3

$
47.7

$
52.2Other Legacy





4.8


2.1Total Product Revenue

$
173.3

$
52.5

$
54.3


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, since 2009 we have viewed 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.

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Satcon Power Conversion Solution Attributes

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



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, 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 total lifecycle management. 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.

In
each core worldwide market we serve, we have a full local organization encompassing sales, inside sales, pre-sales, project management, field service, and applications
engineering. This localized

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expertise
allows us to work closely with our customers to fully understand their requirements and to rapidly respond to the tough challenges that inevitably come up with any large project, ensuring
the highest levels of customer satisfaction.

Strategy

Our growth strategy is to leverage our proven execution with industry-leading products, our advanced innovation capabilities, and our
global commercial and manufacturing footprint to increase our market share. Our focus continues to be on the following strategies:



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, range of services, customer service and technical support. We believe the following represent our
main competitors:



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Satcon
is focused on maintaining our industry-leading position as a provider of large-scale commercial and utility-scale power solutions. 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.

Significant Customers

In 2010, no sales to any one customer exceeded 10% of our annual revenue but there were 3 customers (GCL Solar Limited, Enel Green
Power S.p.A, and CE Solar, S.R.O) that were classified as significant customers in 2010 due to their gross receivables balance at December 31, 2010 exceeding 10% of our total gross accounts
receivables at December 31, 2010 (approximately 34%), and two of these customers balances were backed by irrevocable letters of credit at December 31, 2010.

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%).

Backlog

Our backlog consists primarily of orders for power control systems. At December 31, 2010, our backlog was approximately
$103 million all of which is scheduled to be shipped during 2011. Many of our contracts and sales orders may be canceled at any time with limited or no penalty.

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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 $15.7 million, $8.4 million, and $5.1 million on internally funded research and development during the years ended December 31,
2010, 2009 and 2008, respectively.

Manufacturing

We manufacture our products at our facilities located in Burlington, Ontario, Canada, Boston, Massachusetts, Fremont, California and
through our contract manufacturing partner in Asia. Our overall manufacturing process at these facilities and with our contract manufacturer has a current production capacity of approximately 1.5
gigawatts 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.

As
of December 31, 2010, we held approximately 48 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.

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Foreign Operations

We have foreign operations through our manufacturing 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 have acted as a prime contractor or major subcontractor for 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 disbarment 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.

Employees

At December 31, 2010, we had a total of 340 full-time employees, 4 part-time employees and 86 contract
employees. Of the total, 125 persons were employed in engineering, 167 in manufacturing, 44 in administration, 30 in field service and 64 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 iswww.Satcon.com.Through our web site, we make available free of charge
all of our Securities and Exchange Commission, or SEC, filings, including our annual reports on Form 10-K,

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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.

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.

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, 2010, we had
an accumulated deficit of approximately $243.5 million. During the year ended December 31, 2010 we had a loss from continuing operations of approximately $12.4 million. If 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 117,911,278 shares were issued and outstanding as of
December 31, 2010. 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 may 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 would 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.

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

As of March 1, 2011, we have reserved 28,736,061shares of common stock for issuance upon exercise of stock options and warrants
and 5,579,735 shares for future issuances under our stock plans. As of March 1, 2011, holders of warrants and options to purchase an aggregate of 21,576,253 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
recent 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 recent recession and the restricted credit
markets, certain of our customers may be unable or

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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 innovative 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 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.

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

As of March 1, 2011, we held approximately 48 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 2028, 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

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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.

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.

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.

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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 have established a contract manufacturing relationship with a Chinese supplier for certain of our inverter products.

We
have entered 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 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 continue to be successful in achieving rapid market penetration, we may be required to deliver even 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 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

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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:



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.

Reductions in government subsidies could impact revenue growth in the renewable energy markets.

Various government subsidies, including feed-in tariffs, have been a significant driver in the growth of the renewable
energy industry, with countries throughout the world providing incentives to spur adoption of renewable energy. While many countries are beginning to adopt feed-in tariffs and varying
subsidies, others are re-evaluating the level of incentive they wish to provide or have proposed reductions to their feed-in tariffs. Any reduction in such subsidies could
result in a decline in demand and price levels for renewable energy products, which could have a material adverse effect on our business, financial condition or results of operations.

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. Also, because our sales are

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primarily
made on a purchase order basis, customers may generally cancel, reduce or postpone orders without penalty, resulting in reductions to our net sales and profitability.

We may not be able to realize our deferred tax assets.

At December 31, 2010, we had approximately $60.7 million of deferred tax assets against which we have recognized
valuation allowances equal to the entire amount of such deferred tax assets. Losses for federal income tax purposes can generally be carried back two years and carried forward for a period of
20 years. In order to realize our net deferred tax assets, we must generate sufficient taxable income in such future years.

In
addition, our ability to utilize net operating losses and certain other tax attributes ("NOLs") for federal and state income tax purposes would be limited if we were to experience an
"ownership change," as determined under Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"). Generally, an "ownership change" relates to the cumulative change in
ownership among stockholders with at least a 5% ownership interest in our common stock increase their ownership by more than 50% over a rolling three-year period. If an "ownership change"
occurs, our ability to use the NOLs for income tax purposes could be limited substantially or lost altogether. This would significantly impair the value of our NOL asset and, as a result, have a
negative impact on our financial position and results of operations.

In
January 2011, our board of directors adopted a stockholder rights agreement designed to protect our ability to use the NOLs for income tax purposes. However, the adoption of the
stockholder rights agreement cannot guarantee complete protection against an "ownership change" and it remains possible that one may occur.

Provisions in our charter documents and Delaware law and our NOL-related stockholders rights agreement 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:



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
also have a stockholder rights plan designed to protect our ability to use our NOLs for federal and state income tax purposes. In general terms, the rights plan is intended to act as
a deterrent to any person or group that acquires 4.99% or more of our common stock without approval of our board of directors by allowing other stockholders to acquire our equity securities at half of
their fair value. The

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ownership
limitations in the rights plan may have the effect of inhibiting or impeding a change in control.

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, 2010, 2009 and 2008 were approximately $97.2 million, $13.0 million and
$7.9 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 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. 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:



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 certain
operating results net of capital expenditures, which varies from quarter to quarter. 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

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pursue
business opportunities or strategies that we would otherwise consider to be in the best interests of the Company.

Our subordinated debt agreement subjects us to various restrictions, which may limit our ability to pursue business opportunities.

In June 2010, we entered into a subordinated loan agreement with Compass Horizon Funding Company LLC under which we incurred
$12.0 million of indebtedness. The loan agreement subjects us to various restrictions on our ability to engage in certain activities without the prior written consent of the lender, including,
among other things, our ability to dispose of or encumber certain assets, incur additional indebtedness, merge or consolidate with other entities, or make investments. As of December 31, 2010,
$12 million remained outstanding. Beginning in March 2011 we are obligated to begin repaying the principal amount of the loan. Our ability to meet our debt obligations will depend upon future
performance, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control.

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 March 1, 2011, we had outstanding Warrant As to purchase up to an aggregate of 556,061 shares of common stock and Warrant Cs to purchase up to an
aggregate of 348,485shares 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.

We are responsible for maintaining the registration of the resale of shares of common stock issued upon conversion of our Series C Preferred Stock and related
warrants with the SEC and will incur liquidated damages if we do not meet fulfill this obligation.

Pursuant
to our agreement with the investors in the Series C Preferred Stock financing transaction, we were obligated to file a registration
statement covering the resale of the common stock underlying the Series C Preferred Stock and related warrants with the SEC and cause the registration statement to be declared effective, which
we completed. We are further obligated to use our best efforts to keep the registration statement effective until the earlier of (i) the date all of the securities covered by the registration
statement have been publicly sold and (ii) 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.

As a result of the conversion of the Series C Preferred Stock, the former holders continue to have substantial voting power on matters submitted to our stockholders
and to be able to exert considerable influence over the board level decision-making at our company.

As a result of the conversion of the Series C Preferred Stock on October 27, 2010, the former holders of the
Series C Preferred Stock hold approximately 23% of our outstanding common stock. In addition, such holders own warrants to acquire approximately 13,414,272 shares of our common stock. Because
these holders continue to own a significant percentage of our voting power, they have

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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, these holders continue to be entitled to designate members of our board of directors and designees to serve on our
board committees, enabling them to exert considerable influence over the board level decision-making at our company.

Item 1B.    UNRESOLVED STAFF COMMENTS

None.

Item 2.    PROPERTIES

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

Location

Primary Use

Approximate
Number of
Square Feet

Expiration
of LeaseBoston, MA

Corporate headquarters and research and development


28,000


2011Boston, MA

Research and development and manufacturing


20,000


2016Fremont, CA

Sales and marketing


20,000


2016Burlington, Ontario, Canada

Manufacturing


60,000


2011Prague, Czech Republic

Sales and marketing


5,000


2014Shenzhen, China

Sales and marketing


8,000


2013Shanghai, China

Sales and marketing


5,000


2014


We
believe our facilities are adequate for our current needs and that adequate facilities for expansion, if required, are available. The lease on our corporate headquarters and our
Canadian manufacturing facility expire in 2011; we have entered into a new lease for our corporates that expires in 2016 and we are in the process of extending the Canadian facility lease.

Item 3.    LEGAL PROCEEDINGS

In the normal course of our business, we are party to various claims and suits pending for alleged damages to persons and property,
alleged violations of certain laws and alleged liabilities arising out of matters occurring during the normal operation of our business.

We
accrue for legal proceedings when losses become probable and reasonably estimable. As of the end of each applicable reporting period, we review each of our legal proceedings to
determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably possible, whether a range of loss can be reasonably estimated. In
instances where we determine that a loss is probable and we can reasonably estimate a range of losses we may incur with respect to such a matter, we record an accrual for the amount within the range
that constitutes our best estimate of the possible loss. If we are able to reasonably estimate a range but no amount within the range appears to be a better estimate than any other, we record an
accrual in the amount that is the low end of such range. When a loss is reasonably possible but not probable we will not record an accrual but we will disclose our estimate of the possible range of
loss where such estimate can be made. As of December 31, 2010, there were no accruals established related to our outstanding legal proceedings.

We
offer no prediction of the outcome of any of the proceedings or negotiations described below. We are vigorously defending each of these lawsuits and claims. However, there can be no
guarantee we

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will
prevail or that any judgments against us, if sustained on appeal, will not have a material adverse effect on our business, financial condition, results of operations or cash flows.

On
February 17, 2011, FuelCell Energy, Inc. ("FuelCell Energy") filed a Demand for Arbitration with the American Arbitration Association seeking recovery of damages related
to allegedly defective transformers that we procured for them. In its Demand for Arbitration, FuelCell Energy asserts that it is entitled to recovery of approximately $2.8 million from us. We
vigorously deny the allegation that the transformers were defective, and have filed a counterclaim seeking recovery of amounts due to us from FuelCell Energy for materials and engineering services
that we supplied to them totaling approximately $1.4 million. This matter is at the early stages of discovery, and we have not yet determined whether it is probable, reasonably possible or
remote that we have incurred a liability.

Item 4.    [RESERVED]

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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, 2009 and 2010:

High

LowYear ended December 31, 2009First Quarter

$
1.88

$
1.10Second Quarter

$
2.43

$
1.64Third Quarter

$
2.27

$
1.69Fourth Quarter

$
2.82

$
1.86Year ended December 31, 2010First Quarter

$
2.86

$
2.20Second Quarter

$
3.08

$
2.25Third Quarter

$
3.84

$
2.72Fourth Quarter

$
4.74

$
3.40


On
March 1, 2011, the last reported sale price of our common stock as reported on the Nasdaq Capital Market was $3.26 per share. As of March 1, 2011, there were 118,908,772
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.. 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

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Comparative Stock Performance Graph

The comparative stock performance graph below compares the cumulative total stockholder return (assuming reinvestment of cash
dividends, if any) from investing $100 on December 31, 2005, and plotted at the end of the last trading day of each fiscal year, in each of (i) the Corporation's Common Stock;
(ii) the Nasdaq National Market Index of U.S. Companies (the "Nasdaq Market Index"); and (iii) a peer group index of five companies that provide similar services to those of the
Corporation (Advanced Energy Industries, Inc, Power-One, Inc., Schneider Electric, SA, Siemens AG, and SMA Solar Technologies AG,) (the "Peer Group Index")).

COMPARISON OF CUMULATIVE TOTAL RETURN*Among SatCon Technology Corporation, the NASDAQ Composite Index  and a Peer Group

GRAPHIC

---

Period EndingCompany/Market/Peer Group

12/31/2005

12/31/2006

12/31/2007

12/31/2008

12/31/2009

12/31/2010SatCon Technology Corporation

$
100.00

$
76.00

$
110.00

$
103.33

$
188.00

$
300.00NASDAQ Composite

$
100.00

$
110.25

$
121.88

$
73.10

$
106.22

$
125.36Peer Group

$
100.00

$
117.43

$
188.73

$
94.32

$
128.13

$
172.54


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Table of Contents

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, 2010, 2009 and 2008, and the consolidated balance sheet data as of December 31, 2010 and 2009 are derived from our audited
consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for the year ended
December 31, 2006 and 2007 and the consolidated balance sheet data as of December 31, 2007 and 2006 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 included in this annual report.

Year Ended December 31,2010

2009

2008

2007

2006Statement of Operations DataProduct revenue

$
173,302

$
52,536

$
54,293

$
33,033

$
14,164Cost of product revenue


129,360


49,334


45,818


33,456


13,545Gross margin


43,942


3,202


8,475


(423
)

619Operating expenses:Research and development


15,656


8,411


5,061


2,256


611Selling, general and administrative


34,564


18,169


14,575


7,980


8,129Restructuring charges


784


261


1,307





1,419Gain on sale of assets














(406
)Write-off of impaired long-lived assets














(1,612
)Total operating expenses from continuing operations


51,004


26,841


20,944


10,236


8,141Operating loss


(7,062
)

(23,640
)

(12,468
)

(10,660
)

(7,522
)Change in Fair Value of Notes and Warrants


(3,162
)

(5,722
)

265


(2,252
)

(4,192
)Other income (expense)


(659
)

(287
)

707


(546
)

35Interest income


1


9


216


280


384Interest expense


(1,468
)

(324
)

(329
)

(3,788
)

(1,493
)Net loss from continuing operations


(12,351
)

(29,964
)

(11,610
)

(16,965
)

(12,788
)Income (loss) from discontinued operations, net


31


92


(1,869
)

(801
)

(6,990
)Gain on sale of discontinued operations, net


500





274





Net loss


(11,819
)

(29,872
)

(13,205
)

(17,766
)

(19,778
)Deemed dividend and accretion on Series C preferred stock and warrants


(7,623
)

(3,777
)

(2,849
)




Dividend on Series C Preferred Stockholders


(1,027
)

(1,396
)

(1,376
)

(12,048
)

Net loss attributable to common stockholders

$
(20,469
)
$
(35,045
)
$
(17,429
)
$
(29,814
)
$
(19,778
)Net loss attributable to common stockholders per weighted average share, basic and diluted

$
(0.25
)
$
(0.57
)
$
(0.34
)
$
(0.66
)
$
(0.50
)Weighted average number of common shares, basic and diluted


82,210


61,727


50,685


45,434


39,290




Year Ended December 31,2010

2009

2008

2007

2006(in thousands)Balance Sheet DataCash and cash equivalents, including restricted cash and cash equivalents

$
30,094

$
13,403

$
10,042

$
12,700

$
8,275Total assets


156,063


48,692


36,897


46,609


30,577Working capital


69,268


14,530


12,005


19,616


6,007Redeemable convertible Series B preferred stock





375


1,450


1,700


1,725Redeemable convertible Series C preferred stock





22,257


17,249


13,276


Convertible subordinated debentures














12,740Notes payable


11,166











Investor warrant and placement agent warrant liability


5,454


4,977


2,407


3,244


2,921Other long-term liabilities, net of current portion


11,941


5,812


2,571


1,679


108Stockholders' equity (deficit)


47,991


(14,033
)

(9,185
)

4,363


(2,468
)


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Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Information

This Annual Report on Form 10-K, including, without limitation, this Item 7, 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. Although we believe that these forward-looking statements reasonably reflect our plans, intentions and expectations, 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
above 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.

Overview

Satcon Technology Corporation ("Satcon" or "Company") is a leading clean energy technology provider of utility-grade power conversion
solutions for the renewable energy market. We design and deliver advanced power conversion solutions that enable large-scale producers of renewable energy to convert clean energy into
grid-connected, efficient and reliable electrical power.

Our
power conversion solutions boost total system power production through systems intelligence, advanced command and control capabilities, industrial-grade engineering and total
lifecycle performance optimization. Our power conversion solutions feature the widest range of power ratings in the industry. 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

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of our operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires
management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported revenue and expenses during the reporting periods. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition,
receivable reserves, inventory reserves, intangible assets, contract losses, warranty reserves and income taxes. Management bases its estimates on historical experience and on various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting estimates were discussed with our Audit Committee.

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The
significant accounting policies that management believes are most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue Recognition

We recognize revenue from product sales when there is persuasive evidence of an arrangement, the fee is fixed or determinable, delivery
of the product to the customer has occurred and we have determined that collection of the fee is probable. Title to the product passes upon shipment of the product, as the products are typically
shipped FOB shipping point, except for certain foreign shipments. If the product requires installation to be performed by us, all revenue related to the product is deferred and recognized upon the
completion of the installation. If the product requires specific customer acceptance, revenue is deferred until customer acceptance occurs or the acceptance provisions lapse, unless we can objectively
and reliably demonstrate that the criteria specified in the acceptance provisions are satisfied. When appropriate, we provide for a warranty reserve at the time the product revenue is recognized. If a
contract involves the provision of multiple elements and the elements qualify for separation, total estimated contract revenue is allocated to each element based on the relative fair value of each
element provided. The amount of revenue allocated to each element is limited to the amount that is not contingent upon the delivery of another element in the future. Revenue is recognized on each
element as described above.

On
occasion we enter into fixed-price contracts for which; revenue is generally recognized on the percentage of completion method based upon the proportion of costs incurred to the total
estimated costs for the contract. Revenue from reimbursement contracts is recognized as services are performed. In each type of contract, we receive periodic progress payments or payment upon reaching
interim milestones and retain the rights to the intellectual property developed in government contracts. All payments to us for work performed on contracts with agencies of the U.S. government are
subject to audit and adjustment by the Defense Contract Audit Agency. Adjustments are recognized in the period made. When the current estimates of total contract revenue and contract costs for product
development contracts indicate a loss, a provision for the entire loss on the contract is recorded. For the years ended December 31, 2010 and 2009 there have been no provisions for anticipated
contract losses on commercial contracts. We expect revenue from the percentage of completion type contracts or from cost reimbursement contracts in future periods to be nominal.

Cost
of product revenue includes material, labor and overhead.

Deferred
revenue consists of payments received from customers in advance of services performed, product shipped or installation completed. When an item is deferred for revenue
recognition purposes, the deferred revenue is recorded as a liability and the deferred costs are recorded as a component of inventory in our consolidated balance sheets. Deferred revenue also consists
of cash received for extended product warranties.

Unbilled
contract costs and fees represent revenue recognized in excess of amounts billed due to contractual provisions or deferred costs that have not yet been recognized as revenue or
billed to the customer.

Accounts Receivable

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The estimated allowance for
uncollectible amounts is based primarily on a specific analysis of accounts in the receivable portfolio and historical write-off experience. While management believes the allowance to be
adequate, if the financial condition of our customers were to deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required.

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Inventory

We value our inventory at the lower of actual cost to purchase and/or manufacture the inventory or the current estimated market value
of the inventory, and costs are determined based on the first-in, first-out method of accounting and include material, labor and manufacturing overhead costs. We periodically
review inventory quantities on hand and record a provision for excess and/or obsolete inventory within cost of product revenue based primarily on our historical usage, as well as based on estimated
forecast of product demand. A significant decrease in demand for our products could result in a short-term increase in the cost of inventory purchases and an increase of excess inventory
quantities on hand. In addition, our industry is characterized by rapid technological change, frequent new product development, and rapid product obsolescence that could result in an increase in the
amount of obsolete inventory quantities on hand. Therefore, although we make every effort to ensure the accuracy of our forecasts of future
product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results.

Warranty

We offer warranty coverage for our products for period of 5 years after shipment. We estimate the anticipated costs of repairing
products under warranty based on the historical or expected cost of the repairs and expected failure rates. The assumptions used to estimate warranty accruals are re-evaluated quarterly,
at a minimum, in light of actual experience and, when appropriate, the accruals or the accrual percentage is adjusted based on specific estimates of project repair costs and quantity of product
returns. Our determination of the appropriate level of warranty accrual is based on estimates of the percentage of units affected and the repair costs. Estimated warranty costs are recorded at the
time of sale of the related product, and are recorded within cost of sales in the consolidated statements of operations.

Warrant Liabilities

We determined the fair values of the investor warrants and placement agent warrants using valuation models we consider to be
appropriate. Our stock price has the most significant influence on the fair value of the warrants. An increase in our common stock price would cause the fair values of warrants to increase, because
the exercise prices of such instruments are fixed at $1.815 per share, and result in a charge to our statement of operations. A decrease in our stock price would likewise cause the fair value of the
warrants to decrease and result in a credit to our statement of operations.

Income Taxes

The preparation of our consolidated financial statements requires us to estimate our income taxes in each of the jurisdictions in which
we operate, including those outside the United States, which may be subject to certain risks that ordinarily would not be expected in the United States. The income tax accounting process involves
estimating our actual current exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These
differences result in the recognition of deferred tax assets and liabilities. We must then record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to
be realized.

Significant
management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against deferred
tax assets. We have recorded a full valuation allowance against our deferred tax assets of approximately $59.8 million as of December 31, 2010, due to uncertainties related to our
ability to utilize these assets. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate

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and
the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods we may need to adjust
our valuation allowance which could materially impact our financial position and results of operations.

We
account for income taxes utilizing the asset and liability method for accounting and reporting for income taxes. Under this method, deferred tax assets and deferred tax liabilities
are recognized based on temporary differences between the financial reporting and income tax basis of assets and liabilities using statutory rates. In addition, we are required to establish a
valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The
tax years 1996 through 2010 remain open to examination by major taxing jurisdictions to which we are subject, which are primarily in the United States, as carry forward attributes
generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they are or will be used in a future period. We are currently not under
examination by the Internal Revenue Service or any other jurisdiction for any tax years. We did not recognize any interest and penalties associated with unrecognized tax benefits in the accompanying
financial statements. We would record any such interest and penalties as a component of interest expense. We do not expect any material changes to the unrecognized benefits within 12 months of
the reporting date.

Redeemable Convertible Series B Preferred Stock

We initially accounted for our Series B Preferred Stock and associated warrants by allocating the proceeds received net of
transaction costs based on the relative fair value of the redeemable convertible Series B Preferred Stock and the warrants issued to the investors, and then to any beneficial conversion rights
contained in the convertible redeemable preferred securities. We determined the initial value of the Series B Preferred Stock and investor warrants using valuation models we consider to be
appropriate. Prior to its conversion in October 2010, the Series B Preferred Stock had been classified within the liability section of our balance sheet.

Redeemable Convertible Series C Preferred Stock

Prior to the conversion of all the outstanding shares of the Series C Preferred Stock in October 2010, we initially accounted
for the issuance of our Series C Preferred Stock and associated warrants by allocating the proceeds received net of transaction costs based on the relative fair value of the redeemable
convertible Series C Preferred Stock and the warrants issued to the investors, and then to any beneficial conversion rights contained in the convertible redeemable preferred securities and
classifying the Series C Preferred Stock as temporary equity on the balance sheet between the captions for liabilities and permanent shareholder's equity. We determined the initial value of the
Series C Preferred Stock and investor warrants using valuation models we consider to be appropriate.

The
re-pricing of the exercise price of the warrants issued in the first closing of the Series C Preferred Stock financing from $1.44 to $1.25, as described in
Note I to our Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K, was treated as a cancellation of the original warrants issued on
November 8, 2007 and a re-issuance or new warrants on December 21, 2007. The difference in fair value of the warrant was included in the allocation of net proceeds associated
with the second closing of the Series C Preferred Stock on December 21, 2007. We treated this as a deemed dividend on the Series C Preferred Stock. As of December 31, 2007
we recorded $11,947,881 as a deemed dividend to the holders of the Series C Preferred Stock, which included the beneficial conversion feature of $11,762,887 and $184,994 related to the
accretion of the Series C Preferred Stock to its redemption value through the date that the holders of the Series C Preferred Stock may first exercise their redemption right. Prior to
the conversion of the Series C Preferred Stock in October 2010, we were using the effective interest method to accrete the carrying value of the

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Series C
Preferred stock through November 8, 2011, at which time the value of the Series C Preferred Stock would have been $30.0 million, 120% of its face value.

Recent Accounting Pronouncements

See Note U of our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for
information regarding recently issued accounting pronouncements.

Results of Operations

All data set forth below have been adjusted to reflect the sale of our Electronics, Power Systems US, and Applied Technology business
units. The results of these were captured in "Loss from discontinued operations." See Note D (Discontinued Operations) to the Consolidated Financial Statements included in this Annual Report on
Form 10-K.

Year Ended December 31, 2010 ("2010") Compared to the Year Ended December 31, 2009 ("2009").

Revenue.Total Company revenue increased $120.8 million, or 230%, from $52.5 million in 2009 to $173.3 million in 2010.

Year Ended
December 31,(Amounts in Millions)

2010

2009

Change $

% ChangeProduct RevenueRenewable Energy Solutions

$
173.3

$
47.7

$
125.6


263
%Other Legacy





4.8


(4.8
)

(100
)%Total Revenue

$
173.3

$
52.5

$
120.8


230
%


Renewable
Energy Solutions revenue increased by $125.6 million, or 263%, from $47.7 million in 2009 to $173.3 million in 2010. This increase was due to the broad
market acceptance of our products domestically and overseas. This increase was partially offset by a decrease in our legacy power products offerings of $4.8 million, or 100%, due to the
recognition of revenue on previously delivered legacy products in the early part of 2009.

Gross Margin.Total Company gross margin increased from 6.1% in 2009 to 25.4% in 2010 due to
increased volumes during the period, lower material costs on many of our core products, as compared to prior years and the continued expansion of our manufacturing capacity and international supply
chain. In addition we continue to see continuous improvements in our labor efficiency across our manufacturing facilities. In addition, approximately $4.2 million of deferred frequency
converter revenues recognized during 2009 had no gross margin as the amount recognized as revenue equaled the related costs recognized for the period.

Research and development expenses.We expended approximately $15.7 million on research and development in 2010 compared with
$8.4 million spent in 2009. The increase in spending during 2010 was driven by a planned increase in costs associated with certification of our new products and continued new product
development, including increases in our technical staffing. These additional resources are developing the new products, features and customer solutions which we believe will allow us to take advantage
of both short-term and long-term market opportunities. This investment in research and development is critical to both our current and future success and we anticipate
continued investment in this area.

Selling, general and administrative expenses.Selling, general and administrative expenses increased by approximately $16.4 million
from
$18.2 million in 2009 to $34.6 million in 2010. Approximately

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$11.3 million
of the increase was due to the higher sales and marketing costs related to international business development expansion into Europe and Asia, company re-branding and
our increased marketing efforts in 2010 compared to 2009. Approximately $4.3 million of the increase was due to higher corporate costs. Approximately $0.8 million of the increase is
directly attributable to compensation costs related to the issuance of stock options to our employees and directors.

Restructuring costs.In August 2009, we eliminated certain positions within our operations and sales organizations in accordance with a
plan of
reorganization approved by the Board of Directors. As a result of the 2009 restructuring we recorded approximately $0.3 million in payroll and related costs for 2009. During 2010, in accordance
with the plan of reorganization approved by the Board of Directors, we recorded approximately $0.8 million in payroll and related costs for 2010. As of December 31, 2010 and 2009
approximately $49,000 and $38,000, respectively, remained to be paid to the terminated employees. None of the terminated employees were required to provide any services subsequent to their receiving
notification.

Change in fair value of warrant liabilities.The change in fair value of the warrants for 2010 was a charge of approximately
$3.2 million and
was related solely to the change in valuation of our Warrant As, Warrant Cs and placement agent warrants. The change in fair value of the warrants for 2009 was a charge of approximately
$5.7 million. In 2009, approximately $2.5 million related to the change in valuation of our Warrant As, Warrant Cs and placement agent warrants, and the remaining $3.2 million
charge related to our Series C Preferred Stock warrants and their change in fair value which was due to our adoption of ASC 815-40-15 during the period. As a result of
this adoption, warrants to purchase 19,799,023 shares of our common stock, originally classified as equity, were reclassified to warrant liabilities and were required to be fair valued moving forward.
In July 2009 warrants to purchase 19,799,023 shares of our common stock were modified resulting in these warrants being classified as equity and therefore not requiring any fair value adjustments in
the future. See Note C.Significant Accounting Policies and Basis of PresentationWarrant Liabilitiesfor a description of the
modifications made to such warrants. The most significant factor that contributes to the change in fair value of the warrants is our stock price (See
Note GWarrant Liabilities).

Other Income (expense).Other expense was approximately $0.7 million for 2010 compared to other expense of approximately
$0.3 million
for 2009. Other expense for 2010 consisted primarily of approximately $0.6 million related to foreign exchange impact of operations and translation of inter-company balances and approximately
$0.1 million related to the other expenses not related to ongoing operations. Other expense for 2009 consists primarily of approximately $0.5 million related to the issuance of warrants
to purchase 380,000 shares of common stock to holders of our Series C Preferred Stock for modifying the anti-dilution provisions of their existing warrants along with
$0.1 million in fees and other expenses not related to ongoing operations, offset by approximately $0.5 million related to foreign exchange impact of operations and translation of
inter-company balances.

Interest income.Interest income was approximately $0 million in 2010 and 2009.

Interest expense.Interest expense for 2010 was approximately $1.5 million, which is comprised primarily of the
following:



In
2009 interest expense was approximately $0.3 million and was comprised of the following:



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Income (loss) from discontinued operations.Income (loss) from discontinued operations represents the results of operations of our
Applied
Technology, Power Systems US and Electronics divisions. Our Applied Technology division was sold in January 2010 and our Electronics and Power Systems US divisions were sold during the third quarter
of 2008. The income from discontinued operations for 2010 was approximately $30,000 and for 2009 was approximately $0.1 million. See Note D "Discontinued Operations" of our Consolidated
Financial Statements included in this Annual Report on Form 10-K for more information related to the sale of these divisions.

Gain on sale of discontinued operations.As a result of the sale of our Applied Technology division in 2010, we recorded a gain of
approximately
$0.5 million. See Note D "Discontinued Operations" of our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information related to
the sale of the Applied Technology division and the composition of the net gain calculated.

Deferred Revenue.Total deferred revenue was $19.7 million at December 31, 2010, comprised of $8.1 million of current
deferred
revenue and $11.6 million of long-term deferred revenue, an increase of $13.7 million from the $6.0 million balance at December 31, 2009. We record deferred
revenue (i) when a customer pays in advance or (ii) when provisions for revenue recognition on items shipped have not been achieved or the items have not yet been received by the
customer due to shipping terms such as FOB destination. When an item is deferred for revenue recognition purposes, the deferred revenue is recorded as a liability and the deferred costs are recorded
as a component of inventory in our consolidated balance sheets. Deferred revenue also consists of cash received for extended product warranties. Currently deferred revenue is composed of approximately
$8.1 million related to pre-payments on orders currently being manufactured and $11.6 million on deferred revenue related to extended warranties sold to customers that
purchased our products.

Year Ended December 31, 2009 ("2009") Compared to the Year Ended December 31, 2008 ("2008").

Revenue.Total Company revenue decreased $1.8 million, or 3%, from $54.3 million in 2008 to $52.5 million in 2009.

Year Ended
December 31,(Amounts in Millions)

2009

2008

Change $

% ChangeProduct RevenueRenewable Energy Solutions

$
47.7

$
52.2

$
(4.5
)

(9
)%Other Legacy


4.8


2.1


2.7


129
%Total Revenue

$
52.5

$
54.3

$
(1.8
)

(3
)%


Renewable
Energy Solutions revenue decreased by $4.5 million, or 9%, from $52.2 million in 2008 to $47.7 million in 2009. This decrease was driven by the challenging
macroeconomic market conditions and tough credit markets which affect our customers' ability to fund large scale renewable energy projects. This decrease was partially offset by an increase in our
legacy power products offerings of $2.7 million, or 129%, due to the recognition of revenue on previously delivered legacy products in the early part of 2009. We expect legacy product revenue
to decline as we continue to focus efforts on our renewable energy solutions.

Gross Margin.Total Company gross margin decreased from 15.6% in 2008 to 6.1% in 2009 due to lower volumes during the period and
transition costs
associated with expanding our manufacturing and supply chain internationally while maintaining existing capacity in North America. This global capacity

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expansion
and low cost supply chain are crucial to our long term competitiveness, and were partially offset by material cost reductions and labor efficiency improvements in both factories. In
addition, the $4.2 million of deferred frequency converter revenues recognized during 2009 had no gross margin as the amount recognized as revenue equaled the related costs recognized for the
period.

Research and development expenses.We expended approximately $8.4 million on research and development in 2009 compared with
$5.1 million spent in 2008. The increase in spending during 2009 was driven by a planned increase in costs associated with certification of our new products and continued new product
development, including increases in our technical staffing. These additional resources are developing the new products, features and customer solutions which we believe will allow us to take advantage
of both short-term and long-term market opportunities. This investment in research and development is critical to both our current and future success and we anticipate this
level of investment to continue.

Selling, general and administrative expenses.Selling, general and administrative expenses increased by approximately $3.6 million
from
$14.6 million in 2008 to $18.2 million in 2009. Approximately $0.9 million of the increase is directly attributable to compensation costs related to the issuance of stock options
to our employees and directors charged to operations. Approximately $3.3 million of the increase was due to the higher sales and marketing costs related to international business development
expansion into Europe and Asia, company re-branding and our increased outbound marketing efforts in 2009 compared to 2008. This was partially offset by a $0.6 million decrease in
general corporate costs.

Restructuring costs.In August 2009, we eliminated certain positions within our operations and sales organizations in accordance with a
plan of
reorganization approved by the Board of Directors. As a result of the 2009 restructuring we recorded approximately $0.3 million in payroll and related costs for 2009. As of December 31,
2009 approximately $38,000 remained to be paid to the terminated employees. None of the terminated employees were required to provide any services subsequent to their receiving notification.

In
2008, we initiated and completed the sale of the Electronics and Power Systems US operating divisions and formalized the release of personnel. As a result of these changes and the
sale of the divisions in 2008, we accrued approximately $0.5 million in salary-related costs, costs associated with the modification of existing options held by certain of the severed employees
and relocation costs. Other costs associated with the restructuring that are related to the Electronics and Power Systems US divisions were recorded in their respective divisions and are included in
the loss from discontinued operations for the periods presented, as discussed below, in loss from discontinued operations.

Change in fair value of warrant liabilities.The change in fair value of the warrants for 2009 was a charge of approximately
$5.7 million.
Approximately $2.5 million related to the change in valuation of our Warrant As, Warrant Cs and placement agent warrants. The remaining $3.2 million charge related to our Series C
Preferred Stock warrants and their change in fair value which was due to our adoption of ASC 815-40-15 during the period. As a result of this adoption, warrants to purchase
19,799,023 shares of our common stock, originally classified as equity, were reclassified to warrant liabilities and were required to be fair valued moving forward. The change in fair value of the
warrants for 2008 was a credit of approximately $0.3 million related solely to the Warrant As and Warrant Cs. In July 2009 warrants to purchase 19,799,023 shares of our common stock were
modified resulting in these warrants being classified as equity and therefore not requiring any fair value adjustments in the future. See Note C.Significant Accounting
Policies and Basis of PresentationWarrant Liabilitiesfor a description of the modifications made to such warrants. The most significant factor that contributes to
the change in fair value of the warrants is our stock price (See Note GWarrant Liabilities).

Other Income (expense).Other expense was approximately $0.3 million for 2009 compared to other income of approximately
$0.7 million
for 2008. Other expense for 2009 consists primarily of

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approximately
$0.5 million related to the issuance of warrants to purchase 380,000 shares of common stock to holders of our Series C Preferred Stock for modifying the
anti-dilution provisions of their existing warrants along with $0.1 million in fees paid related to consulting services for the valuation of our warrant instruments as well as other
expenses not related to ongoing operations, offset by approximately $0.5 million related to foreign exchange impact of operations and translation of inter-company balances. Other income, net
for 2008 consists primarily of approximately $0.7 million related to foreign exchange impact of operations and translation of inter-company balances.

Interest income.Interest income decreased from approximately $0.2 million in 2008 to approximately $0 in 2009. The decrease is
directly
attributable to our cash on hand and interest rates.

Interest expense.Interest expense for 2009 was approximately $0.3 million, which is comprised primarily of the
following:



In
2008 interest expense was approximately $0.3 million and was comprised of the following:



Income (loss) from discontinued operations.Loss from discontinued operations represents the results of operations of our Applied
Technology, Power
Systems US and Electronics divisions. Our Applied Technology division was sold in January 2010 and our Electronics and Power Systems US divisions were sold during the third quarter of 2008. The income
from discontinued operations for 2009 was approximately $0.1 million as compared to a loss from discontinued operations of approximately $1.9 million in 2008. See Note D
"Discontinued Operations" of our Consolidated Financial Statements included in this Annual Report on Form 10-K for more information related to the sale of these divisions.

Gain on sale of discontinued operations.As a result of the sale of the Power Systems US and Electronics divisions in 2008, we recorded
income of
approximately $0.3 million. See Note D "Discontinued Operations" for more information related to the sale of these divisions and the composition of the net gain calculated for each
division. The gain on the sale of our Applied Technology division will be recorded during our first quarter ended March 31, 2010.

Deferred Revenue.Total deferred revenue was $6.0 million at December 31, 2009, comprised of $0.5 million of current
deferred
revenue and $5.5 million of long-term deferred revenue, a decrease of $0.7 million from the $6.7 million balance at December 31, 2008. We record deferred
revenue (i) when a customer pays in advance or (ii) when provisions for revenue recognition on items shipped have not been achieved or the items have not yet been received by the
customer due to shipping terms such as FOB destination. When an item is deferred for revenue recognition purposes, the deferred revenue is recorded as a liability and the deferred costs are recorded
as a component of inventory in our consolidated balance sheets. Deferred revenue also consists of cash received for extended product warranties. Currently deferred revenue is composed of approximately
$6.0 million, $0.4 million related to pre-payments on orders currently being manufactured and $5.6 million on deferred revenue related to extended warranties sold to
customers that purchased our products.

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Table of Contents

Quarterly Results of Operations (Unaudited)

The following table presents unaudited quarterly statement of operations data for the eight quarters ended December 31, 2010.
This data has been prepared on a basis consistent with our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This data includes all
adjustments, consisting solely of normal recurring adjustments, which we believe necessary for a fair presentation of this information. The operating results for any quarter are not necessarily
indicative of results to be expected for any future period. In addition, all data set forth below has been adjusted to reflect the sale of our Applied Technology business unit in January 2010. The
results of operations for the Applied Technology are captured in the line item "Loss from discontinued operations" below. See Note D (Discontinued Operations) to the Consolidated Financial
Statements included in this Annual Report on Form 10-K.

CONSOLIDATED
Three Months EndedDec. 31,
2010

Sept. 30,
2010

June 30,
2010

Mar. 31,
2010

Dec. 31,
2009

Oct. 3,
2009

July 4,
2009

April 4,
2009(in thousands, except per share data)Statement of Operations DataProduct revenue

$
72,560

$
58,382

$
27,627

$
14,732

$
21,487

$
10,041

$
7,628

$
13,380Cost of product revenue


52,093


42,678


21,890


12,699


18,648


10,466


7,935


12,285Gross margin (loss)


20,467


15,704


5,737


2,033


2,840


(425
)

(308
)
$
1,095Operating expenses:Research and development


5,893


4,320


2,711


2,732


2,108


2,188


2,244


1,871Selling, general and administrative


11,024


9,677


8,282


5,580


4,791


4,612


4,418


4,348Restructuring charges











784


49


211





Total operating expenses from continuing operations


16,917


13,998


10,994


9,095


6,949


7,010


6,662

$
6,220Operating income (loss)


3,550


1,706


(5,256
)

(7,062
)

(4,109
)

(7,436
)

(6,970
)
$
(5,125
)Change in fair value of notes and warrants


(2,124
)

(1,269
)

(858
)

1,089


(1,822
)

(305
)

1,776


(5,370
)Other income (expense)


(680
)

340


(251
)

(68
)

(45
)

384


(487
)

(139
)Interest income


1














3


2


4Interest expense


(550
)

(628
)

(226
)

(63
)

(65
)

(39
)

(138
)

(82
)Net income (loss) from continuing operations


196


149


(6,591
)

(6,104
)

(6,042
)

(7,393
)

(5,816
)
$
(10,713
)Income (loss) from discontinued operations, net











31


15


135


(17
)

(42
)Gain on sale of discontinued operations, net











500











Net income (loss)


196


149


(6,591
)

(5,573
)

(6,027
)

(7,257
)

(5,833
)
$
(10,754
)Deemed dividend and accretion on Series C preferred stock to redemption value


(3,282
)

(1,429
)

(1,596
)

(1,317
)

(1,235
)

(978
)

(888
)

(821
)Dividend on Series C preferred stock


(92
)

(315
)

(312
)

(308
)

(222
)

(320
)

(387
)

(321
)Net loss attributable to common stockholders

$
(3,178
)
$
(1,595
)
$
(8,499
)
$
(7,198
)
$
(7,484
)
$
(8,556
)
$
(7,108
)
$
(11,897
)Net loss attributable to common stockholders per weighted average share, basic and diluted

$
(0.03
)
$
(0.02
)
$
(0.12
)
$
(0.10
)
$
(0.11
)
$
(0.12
)
$
(0.13
)
$
(0.23
)Weighted average number of common shares, basic and diluted


110,940


75,468


71,512


70,921


70,412


70,240


54,718


51,538


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Liquidity and Capital Resources

As of December 31, 2010, we had $30.1 million of cash, all of which was unrestricted. As of December 31, 2010,
$15.0 million was outstanding under our line of credit.

Based
upon our current working capital position, current operating plans and expected business conditions, we believe that our current cash, and our asset based financing options, will
be adequate to fund our operations through December 31, 2011. Beyond 2011, we expect to fund our working capital needs and other commitments primarily through our operating cash flow, which we
expect to improve as our product costs continue to decrease and as our unit volumes continue to grow. We also expect to use our credit facility to fund a portion of our capital needs and other
commitments. Subsequent to year end we repaid all amounts outstanding on the line of credit. We have availability under our line of credit of $15.0 million as of March 1, 2011.

Our
funding plans for our working capital needs and other commitments may be adversely impacted if we fail to realize our underlying assumed levels of revenues and expenses, or if we
fail to remain in compliance with the covenants of our bank line and subordinated debt. If either of those events occur, we may need to raise additional funds in order to sustain operations by selling
equity or taking other actions to conserve our cash position, which could include selling of certain assets, delaying capital
expenditures and incurring additional indebtedness, subject to the restrictions in the credit facility with Silicon Valley Bank. Such actions would likely require the consent of Silicon Valley Bank
and/or the lender of our subordinated debt, and there can be no assurance that such consents would be given. Furthermore, there can be no assurance that we will be able to raise such funds if they are
required.

If
additional funds are raised in the future through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced and our
stockholders will experience additional dilution. The terms of additional funding may also limit our operating and financial flexibility. There can be no assurance that additional financing of any
kind will be available to us on terms acceptable to us, or at all. Failure to obtain future funding when needed or on acceptable terms would materially, adversely affect our results of operations.

We
have incurred significant costs to develop our technologies and products. These costs have exceeded total revenue. As a result, we have incurred losses in each of the past five years.
As of December 31, 2010, we had an accumulated deficit of approximately $243.5 million. Since inception, we have financed our operations and met our capital expenditure requirements
primarily through the sale of private equity securities and convertible debt, public security offerings, borrowings under our lines of credit and capital equipment leases.

As
of December 31, 2010, our cash and cash equivalents were $30.1 million; this represents an increase in our cash and cash equivalents of approximately
$16.7 million from the $13.4 million on hand at December 31, 2009. Cash used in operating activities from continuing operations for the year ended December 31, 2010 was
$46.9 million as compared to $14.7 million for the year ended December 31, 2009. Cash used in operating activities from continuing operations during the year ended
December 31, 2010 was primarily attributable to the net loss from continuing operations of approximately $11.8 million offset by non-cash items such as the change in the fair
value of our warrants, depreciation and amortization, deferred revenue, increases in allowances for uncollectible accounts and excess and obsolete inventory, non-cash compensation and
consulting expense, non-cash interest expense and decreases in working capital.

Cash
used in investing activities from continuing operations during the year ended December 31, 2010 was $4.1 million as compared to cash used in investing activities from
continuing operations of $3.8 million for the year ended December 31, 2009. Cash used in investing activities from continuing operations during the fiscal year ended December 31,
2010 and 2009 was a result of capital expenditures.

35

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Table of Contents

Cash
provided by financing activities from continuing operations for the year ended December 31, 2010 was $67.1 million as compared to $21.8 million for the year
ended December 31, 2009. Net cash provided by financing activities from continuing operations during 2010 includes approximately $37.5 million related to the sale of common stock,
$4.7 million related to the exercise of warrants to purchase common stock, $2.0 million related to the exercise of employee stock options, $12.0 million in borrowings under our
line of credit, $11.8 million in proceeds from our subordinated debt agreement, offset by a $1.3 million payment to our Series C Preferred shareholders. Net cash provided by
financing activities from continuing operations during 2009 includes approximately $21.5 million related to the sale of common stock and approximately $0.2 million received from the
exercise of stock options and warrants.

Cash
provided by discontinued operations was $0.7 million for the year ended December 31, 2010 as compared to cash provided by discontinued operations of
$0.6 million for the year ended December 31, 2009. Net cash used in operating activities from discontinued operations was $0.1 million in 2010 compared to cash provided by
operating activities of $0.6 million in 2009. Net cash provided by investing activities from discontinued operations was $0.7 million in 2010 compared to cash used in investing
activities of $0.1 million in 2009. Net cash used in financing activities from discontinued operations was $0 in 2010 and 2009.

Payments Due Under Contractual Obligations

The following table summarizes the payments due under our contractual obligations at December 31, 2010, and the effect such
obligations are expected to have on liquidity and cash flow in future periods:

Calendar Years Ending December 31,

Capital
Leases

Principal
Payments on
Subordinated
Debt

Interest
Payments on
Subordinated
Debt

Operating
Leases2011

$


$
2,541,720

$
1,417,799

$
1,414,3922012





4,233,192


951,287


901,1152013





4,797,531


386,947


716,7682014





427,557


4,482


449,5542015











413,610Thereafter











151,527Total

$


$
12,000,000

$
2,760,515

$
4,046,966


We
lease equipment and office space under non-cancelable capital and operating leases. In addition, in June 2010 we entered into a $12 million subordinated debt
agreement. The future minimum principal and interest payments under the subordinated debt agreement and the future minimum rental payments as of December 31, 2010 are included in the table
above.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising
capital, incurring debt or operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entities that are not
consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.

Effects of Inflation

We believe that inflation and changing prices over the past three years have not had a significant impact on our net revenue or on our
income from continuing operations.

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Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially
from those discussed in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial
instruments for speculative or trading purposes.

Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our investing and financing activities. In addition, our
ability to fund working capital requirements may be impacted if we are not able to obtain appropriate financing at acceptable rates.

To
manage interest rage exposure our strategy is to invest in short-term, highly liquid investments. Our investment policy also requires investment in approved instruments
with an initial maximum allowable maturity of twelve months. Currently, our short-term investments are in money market funds with original maturities of 90 days or less. At
December 31, 2010, our short-term investments approximated market value.

At
December 31, 2010 we had a revolving line-of-credit available to us of up to $15.0 million, of which $15.0 million was outstanding. Our
revolving line-of-credit bears an interest rate of the Bank's prime rate plus 0.5% per annum, which resulted in a rate of 4.5% at December 31, 2010.

The
effect of interest rate fluctuations on outstanding borrowings as of December 31, 2010 over the next twelve months is quantified and summarized as follows:

Interest Expense
IncreaseInterest rates increase by 100 basis points

$
150,000Interest rates increase by 200 basis points

$
300,000


Foreign Currency Risk

We face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with
third parties that are denominated in currencies other than ours, or its, functional currency. Intercompany transactions between entities that use different functional currencies also expose us to
foreign currency risk. During the year ended December 31, 2010, the net impact of foreign currency changes on transactions was a loss of $0.6 million. We have not historically used
derivative financial instruments or other financial instruments to hedge such economic exposures.

In
addition, because a substantial portion of our earnings is generated by sales to foreign customers, which in many instances are denominated in the customers local currency, our
earnings could be materially impacted by movements in foreign currency exchange rates, particularly that of the European Union and to a lesser extent the Canadian Dollar, upon the translation of the
earnings into the U.S. Dollar. If the U.S. Dollar had been uniformly stronger by 1%, 5% or 10%, compared to the actual average exchange rates used to translate the financial results of our foreign
sales, our net product sales revenue would not have been materially impacted, as depicted by the table below:

Approximate decrease
in net Revenue(in millions)If, during the year ended December 31, 2010, the U.S. dollar was stronger by:1%

$
0.85%

$
3.810%

$
7.7


*During
2010 the reporting currency of our Canadian division was determined to be the U.S. Dollar.


37

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Item 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS



PageConsolidated Financial Statements of Satcon Technology CorporationReport of Independent Registered Public Accounting Firm (McGladrey & Pullen, LLP)

39Report of Independent Registered Public Accounting Firm (Caturano and Company, P.C.)

41Consolidated Financial Statements:Consolidated Balance Sheets as of December 31, 2010 and 2009

42Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009 and 2008

43Consolidated Statements of Changes in Stockholders' Equity (Deficit) and Comprehensive Loss for the Years Ended
December 31, 2010, 2009 and 2008

44Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008

47Notes to Consolidated Financial Statements

48Schedule II: Valuation and Qualifying Accounts for the Years Ended December 31, 2010, 2009 and
2008

97


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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Satcon Technology Corporation

We
have audited the accompanying consolidated balance sheet of Satcon Technology Corporation and its subsidiaries (the Company) as of December 31, 2010, and the related
consolidated statements of operations, changes in stockholders' equity (deficit) and comprehensive loss and cash flows for the year ended December 31, 2010. Our audit also includes the
financial statement schedule for the year ended December 31, 2010 listed in item 15(2). We also have audited Satcon Technology Corporation's internal control over financial reporting as
of December 31, 2010, based on criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of
the Treadway Commission. The Company's management is responsible for these financial statements and the financial statement schedule, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on these financial statements and an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material
respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Satcon Technology Corporation and
its subsidiaries as of December 31, 2010 and the consolidated results of its operations, changes in stockholder's equity (deficit) and its cash flows for the year ended December 31, 2010
in conformity with accounting principles generally accepted in the United States of America. In addition, in our

39

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Table of Contents

opinion,
the related financial statement schedule listed in Item 15(2) of this Form 10-K when considered in relation to the basic consolidated financial statements taken as
whole, presents fairly in all material respects the information set forth therein. Also in our opinion, Satcon Technology Corporation and its subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2010, based on criteria established inInternal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/
McGladrey & Pullen, LLP

Boston,
Massachusetts
March 15, 2011

40

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Satcon Technology Corporation:

We
have audited the accompanying consolidated balance sheet of Satcon Technology Corporation and its subsidiaries (the Company) (a Delaware corporation) as of December 31, 2009
and the related consolidated statements of operations, changes in stockholders' equity (deficit) and comprehensive loss and cash flows for each of the years ended December 31, 2009 and 2008. We
have also audited the financial statement schedule for the years ended December 31, 2009 and 2008 listed in item 15(2).The Company's management is responsible for these financial
statements and the financial statement schedule. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Satcon Technology Corporation and its
subsidiaries as of December 31, 2009, and the consolidated results of its operations, changes in stockholders' equity (deficit) and its cash flows for each of the years in the
two-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial
statement schedule listed in item 15(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/
CATURANO AND COMPANY, P.C.

Boston,
Massachusetts
March 11, 2010

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Table of Contents



SATCON TECHNOLOGY CORPORATION        CONSOLIDATED BALANCE SHEETS

December 31,
2010

December 31,
2009ASSETSCurrent assets:Cash and cash equivalents

$
30,094,162

$
13,369,208Restricted cash and cash equivalents





34,000Accounts receivable, net of allowance of $974,887 and $196,909 at December 31, 2010 and 2009, respectively


73,713,308


17,577,640Unbilled contract costs and fees


174,342


202,228Inventory


40,542,893


11,898,571Prepaid expenses and other current assets


4,254,246


717,535Current assets of discontinued operations





35,004Total current assets


148,778,951


43,834,186Property and equipment, net


7,284,285


4,633,926Non-current assets of discontinued operations





224,227Total assets

$
156,063,236

$
48,692,339LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilities:Line of credit

$
15,000,000

$
3,000,000Note payable, current portion, net of discount of $434,247


2,107,473


Accounts payable


45,060,537


20,751,975Accrued payroll and payroll related expenses


4,476,685


2,235,349Other accrued expenses


6,824,388


2,710,568Accrued restructuring costs


49,203


38,034Deferred revenue


8,099,852


451,008Current liabilities of discontinued operations





117,702Total current liabilities


81,618,138


29,304,636Warrant liabilities


5,454,109


4,976,774Note payable, net of current portion and discount of $399,589


9,058,691


Deferred revenue, net of current portion


11,622,918


5,531,413Redeemable convertible Series B preferred stock (0 and 75 shares issued and outstanding at December 31, 2010 and 2009, respectively; face value
$5,000 per share; liquidation preference $375,000 at December 31, 2009)





375,000Other long-term liabilities


318,151


280,472Total liabilities


108,072,007


40,468,295Commitments and contingencies (Note K)Redeemable convertible Series C preferred stock (0 and 25,000 shares issued and outstanding at December 31, 2010 and 2009, face
value $1,000 per share, liquidation preference $27,600,000 at December 31, 2009)





22,257,423Stockholders' equity (deficit):Common stock; $0.01 par value, 200,000,000 shares authorized; 117,911,278 and 70,567,781 shares issued and outstanding at December 31, 2010 and 2009,
respectively


1,179,113


705,678Additional paid-in capital


291,717,323


218,599,384Accumulated deficit


(243,475,639
)

(231,656,734
)Accumulated other comprehensive loss


(1,429,568
)

(1,681,707
)Total stockholders' equity (deficit)


47,991,229


(14,033,379
)Total liabilities and stockholders' equity (deficit)

$
156,063,236

$
48,692,339


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

42

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Table of Contents



SATCON TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,2010

2009

2008Revenue:Product revenue

$
173,301,973

$
52,535,633

$
54,293,334Cost of revenue:Cost of product revenue


129,360,472


49,334,132


45,818,090Gross margin


43,941,501


3,201,501


8,475,244Operating expenses:Research and development


15,656,330


8,411,469


5,061,472Selling, general and administrative


34,563,929


18,169,124


14,574,713Restructuring charges


783,701


260,685


1,307,452Total operating expenses from continuing operations


51,003,960


26,841,278


20,943,637Operating loss from continuing operations


(7,062,459
)

(23,639,777
)

(12,468,393
)Change in fair value of notes and warrants


(3,162,323
)

(5,721,580
)

264,628Other (expense) income, net


(658,755
)

(286,678
)

707,450Interest income


784


8,972


216,238Interest expense


(1,467,759
)

(323,995
)

(329,459
)Net loss from continuing operations


(12,350,512
)

(29,963,058
)

(11,609,536
)Income (loss) from discontinued operations, net


31,390


91,677


(1,869,327
)Gain on sale of discontinued operations, net


500,217





274,043Net loss


(11,818,905
)

(29,871,381
)

(13,204,820
)Deemed dividend and accretion on Series C preferred stock


(7,622,576
)

(3,922,830
)

(2,974,502
)Dividend on Series C preferred stock


(1,027,397
)

(1,250,000
)

(1,250,000
)Net loss attributable to common stockholders

$
(20,468,878
)
$
(35,044,211
)
$
(17,429,322
)Net loss per weighted average share, basic and diluted:From loss on continuing operations attributable to common stockholders

$
(0.26
)
$
(0.57
)
$
(0.31
)From income (loss) from discontinued operations







$
(0.04
)From gain on sale of discontinued operations


0.01




$
0.01Net loss attributable to common stockholders per weighted average share, basic and diluted

$
(0.25
)
$
(0.57
)
$
(0.34
)Weighted average number of common shares, basic and diluted


82,210,459


61,727,000


50,684,564


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

43

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Table of Contents

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

For the Year Ended December 31, 2010

Common
Shares

Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total
Stockholders'
Deficit

Comprehensive
LossBalance, December 31, 2009


70,567,781

$
705,678

$
218,599,384

$
(231,656,734
)
$
(1,681,707
)
$
(14,033,379
)Net loss











(11,818,905
)




(11,818,905
)

(11,818,905
)Issuance of warrants to Series C preferred stockholders








515,000








515,000


Beneficial conversion feature on Series C preferred stock








515,000








515,000


Series C preferred stock deemed dividend








(515,000
)







(515,000
)

Accretion of Series C preferred stock to its redemption value








(5,857,577
)







(5,857,577
)

Dividend on Series C preferred stock








(1,027,397
)







(1,027,397
)

Payment to Series C Preferred Shareholders in Conjunction with Conversion








(1,250,000
)







(1,250,000
)

Issuance of common stock in connection with underwritten public offering, net of issuance costs of $2,881,147


10,350,000


103,500


37,380,353








37,483,853


Issuance of common stock in connection with the conversion of Series C Preferred stock to common stock


27,526,344


275,263


28,352,134








28,627,397


Issuance of common stock in connection with the conversion of Series B Preferred stock to common stock


251,677


2,517


372,483








375,000


Issuance of common stock in connection with the exercise of stock options


1,210,887


12,109


2,028,247








2,040,356


Issuance of common stock in connection with the exercise of warrants to purchase common stock


7,883,595


78,836


7,324,042








7,402,878


Issuance of common stock to a consultant


31,032


310


88,490








88,800


Issuance of warrants in connection with subordinated debt financing








910,612








910,612


Issuance of common stock in lieu of six-months cash dividend on redeemable convertible Series B preferred stock


10,067


101


14,899








15,000


Employee stock-based compensation








4,048,100








4,048,100


Issuance of common stock in connection with the Employee Stock Purchase Plan


79,895


799


218,553








219,352


Foreign currency translation adjustment














252,139


252,139


252,139Comprehensive loss



















$
(11,566,766
)Balance, December 31, 2010


117,911,278

$
1,179,113

$
291,717,323

$
(243,475,639
)
$
(1,429,568
)
$
47,991,229


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

44

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Table of Contents

SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

For the Year Ended December 31, 2009

Common
Shares

Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total
Stockholders'
Equity
(Deficit)

Comprehensive
LossBalance, December 31, 2008


51,479,822

$
514,798

$
182,222,762

$
(189,962,435
)
$
(1,959,852
)
$
(9,184,727
)

Cumulative effect of a change in accounting principleJanuary 1, 2009 reclassification of warrants to warrant liabilities (Note C)








(10,218,623
)

(11,822,918
)




(22,041,541
)

Net loss











(29,871,381
)




(29,871,381
)
$
(29,871,381
)Issuance of common stock in connection with underwritten public offering, net of issuance costs of $1,745,525


17,891,346


178,913


21,334,312








21,513,225


Reclassification of Series C preferred stock warrant liability to additional paid in capital due to warrant modification








25,193,785








25,193,785


Issuance of warrants to Series C preferred stockholders








82,000








82,000


Beneficial conversion feature on Series C preferred stock








82,000








82,000


Series C preferred stock deemed dividend








(82,000
)







(82,000
)

Issuance of warrants to Series C preferred stockholders for modification of anti-dilution feature








515,000








515,000


Adjustment to conversion price of Series B preferred stock due to anti-dilution provisions








55,369








55,369


Issuance of common stock to 401(k) Plan


69,650


697


107,262








107,959


Issuance of common stock in connection with the exercise of stock options, issuance of restricted stock to consultants


218,384


2,184


362,784








364,968


Issuance of common stock in connection with the non-cash exercise of warrants to purchase common stock


132,589


1,326


(1,326
)










Issuance of common stock in connection with the conversion of Series B preferred stock


719,528


7,195


1,067,805








1,075,000


Issuance of common stock in lieu of six-month cash dividend on redeemable convertible Series B preferred stock


56,462


565


85,805








86,370


Accretion of Series C preferred stock to its redemption value








(3,840,830
)







(3,840,830
)

Dividend on Series C preferred stock








(1,250,000
)







(1,250,000
)

Employee stock-based compensation








2,883,279








2,883,279


Foreign currency translation adjustment














278,145


278,145


278,145Comprehensive loss



















$
(29,593,236
)Balance, December 31, 2009


70,567,781

$
705,678

$
218,599,384

$
(231,656,734
)
$
(1,681,707
)
$
(14,033,379
)


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

45

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SATCON TECHNOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS

For the Year Ended December 31, 2008

Common
Shares

Common
Stock

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Total
Stockholders'
Equity
(Deficit)

Comprehensive
LossBalance, December 31, 2007


49,803,979

$
498,040

$
180,933,100

$
(176,757,615
)
$
(310,232
)
$
4,363,293

$
Net loss











(13,204,820
)




(13,204,820
)
$
(13,204,820
)Issuance of warrants to Series C preferred stockholders








126,000








126,000Beneficial conversion feature on Series C preferred stock








126,000








126,000Series C preferred stock deemed dividend








(126,000
)







(126,000
)Accretion of Series C preferred stock to its redemption value








(2,848,502
)







(2,848,502
)Dividend on Series C preferred stock








(1,250,000
)







(1,250,000
)Issuance of common stock to 401(k) Plan


279,831


2,798


575,434








578,232Issuance of common stock in connection with the exercise of stock options to purchase common stock


891,168


8,912


1,435,607








1,444,519Issuance of common stock in lieu of six-month cash dividend on redeemable convertible Series B preferred stock.


86,241


862


132,804








133,666Issuance of common stock in connection with the exercise of warrants to purchase common stock


174,967


1,750


239,560








241,310Issuance of restricted stock to employees


82,346


823


144,930








145,753Issuance of common stock in connection with the conversion of Series B preferred stock


161,290


1,613


248,387








250,000Issuance of warrants to purchase common stock to contractor








121,000








121,000Employee stock-based compensation








2,364,442








2,364,442Foreign currency translation adjustment














(1,649,620
)

(1,649,620
)

(1,649,620
)Comprehensive loss



















$
(14,854,440
)Balance, December 31, 2008


51,479,822

$
514,798

$
182,222,762

$
(189,962,435
)
$
(1,959,852
)
$
(9,184,727
)


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

46

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Table of Contents



SATCON TECHNOLOGY CORPORATION        CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,2010

2009

2008Cash flows from operating activities:Net loss

$
(11,818,905
)
$
(29,871,381
)
$
(13,204,820
)Net (income) loss from discontinued operations


(31,390
)

(91,677
)

1,869,327Net gain on sale of discontinued operations


(500,217
)




(274,043
)Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:Depreciation and amortization


1,545,769


1,263,886


769,998Provision for uncollectible accounts


798,551


28,690


80,142Provision for excess and obsolete inventory


1,043,197


185,577


360,035Non-cash compensation expense related to issuance of stock options and warrants to employees and non-employees and issuance of common stock to 401(k) Plan,
including stock based compensation costs from continuing operations of $4,066,457, $2,797,138 and $2,196,166 for the years ended December 31, 2010, 2009 and 2008, respectively.


4,155,257


3,476,639


2,584,295Change in fair value of Senior Secured Convertible Notes and investor and placement agent warrant liability


3,162,323


5,721,580


(264,628
)Non-cash interest expense


260,276


122,406


130,334Non-cash restructuring charges








274,552Changes in operating assets and liabilities:Accounts receivable


(56,417,568
)

(4,019,988
)

(5,205,154
)Unbilled contract costs and fees


27,886


196,479


137,860Prepaid expenses and other assets


(3,529,066
)

366,796


(56,174
)Inventory


(29,209,687
)

1,105,815


(1,965,474
)Other long-term assets








32,931Accounts payable


23,821,194


10,408,195


2,392,434Accrued expenses and payroll


6,224,408


(324,674
)

790,114Accrued restructuring


(2,299
)

(564,748
)

602,782Accrued contract losses





(1,213,995
)

94,700Deferred revenue, current and long portion


13,488,691


(1,668,073
)

2,510,183Other current liabilities


37,679


222,190


(11,793
)Total adjustments


(34,593,389
)
$
15,306,775

$
3,257,137Net cash used in operating activities in continuing operations


(46,943,901
)

(14,656,283
)

(8,352,399
)Net cash provided by (used in) operating activities of discontinued operations


(61,921
)

644,944


(1,741,226
)Net cash used in operating activities


(47,005,822
)

(14,011,339
)

(10,093,625
)Cash flows from investing activities:Purchases of property and equipment


(4,126,607
)

(3,752,449
)

(1,451,678
)Net cash used in investing activities in continuing operations


(4,126,607
)

(3,752,449
)

(1,451,678
)Net cash provided by (used in) investing activities of discontinued operations


716,700


(75,715
)

4,925,584Net cash provided by (used in) investing activities


(3,409,907
)

(3,828,164
)

3,473,906Cash flows from financing activities:Net borrowings under line of credit


12,000,000





3,000,000Proceeds from note payable


11,826,500





Proceeds from short-term loan





1,297,200


Repayment of short-term loan





(1,297,200
)

Proceeds from Employee Stock Purchase Plan


219,352





Net proceeds from public sale of common stock


37,483,853


21,513,225


Payment to Series C Preferred Shareholders


(1,250,000
)




Payments related to warrant holder redemption rights








(572,250
)Decrease in restricted cash


34,000


50,000


Net proceeds from exercise of warrants to purchase common stock


4,717,890





241,310Net proceeds from exercise of options to purchase common stock


2,040,356


200,468


1,444,519Net cash provided by financing activities in continuing operations

$
67,071,951

$
21,763,693

$
4,113,579Net increase (decrease) in cash and cash equivalents

$
16,656,222

$
3,924,190

$
(2,506,140
)Effects of foreign currency exchange rates on cash and cash equivalents

$
68,732

$
(512,698
)
$
(151,710
)Net increase (decrease) in cash and cash equivalents

$
16,724,954

$
3,411,492

$
(2,657,850
)Cash and cash equivalents at beginning of year

$
13,369,208

$
9,957,716

$
12,615,566Cash and cash equivalents at end of year

$
30,094,162

$
13,369,208

$
9,957,716


See Note Q for non-cash disclosures

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

47

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Table of Contents

SATCON TECHNOLOGY CORPORATION        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        DECEMBER 31, 2010, 2009 AND 2008

A. THE COMPANY

Satcon Technology Corporation ("Satcon" or "Company") is a leading clean energy technology provider of utility-grade power conversion solutions for the renewable energy market, primarily
the large-scale commercial and utility-scale solar photovoltaic, or PV, markets. Satcon designs and delivers advanced power conversion solutions that enable large-scale producers of renewable energy
to convert clean energy into grid-connected, efficient and reliable electrical power.

Satcon's
power conversion solutions boost total system power production through system intelligence, advanced command and control capabilities, industrial-grade engineering and total
lifecycle performance optimization. Satcon's power conversion solutions feature the widest range of power ratings in the solar industry. Satcon 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.

The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America.

B. REALIZATION OF ASSETS AND LIQUIDITY

The Company has developed a business plan that envisions a continued increase in assets and revenue from the results experienced in the recent past. The Company believes that its
existing plan will generate sufficient cash which, along with its existing cash on hand, will enable it to fund operations through at least December 31, 2011. Additionally, the Company has a
line of credit in place with a bank and believes that it has the ability to refinance and/or expand the availability of such asset-based financing. Such actions would likely require the consent of its
existing lenders, and there can be no assurance that such consents would be given. Furthermore, there can be no assurance that the Company would be able to obtain similar or additional asset-based
financing if and when sought.

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Consolidation

The consolidated financial statements include the accounts of Satcon and its wholly owned subsidiary (Satcon Power Systems
Canada, Ltd.) and its discontinued operating subsidiaries (Satcon Applied Technology, Inc., Satcon Electronics, Inc. and Satcon Power Systems, Inc.). All intercompany
accounts and transactions have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue from product sales when there is persuasive evidence of an arrangement, the fee is fixed or
determinable, delivery of the product to the customer has occurred and the Company has determined that collection of the fee is probable. Title to the product passes upon shipment of the product, as
the products are typically shipped FOB shipping point, unless otherwise agreed upon in advance with the customer. If the product requires installation to be performed by the Company, all revenue
related to the product is deferred and recognized upon the completion of the installation. If the product requires specific customer acceptance, revenue is deferred until customer acceptance occurs or
the acceptance provisions lapse, unless the Company can objectively and reliably demonstrate that the criteria specified in the acceptance provisions are satisfied. When appropriate the

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

Company
provides for a warranty reserve at the time the product revenue is recognized. If a contract involves the provision of multiple elements and the elements qualify for separation, total
estimated contract revenue is allocated to each element based on the relative fair value of each element provided. The amount of revenue allocated to each element is limited to the amount that is not
contingent upon the delivery of another element in the future. Revenue is recognized on each element as described above.

Cost
of product revenue includes materials, labor, overhead, warranty and freight.

Deferred
revenue primarily consists of cash received for extended product warranties, preventative maintenance plans and up-time guarantee programs. Deferred revenue also
consists of payments received from customers in advance of services performed, product shipped or installation completed. When an item is deferred for revenue recognition purposes, the deferred
revenue is recorded as a liability and the deferred costs are recorded as a component of inventory in the consolidated balance sheets.

Unbilled Contract Costs and Fees and Funded Research and Development Costs in Excess of Billings

Unbilled contract costs and fees represent revenue recognized in excess of amounts billed due to contractual provisions or deferred
costs that have not been recognized as revenue or billed to the customer.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and highly-liquid investments with maturities of three months or less when acquired.
Cash equivalents are stated at cost, which approximates market value. At December 31, 2010 and December 31, 2009, the Company has restricted cash of $0 and $34,000, respectively.

Accounts Receivable

Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The estimated allowance for
uncollectible amounts is based primarily on a specific analysis of accounts in the receivable portfolio and historical write-off experience. While management believes the allowance to be
adequate, if the financial condition of our customers were to deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required.

Inventory

Inventory is valued at the lower of actual cost to purchase and/or manufacture the inventory or the current estimated market value of
the inventory, and costs are determined based on the first-in, first-out method of accounting and include material, labor and manufacturing overhead costs. A significant
decrease in demand for the Company's products could result in a short-term increase in the cost of inventory purchases and an increase of excess inventory quantities on hand. In addition,
the industry is characterized by rapid technological change, frequent new product development, and rapid product obsolescence that could result in an increase in the amount of obsolete inventory
quantities on hand. Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

future
product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of the inventory and reported operating results. The
Company records, as a charge to cost of product revenue, any amounts required to reduce the carrying value to net realizable value.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization is computed using the straight-line method over
the asset's estimated useful life. The estimated useful lives of property and equipment are as follows:

Estimated LivesMachinery and equipment

2-10 yearsFurniture and fixtures

7-10 yearsComputer hardware/software

3 yearsLeasehold improvements

Lesser of the remaining life of the lease
or the useful life of the improvement


When
assets are retired or otherwise disposed of, the cost and related depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in
operating expenses.

Foreign Currency

As of April 1, 2010, the Company determined that the functional currency of its foreign subsidiary in Canada was the US dollar.
As the functional currency changed from the foreign currency to the reporting currency, the translation adjustments as of April 1, 2010 remain as a component of accumulated other comprehensive
income (loss). Prior to this determination, the functional currency was the local currency, assets and liabilities were translated at the rates in effect at the balance sheet dates, while
stockholders' equity (deficit) including the long-term portion of intercompany advances was translated at historical rates. Statements of operations and cash flow amounts were translated
at the average rate for the period. Translation adjustments were included as a component of accumulated other comprehensive income (loss). Foreign currency gains and losses were a loss of
$0.6 million, a gain of $0.3 million and a gain of $0.7 million for the years ended December 31, 2010, 2009 and 2008, respectively. All foreign currency transaction gains
and losses were recorded as a component of other income (expense), net.

During
January 2011 the Company entered into a foreign currency hedge with a bank with a notional amount of approximately $4.7 million and a term of 90 days.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America,
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

during
the period reported. Management believes the most significant estimates include the net realizable value of accounts receivable and inventory, warranty provisions, the recoverability of
long-lived assets, the recoverability of deferred tax assets and the fair value of equity and financial instruments. Actual results could differ from these estimates.

Reclassifications

Certain prior-year balances have been reclassified to conform to current-year presentations.

Income Taxes

The Company accounts for income taxes utilizing the asset and liability method for accounting and reporting for income taxes. Under
this method, deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and income tax basis of assets and liabilities using
statutory rates. In addition, the Company is required to establish a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized.

The
Company is allowed to recognize the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities.
The amount recognized is the amount that represents the largest amount of tax benefit that is greater than 50% likely of being ultimately realized. A liability is recognized for any benefit claimed,
or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements, along with any
interest and penalties (if applicable) on that excess. In addition, the Company is required to provide a tabular reconciliation of the change in the aggregate unrecognized tax benefits claimed, or
expected to be claimed, in tax returns and disclosure relating to the accrued interest and penalties for unrecognized tax benefits. Discussion is also required for those uncertain tax positions where
it is reasonably possible that the estimate of the tax benefit will change significantly in the next twelve months.

As
of December 31, 2010, the Company had federal and state net operating loss ("NOL") carry forwards and federal and state R&D credit carry forwards, which may be
available to offset future federal and state income tax liabilities which expire at various dates through 2031. Utilization of the NOL and R&D credit carry forwards may be subject to a substantial
annual limitation due to ownership change limitations that have occurred previously or that could occur in the future provided by Sections 382 or 383 of the Internal Revenue Code of 1986, as
well as similar state and foreign provisions. These ownership changes may limit the amount of NOL and R&D credit carry forwards that can be utilized annually to offset future taxable income and tax,
respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a
corporation by more than 50 percentage points over a rolling three-year period. Since the Company's formation, the Company has raised capital through the issuance of capital stock
on several occasions (both pre and post initial public offering) which, combined with the purchasing shareholders' subsequent disposition of those shares, may have resulted in a change of control, as
defined by Section 382, or could result in a change of control in the future upon subsequent disposition.

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

The
Company commissioned a study to determine whether Sections 382 or 383 could limit the use of our carryforwards in this manner. After completing this study, the company has
concluded that the limitation will not have a material impact on its ability to utilize its net operating loss or credit carryforwards.

The
tax years 1996 through 2010 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States, as carryforward
attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they are or will be used in a future period. The Company is
currently not under examination by the Internal Revenue Service or any other jurisdiction for any tax years. The Company did not recognize any interest and penalties associated with unrecognized tax
benefits in the accompanying financial statements. The Company would record any such interest and penalties as a component of interest expense. The Company does not expect any material changes to the
unrecognized benefits within 12 months of the reporting date.

Accounting for Stock-based Compensation

The Company has several stock-based employee compensation plans, as well as stock options issued outside of such plans as an inducement
to engage new executives. Stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period.

The
Company uses the Black-Scholes valuation model for valuing options. This model incorporates several assumptions, including volatility, expected life and discount rate. The Company
uses historical volatility as it believes it is more reflective of market conditions and a better indicator of volatility. The Company uses historical information in the calculation of expected life
for its "plain-vanilla" option grants. If the Company determines that another method used to estimate expected volatility is more reasonable than the Company's current methods, or if another method
for calculating these input assumptions is prescribed by authoritative guidance, the fair value calculated for share-based awards could change significantly. Higher volatility and longer expected
lives would result in an increase to share-based compensation determined at the date of grant.

The
Company recognized the full impact of its share-based payment plans in the consolidated financial statements for the year ended December 31, 2010, 2009 and 2008 and did not
capitalize any such costs on the consolidated balance sheets, as such costs that qualified for capitalization were not

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

material.
The following table presents share-based compensation expense included in the Company's consolidated statement of operations:

Year Ended December 31,2010

2009

2008Cost of product revenue

$
285,047

$
171,067

$
96,249Research and development


638,476


332,970


154,641Selling, general and administrative expenses


3,142,934


2,293,102


1,945,276Share based compensation expense from continuing operations, before tax


4,066,457


2,797,139


2,196,166Share based compensation expense from discontinued operations


(18,357
)

86,140


168,276Total share based compensation expense, before tax


4,048,100


2,883,279


2,364,442Income tax benefit








Net share-based compensation expense

$
4,048,100

$
2,883,279

$
2,364,442


Compensation
expense associated with the granting of stock options to employees is being recognized on a straight line basis over the service period of the option. In instances where the
actual compensation expense would be greater than that calculated using the straight line method, the actual compensation expense is recorded in that period.

Included
in the 2010 stock-based compensation expense above are amounts related to employees participation in the Employee Stock Purchase Plan ("ESPP") of approximately $221,000. See
Note L,Employee Benefit Plan.

At
December 31, 2010, approximately $11.0 million in unrecognized compensation expense remains to be recognized in future periods. The table below summaries the recognition
of the deferred compensation expense associated with employee stock options over the next four years as follows:

Calendar Years Ending December 31,

Non Cash
Stock-Based
Compensation
Expense2011

$
4,555,2732012


3,195,8492013


2,200,1162014


1,000,038Total

$
10,951,276


During
the year ended December 31, 2008, the Company accelerated unvested options for two of its senior executives in connection with their departures. In addition, the Company
extended the time to exercise these options, normally ninety days, to two years from the date of their respective last days of employment. As a result, the Company recorded a non-cash
restructuring charge in 2008 of

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

approximately
$0.3 million, of which approximately $0.1 million related to the acceleration of unvested options and $0.2 million related to the extension of time to exercise these
options. The Company valued these changes using the Black-Scholes option pricing model.

The
weighted-average grant-date fair value of options granted during the year ended December 31, 2010, 2009 and 2008 were $1.92, $1.50 and $2.03, respectively, per
option. The fair value of each stock option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following range of assumptions:

Year Ended December 31,2010

2009

2008Assumptions:Expected life(1)

5.0 years to 6.25 years

5.0 years to 6.25 years

5.0 years to 6.25 yearsExpected volatility ranging from(2)

72.38% - 76.45%

72.9% - 82.96%

80.0% - 89.5%Dividends

none

none

noneRisk-free interest rate(3)

1.11% - 2.50%

1.50% - 2.50%

2.70% - 3.38%Forfeiture Rate(4)

0% - 6.25%

0% - 6.25%

0% - 6.25%


(1)The
option life was determined using actual option experience. Prior to March 31, 2010, the option life was determined using the simplified method
for estimating expected option life, which qualify as "plain-vanilla" options.(2)The
stock volatility for each grant is measured using the weighted average of historical daily price changes of the Company's common stock over the most
recent period equal to the expected option life of the grant, the historical short term trend of the option and other factors, such as expected changes in volatility arising from planned changes in
the Company's business operations.(3)The
risk-free interest rate for each grant is equal to the U.S. Treasury yield curve in effect at the time of grant for instruments with a
similar expected life.(4)The
estimated forfeiture rate for each option grant is between 0% and 6.25%. The Company periodically reviews the estimated forfeiture rate, in light of
actual experience.


Net Loss per Basic and Diluted Common Share

The Company reports net loss per basic and diluted common share in accordance with standards established for computing and presenting
earnings per share. Basic earnings per share excludes dilution and is computed by dividing income attributable to common stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the Company, except when the effect would be anti-dilutive. See Note R, Loss Per Share, for more information
related to options, warrants and convertible Preferred Stock which would be considered anti-dilutive.

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

Concentration of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk principally consist of cash equivalents, trade accounts
receivable, unbilled contract costs and deposits in bank accounts. The Company deposits its cash and invests in short-term investments primarily through a national commercial bank.
Deposits in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC) are exposed to loss in the event of nonperformance by the institution.

The
Company's trade accounts receivable and unbilled contract costs and fees are primarily from sales to commercial customers. The Company does not require collateral and has not
historically experienced significant credit losses related to receivables, letters of credit or unbilled contract costs and fees from individual customers or groups of customers in any particular
industry or geographic area.

Significant
customers are defined as those customers that account for 10% or more of total net revenue in a fiscal year or 10% or more of accounts receivable and unbilled contract costs
and fees at the end of a fiscal period. The table below details out customers that were considered significant, greater than 10%, as it pertains to both annual revenues for the years ended
December 31, 2010, 2009 and 2008 and accounts receivable and unbilled contract costs as of December 31, 2010 and 2009.

Year

Revenue

Accounts Receivable and Unbilled Contract Costs2010

None

GCL Solar Limited (approximately 11%)**Enel Green Power (approximately 11%)**CE Solar (approximately 12%)2009

SunPower Corporation (approximately 14%)

**

Enfinity, NV (approximately 10%)2008

Fuel Cell Energy, Inc.(approximately 17%)

Fuel Cell Energy, Inc.(approximately 14%)SunPower Corporation (approximately 12%)

SunPower Corporation (approximately 14%)


*Represents
less than 10% of either the fiscal year revenue or the total accounts receivable balance at December 31, 2009 or 2008.**The
accounts receivable associated with these customers were backed by irrevocable letters of credit at December 31, 2010.


Research and Development Costs

The Company expenses research and development costs as incurred. Cost of research and development and other revenue includes costs
incurred in connection with both funded research and development and other revenue arrangements and unfunded research and development activities.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net loss and foreign currency translation adjustments prior to the changing of the functional
currency in Canada to the US dollar.

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

Fair Value of Financial Instruments

The Company's financial instruments consist of cash equivalents, accounts receivable, unbilled contract costs and fees, warrants to
purchase shares of common stock, accounts payable, subordinated note payable and the line of credit. The estimated fair values of these financial instruments approximate their carrying values at
December 31, 2010 and December 31, 2009. The estimated fair values have been determined through information obtained from market sources and management estimates. The Company's warrant
liability is recorded at fair value. See "Fair Value Measurements" below. The carrying value of the subordinated notes payable, as of December 31, 2010, is not materially different from the
fair value of the notes.

Fair Value Measurements

The Company's financial assets and liabilities are measured using inputs from the three levels of fair value hierarchy which are as
follows:

Level 1



Quoted prices in active markets for identical assets or liabilities.Level 2



Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are
observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.Level 3



Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.


Assets
and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2010 are as follows:

Fair Value Measurements at Reporting Date UsingDescription

Balance as of
December 31,
2010

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)AssetsMoney market funds(2)

$


$


$


$
Total Assets

$


$


$


$
LiabilitiesLong-term warrant liability(1)

$
5,454,109

$


$
5,454,109

$
Total Liabilities

$
5,454,109

$


$
5,454,109

$



56

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2009 are as
follows:

Fair Value Measurements at Reporting Date UsingBalance as of
December 31,
2009

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)AssetsMoney market funds(2)

$
10,003,805

$
10,003,805

$


$
Total Assets

$
10,003,805

$
10,003,805

$


$
LiabilitiesLong-term warrant liability(1)

$
4,976,774

$


$
4,976,774

$
Total Liabilities

$
4,976,774

$


$
4,976,774

$



(1)The
Company's Level 2 financial liabilities consist of long term investor warrant liabilities comprised of the Warrant As, Warrant Cs,
the warrants issued to the investors in connection with the 2007 preferred stock financing (the "2007 Financing Warrants") and the placement agent warrants. The fair value of the Warrant As and
Warrant Cs is being estimated using a binomial lattice model for the portion not included in the outstanding call option at December 31, 2010 and for approximately 50% of the outstanding
Warrant As and Warrant Cs subject to the call the valued using their intrinsic value and the fair value of the placement agent warrants and the 2007 Financing Warrants is being estimated
using the Black-Scholes option pricing model. (see Note G. Warrant Liabilities; Note IRedeemable Convertible Series B and Series C Preferred Stock; and
"Warrant Liabilities" below).(2)Included
as a component of cash and cash equivalents on accompanying consolidated balance sheets.


Warrant Liabilities

On January 1, 2009, the Company adopted ASC 815-40-15 to evaluate whether an instrument is considered
indexed to an entity's own stock. The Company's evaluation of the 2007 Financing Warrants determined that the 2007 Financing Warrants covering 19,799,023 shares of common stock did not qualify for a
scope exception under ASC 815-40-15 as they were determined not to be indexed to the Company's stock as prescribed by ASC 815-40-15. As a result, on the
date of adoption, January 1, 2009, the Company reclassified these warrants from additional paid in capital to warrant liabilities through a cumulative effect of a change in accounting
principle. The initial value of the warrant liability at adoption was $22,041,541.

For
the period through July 3, 2009, the Company recorded a charge to change in fair value of warrants of approximately $3.2 million for the increase in the fair value
related to these warrants during the period. The warrants did not qualify for hedge accounting, and as such, all subsequent changes in the fair value of these warrants were recognized currently in
earnings until such time as the

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

warrants
were modified in the manner described below, or exercised or expired. These common stock purchase warrants do not trade in an active securities market, and as such, the Company estimated the
fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:

January 1, 2009

April 4, 2009

July 3, 2009Assumptions:Expected life

5.9 - 6.7 years

5.6 - 6.5 years

5.4 - 6.2 yearsExpected volatility

80% - 85%

75% - 85%

75% - 80%Dividends

none

none

noneRisk-free interest rate

1.69% - 1.83%

2.06% - 2.35%

2.56% - 2.87%


On
July 3, 2009, the Company modified certain provisions contained within the 2007 Financing Warrants. Under the terms of the original 2007 Financing Warrants (prior to their
modification), in addition to standard anti-dilution protection for stock splits or dividends, stock combinations, mergers, liquidation or similar events, the exercise price and number of
shares issuable upon exercise of these warrants were subject to adjustment in the event of certain dilutive issuances (the "Dilutive Issuance Provision"). Upon each adjustment of the exercise price
pursuant to the Dilutive Issuance Provision, the number of shares subject to the warrant were also to be adjusted by multiplying the current exercise price prior to the adjustment by the number of
shares subject to the warrant and dividing the product by the exercise price resulting from the adjustment. The Dilutive Issuance Provision was modified to (i) limit the instances in which a
dilutive issuance will cause an adjustment to the exercise price of the warrants and (ii) eliminate the provision that correspondingly increased the number of shares underlying the warrants in
the event of a dilutive issuance that causes an adjustment to the exercise price. As a result of this modification these warrants were determined to be equity instruments by the Company, as they now
qualify for the scope exception under ASC 815-40-15. Previously the warrants, due to the adoption of the provisions
of ASC 815-40, were accounted for as a derivative liability. The Company is no longer required to mark these warrants to fair value each quarter. See Note G.
Warrant Liabilities.

In
addition, the Company determined the fair value of the investor warrants (the Warrant As and Warrant Cs) and placement agent warrants using valuation models it considers
to be appropriate. The Company's stock price has the most significant influence on the fair value of its warrants. An increase in the Company's common stock price would cause the fair values of the
warrants to increase, because the exercise price of the warrants is fixed at $1.815 per share, and result in a charge to our statement of operations. A decrease in the Company's stock price would
likewise cause the fair value of the warrants to decrease and result in a credit to our statement of operations. See Note G. for valuation discussion.

Redeemable Convertible Series B Preferred Stock

The Company initially accounted for its issuance of Series B Preferred Stock and associated warrants by allocating the proceeds
received net of transaction costs based on the relative fair value of the Series B Preferred Stock and the warrants issued to the investors, and then to any beneficial conversion rights
contained in the convertible redeemable preferred securities. The Company

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

C. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Continued)

determined
the initial value of the Series B Preferred Stock and investor warrants using valuation models it considers to be appropriate. The Series B Preferred Stock was classified
within the liability section of the Company's balance sheet.

In
October 2010, the holders of the remaining 75 shares of Series B Preferred Stock converted their shares into common stock, resulting in the issuance of 251,677 shares of common
stock.

Redeemable Convertible Series C Preferred Stock

The Company initially accounted for its issuance of Series C Preferred Stock and associated warrants by allocating the proceeds
received net of transaction costs based on the relative fair value of the Series C Preferred Stock and the warrants issued to the investors, and then to any beneficial conversion rights
contained in the convertible redeemable preferred securities. The Series C Preferred Stock is classified as temporary equity on the balance sheet. The Company
determined the initial value of the Series C Preferred Stock and investor warrants using valuation models it considers to be appropriate. The Company used the effective interest method to
accrete the carrying value of the Series C Preferred Stock through the earliest possible redemption date (November 8, 2011), at which time the value of the Series C Preferred
Stock would have been $30.0 million or 120% of its face value and dividends.

On
October 27, 2010, the holders of all of the outstanding shares of Series C Preferred Stock converted their shares and accumulated dividends into common stock, resulting
in the issuance of 27,526,344 shares of common stock. To induce the Series C Preferred Stock holders to convert their shares, the Company paid these holders an aggregate $1.25 million in
cash upon conversion. The entitlement to a redemption of the Series C Preferred Shares was eliminated upon the holders' conversion of the Series C Preferred Stock into common shares in
October 2010.

D. DISCONTINUED OPERATIONS

In January 2010, the Company sold its Applied Technology business unit for approximately $1.0 million in cash and $0.5 million in working capital retained at the date of
the sale. Prior to the sale the Applied Technology business unit was reported by the Company as its own operating segment. Operations associated with the Applied Technology business unit have been
reclassified as income (loss) from discontinued operations in the accompanying consolidated statements of operations, and cash flows associated with this segment are included in cash flows from
discontinued operations in the consolidated statements of cash flows. The Company evaluated the assets of the Applied Technology business unit and as of December 31, 2009 had classified them as
held for sale. The Company recorded a gain on the sale of the Applied Technology business unit of approximately $0.5 million in its results of operations for the first quarter of 2010.

On
September 26, 2008, the Company sold its Electronics and Power Systems US business segments to two unrelated companies, for approximately $5.6 million in cash and
$0.5 million of retained accounts receivable. The Company recorded a gain on the sale of the Electronics and Power Systems US business segments of approximately $0.3 million in 2008.
Prior to the sale, each of these divisions were reported by the Company as its own operating segment. Operations associated with these discontinued segments have been classified as loss from
discontinued operations in the accompanying

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

D. DISCONTINUED OPERATIONS (Continued)

consolidated
statements of operations, and cash flows associated with these segments are included in cash flows from discontinued operations in the consolidated statements of cash flows. Net sales and
net income (loss) from discontinued operations by division was as follows:

Year Ended December 31,Division

2010

2009

2008ElectronicsNet Sales







$
8,250,768Net Loss







$
(1,094,326
)Power Systems, USNet Sales







$
5,021,022Net Loss







$
(40,406
)Applied TechnologyNet Sales




$
6,232,687

$
8,228,769Net Income (Loss)

$
31,390

$
91,677

$
(734,594
)Discontinued OperationsTotal Net Sales




$
6,232,687

$
21,500,559Total Net Income (Loss)

$
31,390

$
91,677

$
(1,869,326
)


The
Company has not allocated interest to discontinued operations. The Company has also eliminated all intercompany activity associated with discontinued operations.

The
net assets of the Electronics and Power Systems US divisions at December 31, 2010 and 2009 were $0. The net assets of the Applied Technology division as of December 31,
2010 were $0 and at December 31, 2009 consisted of the following, which have been reclassified in the accompanying consolidated balance sheets:

December 31,
2009Prepaid expenses

$
35,004Current assets of discontinued operations

$
35,004Property and equipment, net


56,076Goodwill other long-term assets


168,151Non-current assets of discontinued operations

$
224,227Accrued payroll and related expenses

$
117,702Current liabilities of discontinued operations

$
117,702Long-term liabilities of discontinued operations

$



60

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

E. INVENTORY

Inventory includes material, labor and overhead and consisted of the following:

December 31,2010

2009Raw material

$
16,930,407

$
7,268,446Work-in-process


2,881,150


2,588,205Finished goods


20,731,336


2,041,920$
40,542,893

$
11,898,571


The
provision for excess and obsolete inventory, from continuing operations, net of usage, for the years ended December 31, 2010, 2009 and 2008 was $1,089,950, $185,577 and
$360,035, respectively.

F. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

December 31,2010

2009Machinery and equipment

$
5,121,820

$
4,153,178Assets under construction


785,152


1,616,022Furniture and fixtures


991,493


324,689Computer hardware / software


1,099,000


707,667Leasehold improvements


4,226,452


1,098,882$
12,223,917

$
7,900,438Less: accumulated depreciation and amortization


(4,939,632
)

(3,266,512
)$
7,284,285

$
4,633,926


Depreciation
and amortization expense from continuing operations relating to property and equipment for the years ended December 31, 2010, 2009 and 2008 was $1.5 million,
$1.3 million and $0.8 million, respectively.

G. WARRANT LIABILITIES

Warrants Issued in Connection with the July 2006 Financing

In connection with the July 19, 2006 private placement of $12.0 million aggregate principal amount of senior secured
convertible notes (which notes were subsequently retired by cash redemption in November 2007), the Company issued:



The Warrant As originally entitled the holders thereof to purchase up to an aggregate of 3,636,368 shares of the Company's
common stock at a price of $1.815 per share for a period beginning six months from the date of such warrants and ending on the seventh anniversary of the date of such warrants. The period prior to six
months from the date of the warrants is hereinafter referred to as the

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)

"non-exercise
period." The exercise price and the number of shares underlying these warrants are subject to adjustment for stock splits, stock dividends, combinations, distributions of
assets or evidence of indebtedness, mergers, consolidations, sales of all or substantially all assets, tender offers, exchange offers, reclassifications or compulsory share exchanges.

If
a change of control of the Company occurs, as defined, the holders may elect to require the Company to purchase the Warrant As for a purchase price equal to the Black-Scholes
value of the remaining unexercised portion of each Warrant A.

For
so long as any Warrant As remain outstanding, the Company may not issue any common stock or common stock equivalents at a price per share less than $1.65. In the event of a
breach of this provision, the holders may elect to require the Company to purchase the Warrant As for a purchase price equal to the Black-Scholes value of the remaining unexercised portion of
each Warrant A. As a result of the November 8, 2007 and December 20, 2007 preferred stock financing, as described in Note I below, the holders were entitled for a limited
period of time (45 days after each issuance) to exercise this right. During fiscal 2007, the Company paid approximately $1.4 million to redeem Warrant As representing 1,242,426
shares of common stock. During 2008, the Company paid approximately $0.4 million to redeem Warrant As representing 303,031 shares of common stock. (See table below for assumptions used
in valuing the warrants redeemed). During 2010 warrants to purchase 954,547 shares of common stock were exercised. As of December 31, 2010, Warrant As to purchase 1,136,364 shares of
common stock were outstanding.

If
the closing bid price per share of our common stock for any 20 consecutive trading days exceeds 200% of the exercise price, then, if certain conditions are satisfied, including
certain equity conditions, the Company may require the holders of the Warrant As to exercise up to 50% of the unexercised portions of such warrants. If the closing bid price per share of our
common stock for any 20 consecutive trading days exceeds 300% of the exercise price, then, if certain equity conditions are satisfied, the Company may require the holders of the Warrant As to
exercise all or any part of the unexercised portions of such warrants.



The Warrant Bs entitled the holders thereof to purchase up to an aggregate of 3,636,368 shares of the Company's common stock at
a price of $1.68 per share for a period of 90 trading days beginning the later of six months from the date of such warrants and the date the SEC declares effective the Registration Statement. As a
result of an amendment, the expiration date of the Warrant Bs was extended to August 31, 2007.

On
July 17, 2007, the holders of the Warrant Bs exercised such warrants in full, acquiring 3,636,638 shares of common stock at $1.31 per share. The Company received
proceeds of approximately $4.8 million. To entice the holders of the Warrant Bs to exercise such warrants the Company reduced the exercise price from $1.68 to $1.31 per share. As a
result of reducing the exercise price the Company recorded a charge to operations in 2007 related to the warrant modification of approximately $0.9 million to change in fair value of the
Convertible Notes and warrants on the accompanying statement of operations. Pursuant to the original terms of the Warrant Bs, upon exercise of the Warrant Bs, the warrant holders were
entitled to receive additional warrants ("Warrant Cs") to

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)

purchase
a number of shares of common stock equal to 50% of the number of shares of common stock purchased upon exercise of the Warrant Bs. As a result of the full exercise of the
Warrant Bs, the holders received Warrant Cs to purchase 1,818,187 shares of common stock at an exercise price of $1.815 per share for a period beginning six months from the date of such
warrants and ending on the seventh anniversary of the date of such warrants.



As discussed above, upon the exercise of the Warrant Bs, the holders were entitled to receive additional warrants (the
"Warrant Cs"). The Warrant Cs originally entitled the holders thereof to purchase up to an aggregate of 1,818,187 shares of our common stock at a price of $1.815 per share for a period
beginning six months from the date of such warrants and ending on the seventh anniversary of the date of such warrants. The period prior to six months from the date of the warrants is hereinafter
referred to as the "non-exercise period." The exercise price and the number of shares underlying these warrants are subject to adjustment for stock splits, stock dividends, combinations,
distributions of assets or evidence of indebtedness, mergers, consolidations, sales of all or substantially all assets, tender offers, exchange offers, reclassifications or compulsory share exchanges.

If
a change of control of the Company occurs, as defined, the holders may elect to require the Company to purchase the Warrant Cs for a purchase price equal to the Black-Scholes
value of the remaining unexercised portion of each Warrant C.

For
so long as any Warrant Cs remain outstanding, the Company may not issue any common stock or common stock equivalents at a price per share less $1.65. In the event of a breach
of this provision, the holders may elect to require the Company to purchase the Warrant Cs for a purchase price equal to the Black-Scholes value of the remaining unexercised portion of each
Warrant C. As a result of the November 8, 2007 and December 20, 2007 preferred stock financing, as described in Note I below, the holders were entitled for a limited period
of time (45 days after each issuance) to exercise this right. During 2007, the Company paid approximately $0.7 million to redeem Warrant Cs representing 621,215 shares of common
stock. During 2008, the Company paid approximately $0.2 million to redeem Warrant Cs representing 151,516 shares of common stock. (See table below for assumptions used in valuing the
warrants redeemed). During 2010 warrants to purchase 431,819 shares of common stock were exercised. As of December 31, 2010, Warrant Cs to purchase 613,637 shares of common stock were
outstanding.

If
following the later of (i) the effective date of the Registration Statement and (ii) the six month anniversary of the issuance date, the volume weighted average price
per share of the Company's common stock for any 20 consecutive trading days exceeds 200% of the exercise price, then, if certain conditions are satisfied, the Company may require the holders of the
Warrant Cs to exercise up to 50% of the unexercised portions of such warrants. If following the 24 month anniversary of the issuance date, the volume weighted average price per share of
the Company's common stock for any 20 consecutive trading days exceeds 300% of the exercise price, then, if certain equity conditions are satisfied, the Company may require the holders of the
Warrant Cs to exercise all or any part of the unexercised portions of such warrants. During 2010 the Company notified the holders of the outstanding Warrant As and Warrant Cs that
the holders were required to exercise 50% of their un-exercised warrants. As a result of this notification by the Company holders of Warrant As exercised

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)

warrants
to purchase 469,699 shares of common stock and holders of Warrant Cs exercised warrants to purchase 234,849 shares of common stock. Subsequent to December 31, 2010 an additional
580,303 Warrant As and 265,152 Warrant Cs were exercised as a result of notification sent out to the remaining holders of the Warrant As and Warrant Cs.

The
table below summarizes Black-Scholes option pricing model range of assumptions that were used in valuing the warrants redeemed for both the Warrant As and Warrant Cs.

Warrant As

Warrant CsAssumptions:Expected life

5.68 years to 5.69 years

6.67 years to 6.68 yearsExpected volatility ranging from

83.0%

85.0%Dividends

none

noneRisk-free interest rate

3.75% - 3.84%

3.85% - 3.93%




First Albany Capital ("FAC") acted as placement agent in connection with the July 19, 2006 private placement. In addition to a
cash transaction fee, FAC or its designees were entitled to receive five-year warrants to purchase 218,182 shares of the Company's common stock at an exercise price of $1.87 per share. As
of December 31, 2010 and 2009, Placement Agent warrants to purchase 218,182 shares of common stock were outstanding, respectively.

Accounting for the Warrants

Upon issuance, the Warrant As, Warrant Bs and Warrant Cs, along with the Placement Agent Warrants (together the
"Warrants"), did not meet the requirements for equity classification, because such warrants (a) must be settled in registered shares, (b) are subject to substantial
liquidated damages if the Company is unable to maintain the effectiveness of the resale registration of the shares and (c) there is a cash-out election using a Black-Scholes
valuation under various circumstances. Therefore these Warrants are required to be accounted for as freestanding derivative instruments. Changes in fair value are recognized as either a gain or loss
in the statement of operations under the caption "Change in fair value of notes and warrants."

Upon
issuance, the Company allocated $2.7 million of the initial proceeds to the Warrants and immediately marked them to fair value resulting in a derivative liability of
$4.9 million and a charge to other expense of $2.2 million. As of December 31, 2010 and 2009, the remaining outstanding Warrants have been marked to fair value resulting in a
derivative liability of $5.5 million and $5.0 million, respectively.

The
credit / (charge) to Change in fair value of notes and warrants, for the year ended December 31, 2010, 2009 and 2008 was ($3.2) million, ($2.6) million and
$0.3 million, respectively, related to Warrant As, Bs and Cs and placement agent warrants. The Company also recorded a charge to Change in Fair Value of notes and warrants related to its
Series C Preferred Stock warrants of ($3.2) million for the year ended December 31, 2009.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)

A summary of the changes in the fair value of the warrant liabilities:

Balance at December 31, 2007

$
3,244,316Fair value adjustment(2)


(836,878
)Change in fair value of redeemed Warrant As and Cs at redemption(1)(2)


572,250Warrant Redemptions:Cash Paid for Warrant A redemption(1)


(387,591
)Cash paid for Warrant C redemption(1)


(184,659
)Balance at December 31, 2008

$
2,407,438Change in accounting principle(3)


22,041,541Fair value adjustment(2)


2,569,336Series C Preferred Stock Warrant fair value adjustment(2)


3,152,244Reclassification of Series C Preferred Stock Warrants to equity(4)


(25,193,785
)Balance at December 31, 2009

$
4,976,774Warrants exercised


(2,684,988
)Fair value adjustment(2)


3,162,323Balance at December 31, 2010

$
5,454,109


(1)As
a result of the 2007 Series C preferred stock financing, certain holders of both Warrant As (1,242,426) and Warrant Cs (621,215),
through December 31, 2007, exercised their right of redemption, resulting in the Company paying to each redeeming warrant holder the Black-Scholes value of these warrants on the date of
notification of redemption. During the year ended December 31, 2008, holders of both Warrant As (303,031) and Warrant Cs (151,516) exercised their right of redemption, resulting
in the Company paying to each redeeming warrant holder the Black-Scholes value of these warrants on the date of notification of redemption.(2)Amounts
included in change in fair value of warrants on consolidated statement of operations.(3)19,799,022
of the Company's issued and outstanding common stock purchase warrants previously treated as equity pursuant to the derivative treatment
exemption were no longer afforded equity treatment. As such, effective January 1, 2009 the Company reclassified the fair value of these common stock purchase warrants, which have exercised
price reset features, from equity to liability status as if these warrants were treated as derivative liability since their date of issuance.(4)On
July 3, 2009, the Company modified certain provisions contained within the common stock purchase warrants issued in connection with the
Series C Preferred Stock financing. See Note C. Significant Accounting Policies and Basis of ConsolidationWarrant Liabilities for a description of the modifications.
As a result of these modifications 19,799,023 of the Company's issued and outstanding common stock purchase warrants, previously treated as a derivative liability on January 1, 2009 will now be
treated as equity pursuant to the derivative treatment exemptions afforded the Company. In addition, as a result of this modification, the Company will no longer be required to mark these warrants to
their fair value each quarter.


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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)




ValuationMethodology and Significant Assumptions

The valuation of derivative instruments utilizes certain estimates and judgments that affect the fair value of the instruments. Fair
values for the Company's derivatives are estimated by utilizing valuation models that consider current and expected stock prices, volatility, dividends, forward yield curves and discount rates. Such
amounts and the recognition of such amounts are subject to significant estimates which may change in the future.

In
estimating the fair value of the Warrants the following methods and significant input assumptions were applied:



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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)



Warrant AsInput

Dec. 31,
2007

Dec. 31,
2008

Dec. 31,
2009

Jan. 7,
2010

Jan. 14,
2010

April 26,
2010

May 12,
2010

July 27,
2010

Dec. 31,
2010Quoted Stock Price

$
1.650

$
1.55

$
2.82

$
2.78

$
2.77

$
2.88

$
2.74

$
3.41

$
4.50Exercise Price

$
1.815

$
1.815

$
1.815


1.815

$
1.815

$
1.815

$
1.815

$
1.815

$
1.815Time to Maturity (in years)


5.60


4.60


3.60


3.6


3.6


3.2


3.2


3.0


2.6Stock Volatility


83
%

73
%

75
%

75
%

75
%

75
%

75
%

75
%

70
%Risk-Free Rate


3.53
%

1.44
%

2.00
%

1.74
%

1.74
%

1.0
%

1.0
%

0.6
%

.84
%Dividend Rate


0
%

0
%

0
%

0
%

0
%

0
%

0
%

0
%

0
%Non-Exercise Period


N/A


N/A


N/A


N/A


N/A


N/A


N/A


N/A


N/AWarrant CsInput

Dec. 31,
2007

Dec. 31,
2008

Dec. 31,
2009

Jan. 14,
2010

Dec. 31,
2010Quoted Stock Price

$
1.650

$
1.55

$
2.82

$
2.77

$
4.50Exercise Price

$
1.815

$
1.815

$
1.815

$
1.815

$
1.815Time to Maturity (in years)


6.5


5.50


4.50


4.5


3.6Stock Volatility


85
%

80
%

75
%

75
%

70
%Risk-Free Rate


3.64
%

1.63
%

2.44
%

2.22
%

1.29
%Dividend Rate


0
%

0
%

0
%

0
%

0
%Non-Exercise Period


Until 1/17/08


N/A


N/A


N/A


N/A


(1)Warrant Cs
were issued on July 17, 2007 upon the exercise of the Warrant Bs.


Input

Dec. 31,
2008

Dec. 31,
2009

Dec. 31,
2010Quoted Stock Price

$
1.55

$
2.82

$
4.50Exercise Price

$
1.87

$
1.87

$
1.87Time to Maturity (in years)


2.55


1.55


0.55Stock Volatility


80
%

75
%

60
%Risk-Free Rate


0.89
%

0.84
%

.20
%Dividend Rate


0
%

0
%

0
%Non-Exercise Period


N/A


N/A


N/A




67

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

G. WARRANT LIABILITIES (Continued)



H. DEBT INSTRUMENTS

On February 26, 2008, the Company entered into a Loan and Security Agreement (the "Loan Agreement") with Silicon Valley Bank (the "Bank"). Under the terms of the Loan Agreement,
the Bank agreed to provide the Company with a credit line up to $10.0 million. The Company's obligations under the Loan Agreement are secured by substantially all of the assets of the Company
and advances under the Loan Agreement are limited to 80% of eligible receivables and the lesser of 25% of the value of the Company's eligible inventory, as defined, or $1.0 million. Interest on
outstanding borrowings accrued at a rate per annum equal to the Prime Rate plus one percent (1.0%) per annum, as defined, or the LIBOR Rate plus three and three quarter percent (3.75%) per annum. The
Loan Agreement contained certain financial covenants relating to tangible net worth, as defined, which the Company must satisfy in order to borrow under the agreement. In addition, the Company agreed
to pay to the Bank a collateral monitoring fee of $750 per month and agreed to the following additional terms: (i) $50,000 commitment fee, $25,000 to be paid at signing of the Loan Agreement
and $25,000 to be paid on the one year anniversary of the Loan Agreement; (ii) an unused line fee in the amount of 0.5% per annum of the average unused portion of the revolving line; and
(iii) an early termination fee of 0.5% of the total credit line if the Company terminated the Loan Agreement prior to 12 months from the Loan Agreement's effective date.

During
2010, the Company entered into several amendments to Loan Agreement. At December 31, 2010 the terms of the Loan Agreement are as follows:



68

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

H. DEBT INSTRUMENTS (Continued)



At
December 31, 2010 and December 31, 2009, the Company had $15.0 million and $3.0 million outstanding under the Loan Agreement and the Bank's prime rate was
4%. The rate used was the Bank's prime rate of 4.0% plus 0.50% (or 4.5% at December 31, 2010) and 4.0% plus 1% (or 5% at December 31, 2009). Subsequent to December 31, 2010 the
Company repaid $15.0 million outstanding on the line of credit. At December 31, 2010, the Company was in compliance with the liquidity and Adjusted EBITDA covenant requirements. As of
December 31, 2010, the Company had $0 available under the line of credit.

Notes Payable

On June 16, 2010, the Company entered into a Venture Loan and Security Agreement with Compass Horizon Funding Company LLC
(the "Lender") pursuant to which the Lender has loaned the Company $12,000,000 (the "Subordinated Loan"). After the Lender's closing fees and expenses, the net proceeds to the Company were
$11,826,500. Interest on the Subordinated Loan will accrue at a rate per annum equal to 12.58%. The Subordinated Loan is subordinated to up to $15,000,000 of senior indebtedness, provided that from
and after August 31, 2010, the senior indebtedness cannot exceed an amount equal to 80% of the Company's accounts receivable plus 40% of its inventory. The Subordinated Loan is to be repaid
over 42 months following the closing. From June 15, 2010 through April 30, 2011, the Company is only required to pay interest on the Subordinated Loan and thereafter the
Subordinated Loan will be repaid in 33 substantially equal monthly installments of interest and principal. The Subordinated Loan may be prepaid by the Company by paying all accrued interest through
the date of payment, the then outstanding principal balance and a prepayment premium equal to a declining percentage of the principal amount outstanding at the time of prepayment (initially 4% during
the first twelve months of the subordinated Loan, decreasing to 3% for the succeeding twelve months and 2% thereafter). In connection with the Subordinated Loan, the Company has issued to the Lender
five year warrants to acquire up to an aggregate of 591,716 shares of the Company's common stock at an exercise price of $2.43 per share (which was the 20-day trailing volume weighted
average price of the Company's common stock). The relative fair value of the warrants was $0.9 million and will be recorded as interest expense over the term of the loan. The Company estimated
the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions:

June 16, 2010Assumptions:Expected life


5 yearsExpected volatility


74.9
%Dividends


noneRisk-free interest rate


2.0
%


69

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

H. DEBT INSTRUMENTS (Continued)

The
Subordinated Loan is to be repaid over 42 months as follows:

Fiscal Year

Principal
Repayment2011

$
2,541,7202012


4,233,1912013


4,797,5312014


427,558Total

$
12,000,000


I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK

Series B Convertible Preferred Stock

On October 31, 2003, the Company completed a $7.7 million equity transaction involving the issuance of 1,535 shares of
its Series B Convertible Preferred Stock, $0.01 par value per share (the "Series B Preferred Stock"), and warrants to purchase up to 1,228,000 shares of the
Company's common stock, to accredited investors (the "October 2003 Financing Transaction"). In connection with the October 2003 Financing Transaction, the Company issued shares of Series B
Preferred Stock for $5,000 per share. The Series B Preferred Stock was convertible into a number of shares of common stock equal to $5,000 divided by the conversion price of the Series B
Preferred Stock, which was initially $2.50. As of December 31, 2009, and 2008 the conversion price for the Series B Preferred Stock was $1.49 (as a result of adjustments to the
conversion price following issuance in accordance with the terms of the Series B Preferred Stock) and$1.55, respectively. During 2009, 215 shares of Series B Preferred Stock were
converted by their holders resulting in the Company issuing 719,528 shares of common stock. During 2010, the remaining 75 shares of Series B Preferred Stock were converted by their holders
resulting in the company issuing 251,677 shares of common stock. As of December 31, 2010 and 2009, 0 and 75 shares of Series B Preferred Stock were outstanding, respectively. As of
December 31, 2009, the liquidation preference of the remaining 75 shares of Series B Preferred Stock was $375,000, and these were convertible into 251,677 shares of common stock.

As
a result of the issuance of shares of approximately 17.9 million shares of common stock during the year ended December 31, 2009, the Company adjusted the conversion
price on the Series B Preferred Stock to $1.49 from $1.55 at December 31, 2008 and recorded a charge of $55,369.

Dividends on Series B Preferred Stock

The shares of Series B Preferred Stock initially bore a cumulative dividend at a rate of 6% per annum; pursuant to its terms,
this was increased to a rate of rate of 8% per annum on October 1, 2005. Dividends on the Series B Preferred Stock were payable semi-annually and, except in certain limited
circumstances, were entitled to be paid by the Company, at its option, either through the issuance of shares of common stock or in cash. The Company elected to pay the dividend in shares of common
stock, and issued a number of shares of common stock equal to the quotient of the dividend payment divided by the greater of 80% of the average closing bid and ask price of the common stock on the

70

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

Nasdaq
Stock Market for the 15 trading days ending on the 11th trading day prior to the date the dividend is required to be paid, and the conversion price, which was initially $2.50, but which
had subsequently been adjusted in accordance with the terms of the Series B Preferred Stock to $1.49 and $1.55 (as of December 31, 2009 and 2008, respectively). The Company paid all
dividends in shares of common stock, in lieu of cash dividends. The table below details out the number of shares and the amount charged to interest expense during the respective periods:

Period

Shares Issued

$ Value of DividendYear ended December 31, 2008


86,241

$
133,666Year ended December 31, 2009


56,462

$
86,370Year ended December 31, 2010


10,067

$
15,000


As
part of the October 2003 Financing Transaction, the Company also issued warrants to purchase up to 1,228,000 shares of its common stock. These warrants were exercisable for a
five-year term and had an initial exercise price of $3.32 per share. These warrants expired unexercised in 2008.

Liquidation Preference on Series B Preferred Stock

In the event of a liquidation of the Company, the holders of shares of the Series B Preferred Stock would have been entitled to
receive a liquidation payment prior to the payment of any amount with respect to the shares of the common stock. The amount of this preferential liquidation payment would have been $5,000 per share of
Series B Preferred Stock, plus the amount of any accrued but unpaid dividends on those shares. This entitlement to a liquidation preference was eliminated upon the holders' conversion of the
Series B Preferred Stock into common shares in October 2010.

Mandatory Conversion of Series B Preferred Stock

If certain conditions described below are met, each share of Series B Preferred Stock will be automatically converted into a
number of shares of common stock equal to $5,000 divided by the conversion price of the Series B Preferred Stock, which was initially $2.50, but which has since been adjusted in accordance with
the terms of the Series B Preferred Stock to $1.49 and $1.55 (as of December 31, 2009 and 2008, respectively). Mandatory conversion may only occur if the average of the closing bid and
ask price of the common stock on the Nasdaq Stock Market exceeds $5.00 (as adjusted for stock splits, stock dividends, combinations and similar transactions) for 20 consecutive trading days and either
the registration statement governing the underlying shares of common stock is effective or the shares of common stock issuable upon conversion of the Series B Preferred Stock can be sold
without restriction pursuant to Rule 144 of the Securities Act of 1933. The mandatory conversion date will be extended for so long as the following events have occurred and are
continuing:



71

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)



If,
however, on the mandatory conversion date, a holder is prohibited from converting all of its shares of Series B Preferred Stock as a result of the restrictions described below
under "Conversion Restrictions," such shares of Series B Preferred Stock will not be converted, will remain outstanding and will not accrue any dividends.

Conversion Restrictions

Unless the Company seeks and obtains stockholder approval, the number of shares of common stock the Company may issue upon the
conversion of the shares of Series B Preferred Stock (when aggregated with the number of shares of common stock issued as dividends on the Series B Preferred Stock and upon exercise of
the warrants issued to the placement agent and its affiliates for the Series B Preferred Stock financing) is limited to 4,947,352 shares (representing 19.999% of the Company's total outstanding
common stock as of October 31, 2003 immediately prior to the issuance of the Series B Preferred Stock). In addition, no holder may convert shares of Series B Preferred Stock if
conversion of those shares would result in the holder owning more than 4.99% of the common stock then outstanding or would result in the holder beneficially owning more than 9.999% of the common stock
then outstanding, unless the holder waives this limitation at least 61 days prior to the proposed conversion.

Failure to Convert

If for any reason upon an optional or mandatory conversion the Company cannot issue shares of common stock which have been registered
for resale pursuant to an effective registration statement, then the Company will be obligated to issue as many shares of common stock as its is able to issue. If the Company does not have enough
shares of common stock to cover the conversion of all outstanding shares of Series B Preferred Stock, then with respect to the unconverted shares of Series B Preferred Stock (other than
unconverted Series B Preferred Stock resulting from the restrictions described above under "Conversion Restrictions"), the holder will have the right to (i) void its conversion notice,
(ii) require the Company to redeem the unconverted shares of Series B Preferred Stock at a price per share equal to $6,250 plus liquidated damages and any accrued but unpaid dividends or
(iii) require the Company to issue shares of common stock that have not been registered pursuant to the Securities Act. If the holder elects redemption, the Company may pay the redemption price
either in cash or in shares of common stock based on the quotient of the redemption price divided by the greater of 80% of the average of the closing bid and ask price of the common stock on the
Nasdaq Stock Market for the 15 trading days ending on the 11th trading day prior to the redemption date and the conversion price,

72

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

which
was initially $2.50, but which has since been adjusted in accordance with the terms of the Series B Preferred Stock to $1.49, $1.55 and $1.55 (as of December 31, 2009, 2008, and
2007 respectively).

Accounting for the Series B Preferred Stock and Adjustments to the Conversion Price

The Company accounted for the transaction by allocating the proceeds received net of transaction costs based on the relative fair value
of the redeemable convertible Series B Preferred Stock and the warrants issued to the investors, and then to any beneficial conversion rights contained in the convertible redeemable preferred
securities as follows:

Security

Face Value

Fair Value

Allocation of
Proceeds, Net of
Transaction Costs

Beneficial
Conversion
Feature

DiscountRedeemable convertible Series B Preferred Stock

$
7,675,000

$
12,398,195

$
5,247,393

$
3,655,607

$
6,083,214Warrants




$
2,935,558

$
1,242,441








Series C Convertible Preferred Stock

On November 8, 2007, the Company entered into a Stock and Warrant Purchase agreement with Rockport Capital Partners
II, L.P. and NGP Energy Technology Partners, L.P. (the "Investors"). Under this purchase agreement, the Investors agreed to purchase in a private placement 25,000 shares of the Company's
Series C convertible preferred stock (the "Series C Preferred Stock") and warrants to purchase up to 19,711,539 shares of common stock, for an aggregate gross purchase price of
$25.0 million. Each share of Series C Preferred Stock, with a face value of $1,000
per share, plus accumulated dividends, was initially convertible into common stock at a price equal to $1.04 per share.

On
October 27, 2010, the holders of all of the outstanding shares of Series C Preferred Stock converted their shares, including accumulated dividends, into common stock,
resulting in the issuance of 27,526,244 shares of common stock. To induce the Series C Preferred Stockholders to convert their shares, the Company paid them an aggregate $1.25 million in
cash upon conversion. On October 27, 2010, the date the Series C Preferred Stock was converted to common shares, the company accelerated the accretion of $1,587,755 to account for the
difference between the carrying value of the Series C Preferred Shares on that date and their conversion value.

The
private placement occurred in two closings. The first closing occurred on November 8, 2007. At the first closing, the Company issued 10,000 shares of Series C Preferred
Stock at $1,000 per share for an aggregate gross purchase price of $10.0 million. The Company also issued warrants to purchase an aggregate of 15,262,072 shares of common stock (the
"Tranche I Warrants"). These warrants are exercisable for a seven-year term and had an initial exercise price of $1.44 per share and were not exercisable until May 8, 2008.
As a result of stockholder approval of the second closing and related matters on December 20, 2007, as described below, the exercise price of these warrants was reduced to $1.25 per share. The
Company considered this a cancellation and reissuance of new warrants and accounted for the change in the fair value of the warrants in the allocation of net proceeds associated with the second
closing and treated it as a deemed dividend to the Series C Preferred Stock holders.

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

See
"Accounting for the Series C Preferred Stock" below. During the year ended December 31, 2010, Tranche I Warrants to purchase 7,631,036 shares of common stock were exercised
via a cashless exercise, resulting in the issuance of 5,038,970 shares of common stock. As of December 31, 2010 and December 31, 2009, Tranche I Warrants to purchase 7,631,036 and
15,262,072 shares of common stock were outstanding, respectively.

At
the second closing, which occurred on December 20, 2007, following stockholder approval, the Company issued 15,000 shares of Series C Preferred Stock for an aggregate
gross purchase price of $15.0 million, of which $10.0 million was paid through the cancellation of the promissory notes previously issued to the Investors on November 7, 2007. At
this closing, the Company also issued warrants (the "Tranche II Warrants") to purchase an aggregate of 4,449,467 shares of common stock at an exercise price of $1.25 per share. These warrants
are exercisable for a seven-year term and are exercisable immediately. During the year ended December 31, 2010, Tranche II Warrants to purchase 253,580 shares of common stock
were exercised via a cashless exercise, resulting in the issuance of 167,445 shares of common stock. As of December 31, 2010 and December 31, 2009, Tranche II Warrants to purchase
4,195,887 and 4,449,467 shares of common stock were outstanding, respectively.

In
the purchase agreement, the Company also agreed to issue the Investors additional warrants in the event that the holders of certain existing warrants (none of whom are affiliated with
the Investors)
exercise those warrants in the future. Upon such exercises, the Company will issue to the Investors additional warrants to purchase common stock equal to one-half of the number of shares
of common stock issued upon exercise of these existing warrants. The exercise price of these warrants will be $1.66 per share.

During
the year ended December 31, 2010, existing warrants to purchase 2,543,830 shares of common stock were exercised resulting in the Company issuing 2,534,166 shares of common
stock, as a result of these exercises the Company issued to the Investors warrants to purchase 1,267,083 shares of common stock at an exercise price of $1.66 per share. On the dates of issuance, the
Company valued these warrants using a Black-Scholes option pricing model with the assumptions detailed below. After valuing these warrants the Company allocated the calculated value to the relative
fair value of each tranche of preferred stock. As a result, the Company recorded the allocated value of the warrant and the beneficial conversion feature of $1,030,000 in the aggregate to the second
closing of the Series C Preferred Stock. The Company recorded a deemed dividend on the Series C Preferred Stock of $515,000 related to the beneficial conversion feature. See Accounting for the Series C Preferred
Stockbelow.

During
the year ended December 31, 2009, existing warrants to purchase 956,060 shares of common stock were exercised resulting in the Company issuing 132,589 shares of common
stock (all warrants exercised in 2009 were exercised on a "cashless" basis resulting in fewer shares being issued). As a result of these exercises the Company issued to the Investors warrants to
purchase 66,295 shares of common stock at an exercise price of $1.66 per share. On the dates of issuance, the Company valued these warrants using a Black-Scholes option pricing model with the
assumptions detailed below. After valuing these warrants the Company allocated the calculated value to the relative fair value of each tranche of preferred stock. As a result, the Company recorded the
allocated value of the warrant and the beneficial conversion feature of $164,000 in the aggregate to the second closing of the Series C

74

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

Preferred
Stock. The Company recorded a deemed dividend on the Series C Preferred Stock of $82,000 related to the beneficial conversion feature. SeeAccounting for the
Series C Preferred Stockbelow.

During
the year ended December 31, 2008, existing warrants to purchase 271,151 shares of common stock were exercised resulting in the Company issuing 174,857 shares of common
stock (some warrants were exercised on a "cashless" basis resulting in fewer shares being issued). As a result of these exercises the Company issued to the Investors warrants to purchase 87,484 shares
of common stock at an exercise price of $1.66 per share. On the dates of issuance, the Company valued these warrants using a Black-Scholes option pricing model with the assumptions detailed below.
After valuing these warrants the Company allocated the calculated value to the relative fair value of each tranche of preferred stock. As a result, the Company recorded the allocated value of the
warrant and the beneficial conversion feature of $252,000 in the aggregate to the second closing of the Series C Preferred Stock. The Company recorded a deemed dividend on the Series C
Preferred Stock of $126,000 related to the beneficial conversion feature. SeeAccounting for the Series C Preferred Stockbelow.

The
table below details the warrants issued related to the exercise of existing warrants:

Date

Exercise
Price

Term

Expiration

Warrants to Purchase
# of SharesJune 28, 2008

$
1.66

7 years

June 28, 2015


77,379September 27, 2008

$
1.66

7 years

September 27, 2015


10,105October 3, 2009

$
1.66

7 years

October 3, 2016


17,911December 31, 2009

$
1.66

7 years

December 31, 2016


48,384March 31, 2010

$
1.66

7 years

March 31, 2017


157,426June 30, 2010

$
1.66

7 years

June 30, 2017


246,134September 30, 2010

$
1.66

7 years

September 30, 2017


413,303December 31, 2010

$
1.66

7 years

December 29, 2017


450,220




Input

June 28,
2008

September 27,
2008

October 3,
2009

December 31,
2009Quoted Stock Price

$
3.01

$
2.10

$
2.01

$
2.82Exercise Price

$
1.66

$
1.66

$
1.66

$
1.66Time to Maturity (in years)


7.00


7.00


7.00


7.00Stock Volatility


84.65
%

85.44
%

82.66
%

81.55
%Risk-Free Rate


3.5
%

3.18
%

2.50
%

2.00
%Dividend Rate


0
%

0
%

0
%

0
%


75

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)



Input

March 31,
2010

June 30,
2010

Sept. 30,
2010

December 31,
2010Quoted Stock Price

$
2.42

$
2.86

$
3.76

$
4.50Exercise Price

$
1.66

$
1.66

$
1.66

$
1.66Time to Maturity (in years)


7.00


7.00


7.00


7.00Stock Volatility


80.8
%

79.13
%

73.44
%

75
%Risk-Free Rate


2.4
%

2.5
%

1.75
%

1.75
%Dividend Rate


0
%

0
%

0
%

0
%


As
of December 31, 2010, if all of the remaining existing warrants are exercised, the Company would need to issue warrants to purchase an additional 984,091 shares of common stock
to the Investors.

Dividends on Series C Preferred Stock

Until their conversion in October 2010, the shares of Series C Preferred Stock accrued a dividend at a rate of 5% per annum of
the face value. Dividends on the Series C Preferred Stock were accrued, whether or not declared, and were payable quarterly in cash or, at the Company's option, added to the Stated Liquidation
Preference Amount.

Liquidation Preference

In the event of the liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of the Series C Preferred Stock then outstanding would have been entitled to receive, out of the assets of the Company available for distribution to its
stockholders before any payment was made to the holders of junior stock by reason of their ownership thereof, an amount per share equal to the greater of:



Conversion

The holder of Series C Preferred Stock had the following conversion rights:



At any time the holder of any such shares of Series C Preferred Stock may, at such holder's option, elect to convert all or any
portion of the shares of Series C Preferred Stock held by such person into a number of fully paid and nonassessable shares of common stock equal to the quotient of (i) the Stated
Liquidation Preference Amount of the shares of Series C Preferred Stock being converted divided by (ii) the conversion price then in effect as of the date of the delivery by such holder
of its

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

notice
of election to convert. The initial conversion price of the Series C Preferred Stock is $1.04 per share. The Series C Preferred Stock will receive weighted average
anti-dilution protection in the event of a dilutive issuance in accordance with a formula set forth in the Certificate of Designation, subject to certain exceptions.



At any time on or after November 8, 2009, if the average closing price of the Company's common stock for any immediately
preceding 180-day period exceeds $7.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the
common stock), the Company will have the right, but not the obligation, to convert each outstanding share of Series C Preferred Stock into a number of fully paid and nonassessable shares of
common stock equal to the quotient of (i) the Stated Liquidation Preference Amount divided by (ii) the conversion price in effect as of the Company conversion date.

Redemption

At any time and from time to time on or after November 8, 2011 the holders of at least 66.7% of the then outstanding shares of
Series C Preferred Stock could have elected to have all or any portion of the outstanding shares of Series C Preferred Stock redeemed. The Company could have effected the redemption on a
redemption date by paying cash or, at the Company's election, shares of common stock (valued in the manner described below).

If
such redemption was for cash, the Company would have effected the redemption by paying in cash in exchange for each share of Series C Preferred Stock to be redeemed a sum equal
to the product of (i) 1.2 multiplied by (ii) the Stated Liquidation Preference Amount.

If
such redemption was for shares of common stock, the Company would have effected the redemption by issuing, in exchange for each share of Series C Preferred Stock to be
redeemed, that number of shares of common stock equal to (A) the product of (i) 1.4 multiplied by (ii) the Stated Liquidation Preference Amount divided by (B) the fair
market value of the common stock, based on a 10 day volume weighted average, as of the redemption date.

Accounting for the Series C Preferred Stock

Initially, based on the accounting guidance in effect at the time of the closing of the Series C Preferred Stock transaction
(see "Note G. Warrant Liabilities"), the Company accounted for the transaction by allocating the proceeds received net of transaction costs based on the relative fair value of the
redeemable convertible Series C Preferred Stock and the warrants issued to the Investors, and

77

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Table of Contents

SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

then
to any beneficial conversion rights contained in the convertible redeemable preferred securities as follows:

Security

Face
Value

Fair
Value

Allocation of
Proceeds, Net of
Transaction Costs

Beneficial
Conversion
Feature

Initial
Carrying
ValueRedeemable convertible Series C Preferred Stock

$
25,000,000

$
18,193,950

$
12,991,097

$
11,762,887

$
1,228,210Warrants




$
18,352,179

$
10,092,623








The
Series C Preferred Stock was classified as temporary equity on the balance sheet.

The
re-pricing of the exercise price of the Tranche I warrants from $1.44 to $1.25, as described above, was treated as a cancellation of the original warrants issued
on November 8, 2007 and a re-issuance of new warrants on December 20, 2007. The difference in fair value of the warrant was included in the allocation of net proceeds
associated with the second closing of the Series C Preferred Stock on December 20, 2007. The Company treated this as a deemed dividend on the Series C Preferred Stock. The Company
recorded a discount, including the re-pricing and
beneficial conversion feature of $11,762,887 and recorded a deemed dividend of $11,947,881 to the holders of the Series C Preferred Stock, which included the initial allocation of the discount
of $11,762,887 and $184,994 related to the accretion of the Series C Preferred Stock to its redemption value through the date that holders of the Series C Preferred Stock may first
exercise their redemption right. Prior to the conversion of the Series C Preferred Stock in October 2010, the Company used the effective interest method to accrete the carrying value of the
Series C Preferred Stock through the earliest possible redemption date (November 8, 2011), at which time the value of the Series C Preferred Stock would have been
$30.0 million or 120% of its face value and dividends.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

I. REDEEMABLE CONVERTIBLE SERIES B AND SERIES C PREFERRED STOCK (Continued)

The
components of the carrying value of the Series C Preferred Stock from inception on November 8, 2007, through the years ended December 31, 2007,
December 31, 2008, December 31, 2009 and December 31, 2010, are as follows:

TotalBalance at December 31, 2007

$
13,276,091Accretion of original carry value to redemption value


2,848,502Dividend(1)


1,250,000Additional discount from issuance of warrants and beneficial conversion feature


(126,000
)Balance at December 31, 2008

$
17,248,593Accretion of original carry value to redemption value for the year ended December 31, 2009


3,840,830Dividend(1)


1,250,000Additional discount from issuance of warrants and beneficial conversion feature


(82,000
)Balance at December 31, 2009

$
22,257,423Accretion of original carry value to redemption value for the year ended December 31, 2010


5,857,577Dividend(1)


1,027,397Additional discount from issuance of warrants and beneficial conversion feature


(515,000
)Conversion of Series C Preferred Stock to Common Stock


(28,627,397
)Balance at December 31, 2010

$
0


(1)The
Company elected to add the dividend to the liquidation preference of the Series C Preferred Stock and it was recorded as a dividend to the
holders of the Series C Preferred Stock.


In
valuing the warrants associated with the Series C Preferred Stock the Company used the Black-Scholes option pricing model with the following range of assumptions:

November 8, 2007

December 20, 2007Assumptions:Expected life

4.0 years

5.2 yearsExpected volatility

70%

70%Dividends

none

noneRisk-free interest rate

3.64%

3.48%


The
Company currently designates these warrants as equity instruments. As stated above, the holders of the Series C Preferred Stock converted their shares of Series C
Preferred Stock into common stock on October 27, 2010.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

J. PRODUCT WARRANTIES

The Company provides a warranty to its customers for most of its products sold. In general the
Company's warranties are for one year after the sale of the product and five years for photovoltaic inverter product sales. The Company reviews its warranty liability quarterly. The Company's estimate
for product warranties is based on an analysis of actual expenses by specific product line and estimated future costs related to warranty. Factors taken into consideration when evaluating the
Company's warranty reserve are (i) historical claims for each product, (ii) the development stage of the product, (iii) volume increases, (iv) life of warranty and
(v) other factors. To the extent actual experience differs from the Company's estimate, the provision for product warranties will be adjusted in future periods. Such differences may be
significant.

The
following is a summary of the Company's accrued warranty activity for the following periods:

Year Ended December 31,2010

2009

2008Balance at beginning of year

$
1,869,579

$
1,982,087

$
1,901,757Provision


3,050,012


1,204,690


2,340,594Usage


(919,510
)

(1,317,198
)

(2,260,264
)Balance at end of year

$
4,000,081

$
1,869,579

$
1,982,087


The
warranty reserve is included in other accrued expenses on the accompanying consolidated balance sheets.

K. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its facilities under various operating leases that expire through October 2016.

Future
minimum annual rentals under lease agreements at December 31, 2010 are as follows:

Fiscal Year2011

$
1,971,5112012


1,889,7612013


1,712,0532014


1,497,3952015


1,538,277thereafter


2,192,009Total

$
10,801,006


Total
rental expense including operating expenses and real estate taxes for operating leases from continuing operations amounted to $1.8 million, $1.1 million and
$1.1 million for the years ended December 31, 2010, 2009 and 2008, respectively.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

K. COMMITMENTS AND CONTINGENCIES (Continued)

Certain
of the facility leases contain escalation clauses, and rental expense has been recognized on a straight-line basis over the remaining lease term. At
December 31, 2010 and 2009 deferred rent expense amounted to approximately $0.1 million and $0.1 million, respectively.

Letters of Credit

The Company utilizes a standby letter of credit to satisfy a security deposit requirement. Outstanding standby letters of credit as of
December 31, 2010 and 2009 were $0 and $34,000, respectively. The Company is required to pledge cash as collateral on these outstanding letters of credit. As of December 31, 2009, the
cash pledged as collateral for these letters of credit was $34,000, and is included in restricted cash and cash equivalents on the balance sheet.

Employment Agreements

As of December 31, 2008 the Company had either terminated or given notice to certain employees that had employment agreements
with the Company that provided for severance payments and accelerated vesting of options upon termination of employment. As a result, the Company charged approximately $0.5 million to
restructuring during the year ended December 31, 2008. Approximately $0.3 million related to the employment contract of the former chief executive officer, which was paid subsequent to
December 31, 2008.

The
Company's employment arrangement with its current Chief Executive Officer and Chief Financial Officer each provides that if his employment is terminated by the Company without cause
or is constructively terminated within one year following a change of control transaction, their salary and medical benefits will be continued for one year thereafter subject to his execution of a
release agreement with the Company.

Litigation

From time to time, the Company is a party to routine litigation and proceedings in the ordinary course of business. The Company is not
aware of any current or pending litigation in which the Company is or may be a party that it believes could materially adversely affect the results of operations or financial condition.

In
the normal course of our business, the Company is party to various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged
liabilities arising out of matters occurring during the normal operation of our business.

In
accordance with ASC 450-20, the Company accrues for legal proceedings when losses become probable and reasonably estimable. As of the end of each applicable reporting
period, the Company reviews each of its legal proceedings to determine whether it is probable, reasonably possible or remote that a liability has been incurred and, if it is at least reasonably
possible, whether a range of loss can be reasonably estimated under the provisions of ASC 450-20-25-2. In instances where the Company determines that a loss is
probable and the Company can reasonably estimate a range of losses the Company may incur with respect to such a matter, the Company records an accrual for the amount within the range that constitutes
its best estimate of the possible loss. If the Company is able to reasonably estimate a range but no amount within the range appears to be a better estimate than any

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

K. COMMITMENTS AND CONTINGENCIES (Continued)

other,
the Company records an accrual in the amount that is the low end of such range. When a loss is reasonably possible but not probable the Company will not record an accrual but it will disclose
its estimate of the possible range of loss where such estimate can be made in accordance with ASC 450-20-25-3. As of December 31, 2010, there were no
accruals established related to the Company's outstanding legal proceedings.

The
Company offers no prediction of the outcome of any of the proceedings or negotiations described below. The Company is vigorously defending each of these lawsuits and claims. However,
there can be no guarantee the Company will prevail or that any judgments against it, if sustained on appeal, will not have a material adverse effect on our business, financial condition, results of
operations or cash flows.

On
February 17, 2011, FuelCell Energy, Inc. ("FuelCell Energy") filed a Demand for Arbitration with the American Arbitration Association seeking recovery of damages related
to allegedly defective transformers that the Company procured for them. In its Demand for Arbitration, FuelCell Energy asserts that it is entitled to recovery of approximately $2.8 million from
us. The Company vigorously denies the allegation that the transformers were defective, and has filed a counterclaim seeking recovery of amounts due to the Company from FuelCell Energy for materials
and engineering services that the Company supplied to them totaling approximately $1.4 million. This matter is at the early stages of discovery, and the Company does not believe a loss is
probable.

L. EMPLOYEE BENEFIT PLANS

During 2010, the Company implemented its employee stock purchase plan ("ESPP"). Under the ESPP, qualified employees may purchase shares of Common Stock by payroll deduction at a 15%
discount from the market price. 2,000,000 shares of Common Stock have been reserved for this purpose. During the year ended December 31, 2010, 79,895 shares of Common Stock were issued under
the ESPP. As of December 30, 2010, 1,920,105 shares of Common Stock were available for distribution under the ESPP. The Company recorded non-cash stock-based compensation expense of
approximately $221,000 for the year ended December 31, 2010.

In
addition, the Company offers a 401(k) Employee Benefit Plan (the "Plan"). Under the Plan, any regular employee of the Company or its wholly owned US subsidiaries, as defined by the
Plan, who has attained the age of 21 years is eligible to participate. The Plan allows an employee to defer up to 100% of his or her compensation, as limited under IRC Section 402(g),
through contributions to the Plan. Prior to January 1, 2009, the Company matched 100% in the Company's common stock up to the first 6% of an employee's pay that he or she contributed to the
Plan. Participants were vested immediately in the matches of the Company common stock. The match contribution was determined and accrued in dollars and converted to shares of the Company's common
stock using the share price of the last business day of each fiscal quarter. The stock was issued as soon as practical in the following period. The table below details out the Company's matching
contributions made under the Plan, the number of shares of the Company's common stock issued under the Plan and the value of the common

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

L. EMPLOYEE BENEFIT PLANS (Continued)

stock
issued by the Company as matching contributions to the Plan for the year ended December 31, 2008, as follows:

Matching
Contribution $'s

Shares of
Common
Stock
Issued

Value of
Common
Stock
Issued $'sYear ended December 31, 2008

$
541,680


279,831

$
578,232


The
value of the common stock issued as matching contributions was based on the closing price of the Company's common stock on the Nasdaq Capital Market for the last day of the fiscal
quarter in which the contributions were earned. Shares of common stock were transferred the first practical day following the end of the quarter in which the shares were earned. As of
January 1, 2009, the Company has elected to cease the matching in shares of its common stock. During January 2009, the Company issued 69,650 shares of common stock related to the final
distribution to its employees. Since January 2009, the Company has provided a 3% match to be paid in cash to all eligible participants on a quarterly basis. For the years ended December 31,
2010, 2009 and 2008, the Company incurred $408,722, $304,867 and $541,680, respectively, in 401(k) matching contribution expense.

M. INCOME TAXES

The provision for income taxes consists of the following:

Year Ended December 31,2010

2009

2008Loss before income taxes:Continuing Operations:United States


(5,316,810
)
$
(28,098,354
)
$
(9,379,900
)Foreign


(7,033,702
)

(1,864,704
)

(2,229,636
)$
(12,350,512
)
$
(29,963,058
)
$
(11,609,536
)Discontinued Operations:United States


531,607

$
91,677

$
(1,595,284
)Foreign








$
531,607

$
91,677

$
(1, 595,284
)Deferred income tax benefit / (provision)Federal

$
(2,574,672
)
$
8,199,910

$
(1,557,838
)Foreign


3,461,044


(273,604
)

(486,986
)State


1,477,442


589,512


(954,656
)$
2,363,814

$
8,515,818

$
(2,999,480
)Change in valuation allowance for deferred tax assets

$
(2,363,814
)
$
(8,515,818
)
$
2,999,480Income tax expense, net, reported in the accompanying statement of operations

$


$


$



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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

M. INCOME TAXES (Continued)

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. As of December 31, 2010 and 2009, the components of the net deferred tax assets/ (liabilities) are as follows:

Year Ended December 31,2010

2009Federal net operating loss carryforwards

$
40,470,482

$
45,996,750Foreign net operating loss carryforwards


8,236,714


4,775,671State net operating loss carryforwards, net of federal benefit


5,173,209


4,138,788Tax credits


759,051


957,551Depreciation and amortization


465,648


440,348Stock options


1,259,740


Accrued expenses


2,852,944


Other


584,588


1,129,454Total

$
59,802,376

$
57,438,562Valuation allowance


(59,802,376
)

(57,438,562
)Net deferred income taxes

$


$



As
of December 31, 2010, the Company had U.S. federal and state net operating loss carry forwards of approximately $119.0 million and $55.0 million, respectively,
which may be available to offset future federal and state income tax liabilities. The federal net operating loss carryforwards expire at various dates beginning in 2010 through 2030 and the state net
operating loss carryforwards expire beginning in 2011 through 2030. The Company has foreign net operating loss carryforwards of approximately $27.0 million, which expire beginning in 2011
through 2020. The Company has federal and state tax credits of approximately $0.5 million and $0.2 million, respectively. The federal research and development credits begin to expire in
2011, and the state credits begin to expire in 2018.

Management
has evaluated the positive and negative evidence bearing upon the realizability of the Company's deferred tax assets. Management has determined that it is more likely than not
that the Company will not realize the benefits of federal deferred tax assets, and as a result, a full valuation allowance has been established.

At
December 31, 2010, $275,000 of federal and state net operating loss carryforwards relate to deductions for stock option compensation for which the associated tax benefit will
be credited to additional paid-in capital when realized. This amount is tracked separately and not included in the Company's deferred tax assets.

The
tax years 1996 through 2010 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States, as carry forward
attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they are or will be used in a future period. The Company is
currently not under examination by the Internal Revenue Service or any other jurisdiction for any tax years. The Company

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

M. INCOME TAXES (Continued)

did
not recognize any interest and penalties associated with unrecognized tax benefits in the accompanying financial statements. The Company would record any such interest and penalties as a component
of interest expense. The Company does not expect any material changes to the unrecognized benefits within 12 months of the reporting date. The Company had not recorded any adjustments upon
adoption of Uncertainty in Income Taxes (as Amended) and no amount has been reflected in the Company's financial statements related to uncertainty in income taxes.

Under
the Internal Revenue Code, certain substantial changes in the Company's ownership may result in an annual limitation on the amount of net operating loss and tax credit
carryforwards, which may be utilized in future periods. The Company commissioned a study to determine whether Sections 382 or 383 could limit the use of our carryforwards in this manner. After
completing this study, the Company has concluded that the limitation will not have a material impact on its ability to utilize its net operating loss or credit carryforwards.

The
provision for income taxes differs from the federal statutory rate due to the following:

Year Ended December 31,2010

2009

2008Federal and foreign tax at statutory rate


34.0
%

34.0
%

34.0
%State taxes, net of federal benefit


12.5
%

1.3
%

6.5
%Expired net operating loss carryforwards


(9.6
)%


%

(54.2
)%Permanent items


(12.6
)%

(7.6
)%

(7.6
)%Other


(4.3
)%

1.1
%

(1.4
)%Change in valuation allowance


(20.0
)%

(28.8
)%

22.7
%Effective tax rate



%


%


%


N. STOCKHOLDERS' EQUITY

As of December 31, 2010, the Company has reserved 29,401,139 shares of common stock for issuance upon exercise of stock options and warrants, 5,814,110 shares for future issuances
under its stock plans and 1,920,105 shares for future issuances under its Employee Stock Purchase Plan. As of December 31, 2010, holders of warrants may exercise their rights to purchase an
aggregate of 15,974,171 shares of the Company's common stock. As of December 31, 2010 there were options to purchase 13,426,968 shares of common stock outstanding.

Stock Option Plans

Under the Company's 2000, 2002 and 2005 Stock Option Plans (collectively, the "Plans"), both qualified and non-qualified
stock options may be granted to certain officers, employees, directors and consultants to purchase shares of the Company's common stock.

The
Plans are subject to the following provisions:



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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

N. STOCKHOLDERS' EQUITY (Continued)



The
following table summarizes activity of the Company's stock plans since December 31, 2008:

Options OutstandingNumber of
Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual
Term
(years)

Aggregate
Intrinsic
ValueOutstanding at December 31, 2008


10,147,996

$
2.39


8.09

$
382,951Grants


1,657,000


1.49Exercises


(126,250
)

1.59Cancellations


(729,126
)

4.27Outstanding at December 31, 2009


10,949,620

$
2.14


7.66

$
10,096,729Grants


4,618,000


2.96Exercises


(1,210,887
)

1.69Cancellations


(929,765
)

4.05Outstanding at December 31, 2010


13,426,968

$
2.33


7.74

$
29,712,186Vested or expected to vest at December 31, 2010


12,915,233

$
2.30


7.69

$
28,905,458Exercisable at December 31, 2010


6,000,134

$
2.06


6.59

$
15,147,062Exercisable at December 31, 2009


5,322,244

$
2.44


6.67

$
4,631,057


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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

N. STOCKHOLDERS' EQUITY (Continued)

Information
related to stock options outstanding as of December 31, 2010 is as follows:

Options OutstandingOptions ExercisableWeighted
Average
Remaining
Contractual
Life
(years)Range of Exercise Prices

Number of
Shares

Weighted
Average
Exercise
Price

Exercisable
Number of
Shares

Exercisable
Weighted
Average
Exercise
Price$0.62 to $1.82


1,974,073


6.38

$
1.34


1,370,612

$
1.34$1.83 to $1.89


32,500


8.57

$
1.88


9,376

$
1.88$1.90 to $1.90


4,810,020


7.33

$
1.90


3,002,201

$
1.90$1.91 to $2.35


3,171,500


8.68

$
2.29


560,688

$
2.11$2.40 to $3.73


1,919,375


7.83

$
2.66


877,257

$
2.62$3.76 to $5.26


1,419,500


9.33

$
4.31


80,000

$
5.26$9.25 to $9.25


100,000


0.26

$
9.25


100,000

$
9.25$0.62 to $9.25


13,426,968


7.74

$
2.33


6,000,134

$
2.06


As
of December 31, 2010 and 2009, there was approximately $11.0 million and $6.7 million, respectively, of total unrecognized costs related to non-vested
share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted average period of approximately 2.0 years. The table below summarizes the
recognition of the deferred compensation expense associated with employee stock options over the next four years as follows:

Calendar Years Ending December 31,

Non Cash
Stock-Based
Compensation
Expense2011

$
4,555,2732012


3,195,8492013


2,200,1162014


1,000,038Total

$
10,951,276


As
of December 31, 2009, the Company had 92,135 shares of restricted stock outstanding of which all were vested. Restricted stock is comprised of restricted stock awards to
non-employee consultants of the Company for services rendered in fiscal 2009. The Company valued the restricted stock grants at $165,000, the price of the Company's stock on the day of the
grant ($1.78 per share). In connection with these restricted stock grants the Company recognized a general and administrative expense of $75,000 for the year ended December 31, 2009, and
$89,000 in cost of product revenue for the year ended December 31, 2009.

Options
to purchase 1,210,887, 126,250 and 891,168 shares were exercised during the years ended December 31, 2010, 2009 and 2008, respectively, and these options had an intrinsic
value of approximately $1.8 million, $0.3 million and $0.5 million on the date of exercise, respectively.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

N. STOCKHOLDERS' EQUITY (Continued)

During 2008, as an inducement to his joining the Company, the Company granted its new Chief
Executive Officer an option to acquire 4,796,020 shares of common stock at a price per share equal to $1.90, the closing price of the common stock on May 1, 2008, the date his employment
commenced. The option vests over four years, with the first 25% vesting on May 1, 2009 and the balance vesting in equal quarterly installments over the following three years. The option was
issued outside of the Company's 2005 Incentive Compensation Plan. As of December 31, 2010, 2009 and 2008, this option was outstanding and is included in the table above.

During
2010, as an inducement to his joining the Company, the Company granted its new Chief Financial Officer options to acquire 1,000,000 shares of common stock at a price per share
equal to $2.33, the closing price of the common stock on March 15, 2010, the date his employment commenced. The option vests over four years, with the first 25% vesting on March 15, 2011
and the balance vesting in equal quarterly installments over the following three years. Of these options, one option to purchase 500,000 shares was issued under the Company's 2005 Plan and one option
to purchase 500,000 shares was issued outside of the 2005 Plan. As of December 31, 2010, these options were outstanding and are included in the table above.

During
2000, the Company granted 216,000 non-qualified stock options to employees at an exercise price of $17.56 per share outside of the Board approved Plans. As of
December 31, 2010 and 2009, there were 0, and 21,000 options outstanding, respectively, which are included in the above table.

Warrants

A summary of the status of the Company's warrants as of the year ended December 31, 2010, 2009 and 2008 and the changes for
these periods are presented below. The actual number of common stock issued on warrants exercised in 2010, 2009 and 2008 is less than the table presented below due to cashless exercises of warrants in
2010, 2009 and 2008. The actual number of common stock issued under warrant exercises for 2010, 2009 and 2008 was 7,883,595, 132,589 and 174,967, respectively, and the Company received proceeds of
$4,773,412 related to the 2010 exercises and $241,310 related to the 2008 exercises.

Year Ended
December 31, 2010

Year Ended
December 31, 2009

Year Ended
December 31, 2008Number of
Shares

Weighted
Average
Price

Number of
Shares

Weighted
Average
Price

Number of
Shares

Weighted
Average
PriceOutstanding at beginning of year


24,857,329

$
1.48


25,367,096

$
1.49


27,111,262

$
1.56Granted(1)


1,858,799
(2)

1.91


446,294
(5)

1.78


187,483


1.76Exercised(3)


(10,741,957
)

1.42


(956,061
)(3)

1.90


(271,261
)(4)

2.00Canceled / Expired














(1,660,388
)(6)

2.55Outstanding at end of year


15,974,171

$
1.57


24,857,329

$
1.48


25,367,096

$
1.49


(1)As
described above in Note l, the Company issued warrants to purchase 1,267,083 shares of common stock during 2010 at $1.66 per share to the
Investors as a result of warrant exercises during the year ended December 31, 2010. During the year ended December 31, 2009 the


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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

N. STOCKHOLDERS' EQUITY (Continued)

Company
issued warrants to purchase 66,295 shares of common stock at $1.66 per share. During the year ended December 31, 2008 the Company issued warrants to purchase 87,483 shares of common
stock at $1.66 per share. These warrants are immediately exercisable upon their issuance and have a 7 year life. (2)In
connection with the Company' s subordinated debt financing, see Note ICommitments and ContingenciesNotes
Payablefor more information, warrants to purchase 591,716 shares of common stock were issued to the lender in 2010. These warrants were immediately exercisable and expire on
June 18, 2015.(3)During
the year ended December 31, 2010, warrants to purchase 8,214,291 shares of common stock were exercised via a cashless exercise resulting in
the issuance of 5,355,929 shares of common stock. During the year ended December 31, 2009, warrants to purchase 151,515 shares of common stock were exercised via a cashless exercise resulting
in the issuance of 35,821 shares of common stock. During the year ended December 31, 2008, warrants to purchase 150,000 shares of common stock were exercised via a cashless exercise resulting
in the issuance of 53,706 shares of common stock.(4)Includes
303,031 Warrant As and 151,516 Warrant Cs which were redeemed for cash; see Note G. Convertible Debt Instruments and
Warrant Liabilities for more information.(5)On
July 3, 2009, the Company issued warrants to purchase 380,000 shares of common stock at a price of $1.80 per share, the closing price on the date
of issuance, in connection with the modification of the anti-dilution provisions of the Investors' existing, and future, warrants to purchase common stock of the Company. The warrants were
immediately exercisable and had no vesting provisions. The Company recorded a charge to other income of approximately $0.5 million related to the issuance of these warrants to the Investors.
The Company used a Black-Scholes Option pricing model to value this warrant with key inputs as follows:


Input

July 3, 2009Quoted Stock Price

$
1.80Exercise Price

$
1.80Time to Maturity (in years)


7.0Stock Volatility


84
%Risk-Free Rate


2.0
%Dividend Rate


0
%


(6)On
April 7, 2008, the Company issued a warrant to purchase 100,000 shares of common stock at a price of $1.84 per share, the closing price on the
date of issuance, in connection with a sales and marketing agreement. The Company recorded a charge to operations of approximately $121,000 related to the issuance of these warrants to the contractor.
These warrants are immediately exercisable and had no vesting provisions. These warrants were exercised during 2010 via a cashless


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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

N. STOCKHOLDERS' EQUITY (Continued)

exercise
resulting in the issuance of 31,599 shares of common stock. The Company used a Black-Scholes Option pricing model to value these warrants with key inputs as follows:


Input

April 7, 2008Quoted Stock Price

$
1.84Exercise Price

$
1.84Time to Maturity (in years)


5.0Stock Volatility


80.6
%Risk-Free Rate


2.80
%Dividend Rate


0
%




O. PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of Preferred Stock, $0.01 par value per share. The Preferred Stock may be issued in one or more series, the terms of which may
be determined at the time of issuance by the Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions. See Note I for a discussion of Series B Preferred Stock issued in October 2003
and Series C Preferred Stock issued in November and December 2007. As of December 31, 2010 there were no shares of Preferred Stock outstanding.

On
January 6, 2011, the Company entered into a stockholder rights agreement (the "Rights Agreement"). The Rights Agreement provides for a dividend distribution of one preferred
stock purchase right for each outstanding share of the Company's common stock. Each right entitles the registered holder to purchase from the Company one-thousandth of a share of the
Company's Series A Junior Participating Preferred Stock. The Company's board of directors adopted the Rights Agreement to protect the Company's ability to use its net operating losses and
certain other tax attributes ("NOLs") for federal and state income tax purposes. Under the Internal Revenue Code of 1986, as amended (the "Code"), the Company may utilize the NOLs in certain
circumstances to offset current and future earnings and thus reduce its federal income tax liability, subject to certain requirements and restrictions. If the Company experiences an "ownership
change," as defined in Section 382 of the Code, its ability to use the NOLs could be substantially limited or lost altogether. In general terms, the Rights Agreement is intended to act as a
deterrent to any person or group that acquires 4.99% or more of the Company's common stock without approval of the Company's board of directors by allowing other stockholders to acquire equity
securities of the Company at half of their fair value. The Rights Plan will continue in effect until January 6, 2014, unless it is terminated or redeemed earlier by the Company's board of
directors.

P. SHORT-TERM NOTES

On October 1, 2009, the Company entered into a short-term loan agreement with a bank for $1.3 million backed by a letter of credit from a customer. The short
term loan was repaid by the Company during the fourth quarter of 2009.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

Q. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Non-Cash Investing and Financing Activities

Year Ended December 31,2010

2009

2008Stock-based compensation(1)

$
4,136,900

$
3,562,779

$
2,752,570Common Stock issued in lieu of interest on redeemable convertible Series B Preferred Stock


15,000


86,370


133,666Common stock issued related to 401(K) contributions





107,959


578,232Issuance of warrants


910,000





Conversion of Series B Preferred Stock for common stock


375,000


1,075,000


250,000Conversion of Series C Preferred Stock for common stock


28,627,397





Adjustment to conversion price of Series B Preferred Stock





55,369


Accretion of redeemable convertible preferred stock discount and dividends


6,884,973


5,090,830


4,224,502Issuance of warrants and beneficial conversion feature


515,000


164,000


252,000


(1)Includes
$(18,357), $86,140, and $168,275, related to discontinued operations for the year ended December 31, 2010, 2009 and 2008, respectively.


Interest and Income Taxes Paid

Cash paid for interest and income taxes was as follows:

Year Ended December 31,2010

2009

2008Interest

$
1,081,681

$
196,589

$
199,126Income taxes











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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

R. LOSS PER SHARE

The following is the reconciliation of the numerators and denominators of the basic and diluted loss per share computations:

Year EndedDecember 31,
2010

December 31,
2009

December 31,
2008Loss from continuing operations

$
(12,350,512
)
$
(29,963,058
)
$
(11,609,536
)Income (loss) from discontinued operations


31,390


91,677


(1,869,327
)Gain on disposal of discontinued operations


500,217





274,043Accretion and dividends and deemed dividends on Series C Preferred Stock


(8,649,973
)

(5,172,830
)

(4,224,502
)Net loss attributable to common shareholders

$
(20,468,878
)
$
(35,044,211
)
$
(17,429,322
)Basic and diluted:Common shares outstanding, beginning of period


70,567,781


51,479,822


49,803,979Weighted average common shares issued during the period


11,642,678


10,247,178


880,585Weighted average shares outstandingbasic and diluted


82,210,459


61,727,000


50,684,564Net loss per weighted average share, basic and diluted:From loss on continuing operations attributable to common stockholders

$
(0.26
)
$
(0.57
)
$
(0.31
)From loss on discontinued operations







$
(0.04
)From gain on sale of discontinued operations

$
0.01




$
0.01Net loss per weighted average share, basic and diluted

$
(0.25
)
$
(0.57
)
$
(0.34
)


As
of the year ended December 31, 2010, 2009 and 2008, shares of common stock issuable upon the exercise of options and warrants were excluded from the diluted average common
shares outstanding, as their effect would have been antidilutive. In addition, for years ended December 31, 2009 and 2008, shares of common stock issuable upon the conversion of Series B
Preferred Stock and Series C Preferred Stock and related dividends were excluded from the diluted weighted average common shares outstanding as their effect would also have been
anti-dilutive. Basic earnings per share excludes dilution and is computed by dividing income attributable to common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the Company, except when the effect would be anti-dilutive.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

R. LOSS PER SHARE (Continued)

The
table below summarizes the option and warrants and convertible preferred stock that were excluded from the calculation above due to their effect being antidilutive:

Year Ended December 31,2010

2009

2008Common Stock issuable upon the exercise of:Options


13,426,968


10,949,620


10,147,996Warrants


15,974,171


24,857,329


25,367,096Total Options and Warrants excluded


29,401,139


35,806,949


35,515,092Common Stock issuable upon the conversion of redeemable convertible Series B Preferred Stock(1)





251,678


935,484Common Stock issuable upon the conversion of redeemable convertible Series C Preferred Stock(1)





26,538,462


25,336,538


(1)During
2010 the Series B Preferred Stock and the Series C Preferred Stock were converted into Common Stock of the Company.


The
table below details shares of common stock underlying securities for which the securities would have been considered dilutive at December 31, 2010, 2009 and 2008 had the
Company not been in a loss position:

# of Underlying Common SharesDecember 31,
2010

December 31,
2009

December 31,
2008Employee stock options


13,426,968


4,593,244


1,179,827Warrants to purchase common stock


15,974,171


24,841,165


19,863,054Series B Convertible Preferred Stock(2)





251,678


935,484Series C Convertible Preferred Stock(2)





26,538,462


25,336,538Total


29,401,139


56,224,549


47,314,903


(2)During
2010 the Series B Preferred Stock and the Series C Preferred Stock were converted into Common Stock of the Company.


S. SEGMENT DISCLOSURES

Following the sale in 2008 of its Electronics and Power Systems US segments and the classification in 2009 of its Applied Technology segment as part of discontinued operations, the
Company believes it operates in one business segment, Renewable Energy Solutions.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

S. SEGMENT DISCLOSURES (Continued)

The
Company operates and markets its services and products on a worldwide basis with its principal markets as follows:

For the Year Ended December 31,2010

2009

2008Revenue by geographic region based on location of customer(1):United States

$
76,079,866

$
39,734,485

$
46,371,717China


18,667,566


4,352,564


Taiwan


1,651,302


35,669


Czech Republic


32,595,335


3,283,315


1,678,984Belgium


1,781,647


2,224,237


France


6,472,026





Germany


6,762,284


194,442


Greece


2,055,831





Italy


11,947,960





South Korea





551,630


2,098,366Spain


679,451





3,329,050Canada


14,296,291


1,929,087


343,195Rest of World


312,414


230,204


472,022Total Revenue

$
173,301,973

$
52,535,633

$
54,293,334


(1)Does
not include revenue from discontinued operations for all periods presented.


At December 31,2010

2009Long-lived assets by geographic region based on location of operations(2):United States

$
5,421,764

$
2,517,288Canada


1,862,521


2,116,638Total long-lived assets

$
7,284,285

$
4,633,926


(2)Does
not include assets from discontinued operations for all periods presented.


T. RESTRUCTURING COSTS

During the quarter ended March 31, 2010, the Company completed the final steps of its reorganization efforts in accordance with a plan of reorganization approved by the Board of
Directors. As a result of the March 2010 restructuring the Company recorded approximately $0.8 million in payroll related costs. As of December 31, 2010 approximately $49,000 remains to
be paid to the terminated employees. None of the terminated employees were required to provide any service to the Company subsequent to their receiving notification.

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

T. RESTRUCTURING COSTS (Continued)

In
August 2009, the Company eliminated certain positions within its operations and sales organizations in accordance with a plan of reorganization approved by the Board of Directors. As
a result of the 2009 restructuring the Company recorded approximately $0.3 million in payroll and related costs. As of December 31, 2009 approximately $38,000 remains to be paid to the
terminated employees. As of December 31, 2010, no payments were remaining as a result of the 2009 restructuring. None of the terminated employees were required to provide any services to the
Company subsequent to their receiving notification.

In
June 2008, the Company began its restructuring efforts by eliminating the position of divisional presidents in its Applied Technology and Renewable Energy Solutions divisions and
recorded a restructuring charge of approximately $0.6 million. During the third quarter of 2008 the Company consolidated its Applied Technology division into one facility. As a result, the
Company recorded an additional restructuring charge of approximately $0.5 million. These restructuring charges were
comprised of approximately $0.8 million in employee severance, which were paid out over the term of each specific employee agreement and $0.3 million in non-cash stock based
compensation charges associated with the acceleration of certain unvested stock options and extensions of time to exercise certain stock options from 90 days to 2 years. In addition,
during the fourth quarter of 2008, as part of its restructuring efforts, the Company elected to terminate the employment contract of its former president. As a result of this election, the Company
recorded a restructuring charge of approximately $0.3 million, which was paid in twenty six equal bi-weekly installments beginning after March 1, 2009.

During
2008, the Company sold its Electronics and Power Systems divisions and recorded in its loss on sale of discontinued operations approximately $0.2 million in restructuring
charges related to these sales. (See Footnote D "Discontinued Operations" above).

The
following is a summary of the Company's accrued restructuring activity for the following periods:

Year EndedDecember 31,
2010

December 31,
2009

December 31,
2008Balance at beginning of period

$
38,034

$
602,782

$
Provision


783,701


260,685


1,307,452Usage


(772,532
)

(825,433
)

(704,670
)Balance at end of period

$
49,203

$
38,034

$
602,782


U. RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the FASB issued ASU No. 2010-06, "Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"), which is included in the ASC Topic
820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. ASU
2010-06 also requires disclosure of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements and clarifies existing disclosure
requirements on levels of disaggregation and disclosures about inputs and valuation techniques. ASU 2010-06 is effective for interim and annual reporting periods beginning after

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SATCON TECHNOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

DECEMBER 31, 2010, 2009 AND 2008

U. RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

December 15,
2009. The adoption of this standard did not have a material effect on our financial statements.

V. SUBSEQUENT EVENTS

The Company has evaluated all events or transactions through the date of this filing. During this period, the Company did not have any material subsequent events that impacted its
consolidated financial statements or disclosures.

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FINANCIAL STATEMENT SCHEDULE
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

Balance at
beginning
of period

Additions
charged to
costs and
expenses

Settlement
Amounts

Balance
at end
of periodYear Ended December 31, 2008:Allowance for uncollectible accounts

$
124,279


80,142


(36,202
)
$
168,219Reserve for product warranty expense

$
1,901,757


2,340,594


(2,260,264
)
$
1,982,087Accrued restructuring costs

$



1,307,452


(704,670
)
$
602,782Year Ended December 31, 2009:Allowance for uncollectible accounts

$
168,219


28,690




$
196,909Reserve for product warranty expense

$
1,982,087


1,204,690


(1,317,198
)
$
1,869,579Accrued restructuring costs

$
602,782


260,685


(825,433
)
$
38,034Year Ended December 31, 2010:Allowance for uncollectible accounts

$
196,909


798,551


(20,573
)
$
974,887Reserve for product warranty expense

$
1,869,579


3,050,012


(919,510
)
$
4,000,081Accrued restructuring costs

$
38,034


783,701


(772,532
)
$
49,203


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Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

Item 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we carried out an
evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as of December 31, 2010. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer, concluded as of December 31, 2010 that our disclosure
controls and procedures are effective.

Management's Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our company's internal control over financial reporting is a process designed under the supervision of the
Chief Executive Officer, Chief Financial Officer and Corporate Controller to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:



There
are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even
effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management
assessed the effectiveness of our company's internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria
established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on management's assessment and those criteria, management determined that our internal control over financial reporting was effective as of December 31, 2010.

Our
independent registered public accounting firm, McGladrey & Pullen, LLP, has issued an attestation report on our internal control over financial reporting as of
December 31, 2010, which is included in this Annual Report on Form 10-K.

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Changes in Internal Control Over Financial Reporting.

There
was no change in our internal control over financial reporting that occurred during the fourth quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

Item 9B.    OTHER INFORMATION.

Not applicable.

PART III

Item 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the information regarding directors, executive officers
and corporate governance included in our proxy statement for our 2011 Annual Meeting of Stockholders.

Item 11.    EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to information regarding executive compensation included
in our proxy statement for our 2011 Annual Meeting of Stockholders.

Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required under this item is incorporated herein by reference to the information regarding security ownership of certain
beneficial owner and management and related stockholder matters included in our proxy statement for our 2011 Annual Meeting of Stockholders.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required under this item is incorporated herein by reference to the information regarding certain relationships and
related transactions, and director independence included in our proxy statement for our 2011 Annual Meeting of Stockholders.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this item is incorporated herein by reference to the information regarding principal accounting fees and
services included in our proxy statement for our 2011 Annual Meeting of Stockholders.

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PART IV

Item 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:









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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts on March 15, 2011.

SATCON TECHNOLOGY CORPORATIONBy:

/s/ CHARLES S. RHOADES Charles S. Rhoades President and Chief Executive Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

Signature

Title

Date/s/ CHARLES S. RHOADES Charles S. Rhoades

Chief Executive Officer, President and Director (Principal Executive Officer)

March 15, 2011/s/ DONALD R. PECK Donald R. Peck

Chief Financial Officer and Treasurer (Principal Financial Officer)

March 15, 2011/s/ JOHN W. PEACOCK John W. Peacock

Controller and Chief Accounting Officer (Principal Accounting Officer)

March 15, 2011/s/ JAMES L. KIRTLEY, JR. James L. Kirtley, Jr.

Director

March 15, 2011/s/ DAVID J. PREND David J. Prend

Director

March 15, 2011/s/ JOHN M. CARROLL John M. Carroll

Chairman of the Board

March 15, 2011/s/ DANIEL R. DWIGHT Daniel R. Dwight

Director

March 15, 2011/s/ PHILIP J. DEUTCH Philip J. Deutch

Director

March 15, 2011/s/ ROBERT G. SCHOENBERGER Robert G. Schoenberger

Director

March 15, 2011


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EXHIBIT INDEX

Exhibit No.

Description1.1

Underwriting Agreement, dated June 9, 2009, between the Registrant and Thomas Weisel Partners LLC and Ardour Capital Investments, LLC, as Underwriters, is incorporated herein by reference to Exhibits to the
Registrant's Current Report on Form 8-K dated June 9, 2009 (File No. 1-11512).1.2

Underwriting Agreement, dated October 21, 2010, between the Registrant and Jefferies & Company, Inc. is incorporated herein by reference to Exhibits to Registrant's Current Report on Form 8-K
dated October 21, 2010 (File No. 1-11512).3.1

Certificate of Incorporation of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286).3.2

Bylaws of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286).3.3

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on May 12, 1997, is incorporated herein by reference to Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997 (File No. 1-11512).3.4

Bylaws Amendment of the Registrant is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 1997 (File No. 1-11512).3.5

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 17, 1999, is incorporated herein by reference to Exhibits to the
Registrant's Current Report on Form 8-K dated August 25, 1999 (File No. 1-11512).3.6

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 15, 2000 is incorporated by reference to Exhibits to the
Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 2000 (File No. 1-11512).3.7

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on May 4, 2001, is incorporated herein by reference to Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2001 (File No. 1-11512).3.8

Certificate of Designation of the Relative Rights and Preferences of the Series A Convertible Preferred Stock of the Registrant, dated as of February 14, 2003, is incorporated herein by reference to Exhibits
to the Registrant's Current Report on Form 8-K dated February 18, 2003 (File No. 1-11512).3.9

Certificate of Designation of the Relative Rights and Preferences of the Series B Convertible Preferred Stock of the Registrant, dated as of October 31, 2003, is incorporated herein by reference to Exhibits
to the Registrant's Current Report on Form 8-K, as amended, dated October 31, 2003 (File No. 1-11512).3.10

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on March 23, 2006, is incorporated herein by reference to Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the period ended April 1, 2006 (File No. 1-11512).


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Exhibit No.

Description3.11

Amendment to Bylaws of the Registrant (Adopted by the Board of Directors on February 27, 2007) is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated
February 27, 2007 (File No. 1-11512).3.12

Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible Preferred Stock of the Registrant, as filed with the Delaware Secretary of State on November 8, 2007, is
incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 7, 2007 (File No. 11512).3.13

Certificate of Amendment of Certificate of Incorporation of the Registrant, as filed with the Secretary of State of the State of Delaware on December 20, 2007, is incorporated herein by reference to Exhibits to
the Registrant's Current Report on Form 8-K dated December 19, 2007 (File No. 1-11512).3.14

Certificate of Elimination of Series A Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware on December 20, 2007, is incorporated herein by reference to Exhibits to the
Registrant's Current Report on Form 8-K dated December 19, 2007 (File No. 1-11512).3.15

Certificate of Correction of Certificate of Designation of the Relative Rights and Preferences of the Series C Convertible Preferred Stock of the Registrant, as filed with the Delaware Secretary of State on
August 6, 2010, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).3.16

Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant, as filed with the Delaware Secretary of State on January 7, 2011, is incorporated herein by reference to
Exhibits to the Registrant's Registration Statement on Form 8-A filed January 7, 2011 (File No. 1-11512).4.1

Specimen Certificate of Common Stock, $.01 par value, is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File No. 33-49286).4.2

Rights Agreement, dated as of January 6, 2011, between the Registrant and American Stock Transfer & Trust Co., LLC, as Rights Agent, is incorporated herein by reference to Exhibits to the
Registrant's Registration Statement on Form 8-A filed January 7, 2011 (File No. 1-11512).10.1

Key Employee Agreement, dated July 1, 1992, between the Registrant and David B. Eisenhaure is incorporated herein by reference to Exhibits to the Registrant's Registration Statement on Form S-1 (File
No. 33-49286).10.2

Amendment to Employment Agreement, dated March 31, 2004, between the Registrant and David B. Eisenhaure is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 2007 (File No. 1-11512).10.3

Amendment to Employee Agreement dated January 15, 2008, between the Registrant and David B. Eisenhaure is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 2007 (File No. 1-11512).10.4

Key Employee Agreement, dated September 13, 2007, between the Registrant and David E. O'Neil is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated
September 13, 2007 (File No. 1-11512).


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Exhibit No.

Description10.5

Amendment to Key Employee Agreement between Registrant and David E. O'Neil, dated June 5, 2008, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the
period ended June 28, 2008 (File No. 1-11512).10.6

Charles S. Rhoades Employment Offer Letter, dated May 1, 2008, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 28, 2008
(File No. 1-11512).10.7

Charles S. Rhoades Incentive Stock Option Agreement, dated May 1, 2008, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended
June 28, 2008 (File No. 1-11512).10.8

2000 Stock Incentive Plan is incorporated herein by reference to Exhibit C to the Registrant's Preliminary Schedule 14A filed March 19, 2001 (File No. 1-11512).10.9

2002 Stock Incentive Plan is incorporated herein by reference to Exhibit A to the Registrant's Definitive Schedule 14A filed January 28, 2002 (File No. 1-11512).10.10

2005 Incentive Compensation Plan is incorporated herein by reference to Exhibit A to the Registrant's Definitive Schedule 14A filed April 14, 2005 (File No. 1-11512).10.11

Amendment No. 1 to the Registrant's 2005 Incentive Compensation Plan is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2007
(File No. 1-11512).10.12

Amendment No. 2 to the Registrant's 2005 Incentive Compensation Plan is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
2007 (File No. 1-11512).10.13

Registration Rights Agreement, dated as of October 31, 2003, by and among the Registrant and the purchasers listed on Schedule I thereto is incorporated herein by reference to Exhibits to the Registrant's
Current Report on Form 8-K/A dated October 31, 2003 (File No. 1-11512).10. 14

Facilities Lease, dated May 12, 2004, between the Registrant and Zoom Group, LLC is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended
September 30, 2004 (File No. 1-11512).10.15

Loan and Security Agreement, dated February 26, 2008, by and among the Registrant, SatCon Power Systems, Inc., SatCon Electronics, Inc., SatCon Applied Technology, Inc., SatCon Power Systems
Canada LTD. and Silicon Valley Bank is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 29, 2008 (File No. 1-11512).10.16

Second Loan Modification Agreement, dated as of September 26, 2008, between Silicon Valley Bank and the Registrant, SatCon Power Systems, Inc., SatCon Applied Technology, Inc., SatCon Electronics,
 Inc., and SatCon Power Systems Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended September 27, 2008 (File No. 1-11512).10.17

Third Loan Modification Agreement, dated as of September 29, 2009, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Applied Technology, Inc., Satcon Electronics,
 Inc., and Satcon Power Systems Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended October 3, 2009 (File No. 1-11512).


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Exhibit No.

Description10.18

Waiver and Fourth Loan Modification Agreement, dated as of February 18, 2010, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Electronics, Inc., and Satcon Power Systems
Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2010 (File No. 1-11512).10.19

Fifth Loan Modification Agreement, dated as of March 10, 2010, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Electronics, Inc., and Satcon Power Systems
Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31, 2010 (File No. 1-11512).10.20

Sixth Loan Modification Agreement, dated as of April 22, 2010, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Electronics, Inc., and Satcon Power Systems
Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.21

Seventh Loan Modification Agreement, dated as of June 16, 2010, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Electronics, Inc., and Satcon Power Systems
Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.22

Eighth Loan Modification Agreement, dated as of August 3, 2010, between Silicon Valley Bank and the Registrant, Satcon Power Systems, Inc., Satcon Electronics, Inc., and Satcon Power Systems
Canada Ltd. is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended September 30, 2010 (File No. 1-11512).10.23

Form of Satcon Technology Corporation 2005 Incentive Compensation Plan, Incentive Stock Option agreement for Directors and Officers of the Registrant is incorporated herein by reference to Exhibits to the Registrant's
Quarterly Report on Form 10-Q for the period ended July 2, 2005 (File No. 1-11512).10.24

Form of Satcon Technology Corporation 2005 Incentive Compensation Plan, Non-Qualified Stock Option agreement for Directors and Officers of the Registrant is incorporated herein by reference to Exhibits to the
Registrant's Quarterly Report on Form 10-Q for the period ended July 2, 2005 (File No. 1-11512).10.25

Form of Warrant to purchase shares of Common Stock of the Registrant issued on December 22, 2004 is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated
December 22, 2004 (File No. 1-11512).10.26

Form of Warrant to purchase shares of Common Stock of the Registrant issued on August 11, 2005 is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated
August 11, 2005 (File No. 1-11512).10.27

Form of Warrant A is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated July 19, 2006 (File No. 1-11512).10.28

Form of Warrant B is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated July 19, 2006 (File No. 1-11512).


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Exhibit No.

Description10.29

Modification, Termination and Release of Lease, dated as of December 22, 2006, between the Registrant and Paul E. Hanlon, Trustee of C&M Realty Trust is incorporated herein by reference to Exhibits to the
Registrants Current Report on Form 8-K dated December 20, 2006 (File No. 1-11512).10.30

Amendment and Exercise Agreement, dated as of July 17, 2007, by and among the Registrant and the entities identified on the signature pages thereto is incorporated by reference to Exhibits to the Registrant's
Current Report on Form 8-K dated July 17, 2007 (File No. 1-11512).10.31

Form of Warrant C is incorporated herein by reference to Exhibits to the Registrants Current Report on Form 8-K dated July 17, 2007 (File No. 1-11512).10.32

Offer to Sell Notes, dated as of October 19, 2007 by and among the Registrant and the entities identified on the signature pages thereto is herein incorporated by reference to the Registrant's Current Report on
Form 8-K dated October 19, 2007 and filed on October 22, 2007 (File No. 1-11512).10.33

Note Purchase Agreement, dated as of October 19, 2007, by and among the Registrant and the Purchasers named therein is herein incorporated by reference to the Registrant's Current Report on Form 8-K dated
October 19, 2007 (File No. 1-11512).10.34

Form of Note issued pursuant to Note Purchase Agreement, dated as of October 19, 2007, by and among the Registrant and the Purchasers named therein is herein incorporated by reference to Exhibits to the
Registrant's Current Report on Form 8-K dated October 19, 2007 (File No. 1-11512).10.35

Stock and Warrant Purchase Agreement, dated as of November 8, 2007, by and among the Registrant and the Purchasers named therein is herein incorporated by reference to Exhibits to the Registrant's Current Report
on Form 8-K dated November 7, 2007 (File No. 1-11512).10.36

Form of Tranche 1 Warrant to Purchase Common Stock, dated as of November 8, 2007 is herein incorporated by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 7,
2007 (File No. 1-11512)10.37

Form of Tranche 2 Warrant and Additional Warrant to Purchase Common Stock is herein incorporated by reference to Exhibits to the Registrant's Current Report on Form 8-K dated November 7, 2007 (File
No. 1-11512).10.38

Agreement to Amend Warrants, dated July 3, 2009, between the Registrant and RockPort Capital Partners II, L.P. is incorporated herein by reference to Exhibits to the Registrant's Current Report on
Form 8-K dated July 3, 2009 (File No. 1-11512).10.39

Agreement to Amend Warrants, dated July 3, 2009, between the Registrant and NGP Energy Technology Partners, L.P. is incorporated herein by reference to Exhibits to the Registrant's Current Report on
Form 8-K dated July 3, 2009 (File No. 1-11512).10.40

Registration Rights Agreement dated as of November 8, 2007, by and among the Registrant and the Purchasers is herein incorporated by reference to Exhibits to the Registrant's Current Report on Form 8-K dated
November 7, 2007 (File No. 1-11512).10.41

First Amendment to Registration Rights Agreement dated as of January 24, 2008, by and among the Registrant and the Purchasers is incorporated by reference to Exhibits to the Registrant's Current Report on
Form 8-K dated January 24, 2008 (File No. 1-11512).


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Table of Contents

Exhibit No.

Description10.42

Satcon 2008 Incentive Plan for Senior Management is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated September 24, 2008 (File No. 1-11512).10.43

Satcon 2009 Incentive Plan for Management is incorporated herein by reference to Exhibits to the Registrant's Current Report on Form 8-K dated February 24, 2009 (File No. 1-11512).10.44

Asset Purchase Agreement by and between the Registrant, Satcon Electronics, Inc. and Spectrum Microwave, Inc., dated September 25, 2008, is incorporated herein by reference to Exhibits to the
Registrant's Current Report on Form 8-K dated September 25, 2008 (File No. 1-11512).10.45

Donald R. Peck Employment Offer Letter, effective March 15, 2010, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
2010 (File No. 1-11512).10.46

Donald R. Peck Incentive Stock Option Agreement, dated March 15, 2010, is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended
March 31, 2010 (File No. 1-11512).10.47

Satcon Technology Corporation 2010 Employee Stock Purchase Plan is incorporated herein by reference to Exhibit A to the Registrant's Definitive Schedule 14A filed April 30, 2010 (File
No. 1-11512).10.48

Venture Loan and Security Agreement, dated as of June 16, 2010, by and between Compass Horizon Funding Company LLC, the Registrant, Satcon Power Systems, Inc., and Satcon Electronics, Inc. is
incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.49

Secured Promissory Note in the principal amount of $10,000,000 dated June 16, 2010 by the Registrant, Satcon Power Systems, Inc., and Satcon Electronics, Inc. in favor of Compass Horizon Funding
Company LLC is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.50

Secured Promissory Note in the principal amount of $2,000,000 dated June 16, 2010 by the Registrant, Satcon Power Systems, Inc., and Satcon Electronics, Inc. in favor of Compass Horizon Funding
Company LLC is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.51

Warrant to Purchase 493,097 shares of the Registrant's Common Stock dated as of June 16, 2010 is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 2010 (File No. 1-11512).10.52

Warrant to Purchase 98,619 shares of the Registrant's Common Stock dated as of June 16, 2010 is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 2010 (File No. 1-11512).10.53

Registration Rights Agreement, dated as of June 16, 2010, by and between Compass Horizon Funding Company LLC and the Registrant is incorporated herein by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).


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Exhibit No.

Description10.54+

Manufacturing and Purchase Agreement, dated as of December 18, 2008, by and between the Registrant and ESGW International Limited is incorporated herein by reference to Exhibits to the Registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 2010 (File No. 1-11512).10.55*

Securities Conversion Agreement, dated as of October 15, 2010, between the Registrant, RockPort Capital Partners II, L.P., and NGP Energy Technology Partners, L.P.10.56*

Donald R. Peck Non-Qualified Incentive Stock Option Agreement, dated March 15, 2010.14.1

Code of Ethics is incorporated herein by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the year ended September 30, 2004 (File No. 1-11512).21.1*

Subsidiaries of the Registrant.23.1*

Consent of McGladrey & Pullen, LLP23.2*

Consent of Caturano and Company, Inc.31.1*

Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*

Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*Filed
herewith+Portion
of this Exhibit have been omitted pursuant to a grant of confidential treatment.


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