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                                                                    EXHIBIT 99.1

                                  RISK FACTORS

     WE NEED AN IMMEDIATE INFUSION OF CAPITAL TO SUSTAIN OUR OPERATIONS, AND WE
MAY NOT BE ABLE TO RAISE ADDITIONAL FUNDS ON TERM ACCEPTABLE TO US, OR AT ALL.

     We need an immediate infusion of capital in order to continue operations.
We are endeavoring to raise capital from the following sources:

     -    A third-party guarantee acceptable to our bank (Silicon Valley Bank)
          which will allow us to access an additional $3 million, beyond the
          $1.5 million currently available from our Bank, of which approximately
          $1 million was already used as of June 27, 2003. We have contacted
          several prospective guarantors and identified several more but have no
          commitment to date. We continue to discuss with two to three parties a
          potential guarantor.

     -    As an alternative to a third-party guarantee, we could obtain a
          third-party loan which will be collateralized, but subordinate to
          Silicon Valley Bank. We believe that the Bank's collateral exceeds its
          exposure and this may present an opportunity to attract a new lender
          who could receive some collateral protection, albeit in a second
          priority position.

     -    Proceeds from the sale of non-core assets. The Company continues to
          discuss the sale of its test and vibration product line with several
          potential interested buyers and is working with its financial advisor,
          Alliant Capital Partners, to consider other asset sales as well. In
          addition, the Company sold $1.5 million of its Beacon Power
          Corporation common stock in June 2003. We requested and the Bank
          granted the right for us to use $0.8 million of these proceeds to fund
          operations. The remaining $0.7 million has been placed in a restricted
          cash account with the Bank. In July 2003, we intend to request the use
          of the $0.7 million for operational needs as well.

     Although we have engaged in discussions regarding the above described
transactions with a number of third parties, no commitments have been made by
any third-party to date and there can be no assurance that the above described
transactions will occur.

     In February of 2003, we received approximately $3 million in proceeds from
a private offering of preferred stock and warrants. The terms of this financing
also provided that the investors will purchase $0.8 million in secured
convertible subordinated debentures from us, subject to the satisfaction of two
material conditions. We must obtain stockholder approval of the common stock
issuable upon conversion of the convertible instruments and a registration
statement filed with the Securities and Exchange Commission ("SEC") registering
all of the equity securities underlying this transaction must be declared
effective.

     Our stockholders approved the proposed debenture offering at our annual
meeting on April 24, 2003. In addition, we filed the required registration
statement with the SEC on March 20, 2003 and received a comment letter from the
SEC on April 16, 2003. We responded to that letter on May 15, 2003 and received
another comment letter from the SEC on June 6, 2003. We responded to that letter
on June 16, 2003 and received another comment letter from the SEC

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on June 20, 2003. Because we failed to have this registration become effective
on or before JUNE 18, 2003 we may have to pay liquidated damages to each of the
investors in the private offering of 3% of the investor's investment in cash for
the first month of delay and 1.5% of the investor's investment for each
additional month of delay in cash or shares of our common stock, at our option.

     As of March 29, 2003, we were in default under our Loan and Security
Agreement, dated September 13, 2002 with Silicon Valley Bank due to our failure
to obtain additional capital and to maintain adjusted tangible net worth, as
defined.

     On April 4, 2003, we entered into an Amended and Restated Accounts
Receivable Financing Agreement with Silicon Valley Bank, our senior secured
lender. In the Agreement, Silicon Valley Bank has agreed to provide us with a
line of credit of up to $5 million. Advances under the line of credit are
limited to 80% of eligible accounts receivables. Based on current business
levels, we believe that we will be able to borrow approximately $1.5 million
from Silicon Valley Bank during the current quarter, of which over $1 million is
already outstanding. Loans under this line of credit bear interest at the prime
rate plus 3.0% per annum. Other customary banking fees are also charged. In
connection with this financing, we issued to an affiliate of Silicon Valley Bank
a warrant to purchase 210,000 shares of our common stock at an exercise price of
$1.05 per share. The terms of the line of credit provide that we will be in
default under the line of credit if we are unable to consummate the debenture
offering described above on or before July 31, 2003. We are also required to
maintain a tangible net worth in excess of $9 million at all times. As of May
31, 2003, the Company's adjusted tangible net worth totaled $9.9 million. Unless
we are able to stem our current operating losses or sell assets at values higher
than reflected on our books of account, we anticipate that our tangible net
worth may drop below the required threshold when we report our financial results
for our fiscal quarter ended June 28, 2003. We anticipate reporting these
results to Silicon Valley Bank in August 2003. Unless we can obtain a waiver
from Silicon Valley Bank, dropping below this tangible net worth threshold would
constitute a default under the line of credit documents at that time. This
credit expires on April 3, 2004 and carries a $0.1 million early termination
fee.

     During the fiscal quarter ended June 28, 2003, we conserved cash by further
extending our trade creditors. During the quarter the trade payables increased
from approximately $5.2 million at the beginning of the quarter to $5.4 million
at the end of the quarter. In addition, the amount of these payables which were
over 90 days old increased from approximately $2.6 million at the beginning of
the quarter to approximately $3.4 million at the end of the quarter.

     In order to sustain current business operations, we believe we will require
additional funds of approximately $5 million during the quarter ended September
30, 2003. This amount is expected to come from the following sources: $0.5
million from our borrowing capacity under our line of credit, $0.7 million from
the release of the bank restricted proceeds from the sale of the Beacon Power
Corporation common stock, $0.8 million from the debenture offering and the
balance made up of a combination of asset sales and the third-party guarantee or
loan. However, there can be no assurance that these potential funding sources
will materialize.

     We have also engaged a financial advisor, Alliant Partners (an affiliate of
Silicon Valley Bank), to assist us in disposing of assets unrelated to our
engineering and manufacturing expertise in electromechanical systems. The assets
and businesses we would consider selling include our Ling test and measurement
vibration system business, our patented smart predictive line control technology
utilized by the electric arc steel manufacturing industry and patents acquired
from

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Northrop Grumman related to hybrid electric vehicles. These assets represent
approximately 25% of our assets. For larger systems, such as our UPS system, we
intend to enter into strategic alliances for the manufacture, sale, service and
distribution of our products.

     WE CANNOT BE ASSURED THAT ANY OF THESE INITIATIVES WILL BE SUCCESSFUL IN
RAISING NEW CAPITAL IN OUR FOURTH FISCAL QUARTER AND IF UNSUCCESSFUL, WE MAY NOT
BE ABLE TO CONTINUE OUR OPERATIONS.

     We cannot be assured that any of these initiatives will be successful in
raising new capital. If we are unsuccessful in raising additional capital in our
fourth fiscal quarter, we will be forced to furlough or permanently lay off a
significant portion of our work force which will have a material adverse impact
on us, including our financial position and results of operations. Under these
circumstances, we may not be able to continue our operations. Further, without
additional cash resources, we may not be able to keep all or significant
portions of our operations going for a sufficient period of time to enable us to
sell all or portions of our assets or operations for their market values.

     WE HAVE INCURRED SIGNIFICANT COST TO DEVELOP TECHNOLOGIES AND PRODUCTS THAT
HAVE CONTRIBUTED TO OUR NEED TO RAISE CAPITAL.

     We have incurred significant costs to develop our technologies and products
which has contributed to our need to raise capital. These developments and other
operating costs have exceeded total revenue. As a result, we have incurred
losses in each of the past five years and for the six months ended March 29,
2003. As of March 29, 2003, we had an accumulated deficit of $102.7 million.
During the six months ended March 29, 2003, we incurred a loss of $17.5 million
and a reduction in our cash, net of borrowings, from $2.1 million to $0.2
million.

     Our current cost base will require quarterly revenues of approximately $11
to $12 million to enable us to breakeven on a cash basis. Our highest quarterly
revenue for fiscal year 2002 was $11.7 million in the third quarter of fiscal
year 2002. In addition to the $5 million of new capital we forecast needing in
our fiscal fourth quarter, we may also need additional future funds in order to
fund unanticipated operating losses, to grow, to develop new or enhance existing
products and services and to respond to competitive pressures.

     WE HAVE GRANTED TO THE SELLING STOCKHOLDERS RIGHTS OF FIRST REFUSAL AND
EXCHANGE RIGHTS WHICH WOULD BE TRIGGERED UPON FUTURE FINANCINGS.

     In order to sell additional securities, we have granted rights of first
refusal and exchange rights which would generally be triggered upon future
financings we may seek to consummate. The right of first refusal allows
investors to purchase future securities issued by us for a period of time
following the initial closing of their financing. The exchange rights allow the
investors to exchange any securities held by them into future securities that we
may issue at the liquidation preference of the exchanged security. Each of these
factors may adversely affect our ability to raise additional funds from third
parties on terms acceptable to us, or at all.

     THE CONSENT OF THE HOLDERS OF THE CONVERTIBLE SUBORDINATED NOTES MAY BE
REQUIRED IN ORDER FOR US TO INCUR CERTAIN INDEBTEDNESS.

     It constitutes a default under the Convertible Subordinated Notes for us to
issue any new debt securities that are not subordinate to such Notes unless the
terms thereof are acceptable to the holders of at least 80% in principal amount
of such Notes. If we propose to incur new

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indebtedness to finance operations or growth on a basis that is not subordinate
to such Notes we may not be able to do so unless we are able to obtain such
consent. Our ability to fund our operations and growth could be adversely
effected as a consequence.

     WE MAY NOT BE ABLE TO CONTINUE AS A GOING CONCERN.

     Our financial statements for our fiscal year ended September 30, 2002,
which are included in our Annual Report on Form 10-K, contain an audit report
from Grant Thornton LLP. The audit report contains a going concern qualification
which raises substantial doubt with respect to our ability to continue as a
going concern. The receipt of a going concern qualification may adversely affect
our ability to manage our accounts payable and cause some of our suppliers to
deal with us on a cash-on-delivery basis only. If this were to occur, this would
adversely affect our operations by increasing our immediate need for additional
capital.

     WE COULD ISSUE ADDITIONAL COMMON STOCK, WHICH MIGHT DILUTE THE BOOK VALUE
OF OUR COMMON STOCK.

     We have authorized 50,000,000 shares of our common stock, of which
18,930,061 shares were issued and outstanding as of June 30, 2003. 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 which reflects a discount from the then-current
trading price of our common stock. In addition, in order to raise capital that
we may need at today's stock prices, we will need to issue securities which are
convertible into or exercisable for a significant amount of our common stock.
These issuances would dilute your percentage ownership interest, which will have
the effect of reducing your influence on matters on which our stockholders vote,
and might dilute the book value of our common stock. You may incur additional
dilution of net tangible book value if holders of stock options, whether
currently outstanding or subsequently granted, exercise their options or if
warrant holders exercise their warrants to purchase shares of our common stock.

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

     As of June 30, 2003, we have reserved 5,655,717 shares of common stock for
issuance upon exercise of stock options and warrants, 1,435,631 shares for
future issuances under our stock plans and 230,253 shares for future issuances
as matching contributions under our 401(k) plan. We have also reserved 3,045,600
shares of common stock for issuance upon conversion of the outstanding Series A
Preferred Stock. As of June 30, 2003, holders of warrants and options to
purchase an aggregate of 4,567,037 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. In accordance with registration rights that we have granted
to various individuals and entities requiring us to register their shares for
public resale, we also have resale registration statements in effect registering
4,935,322 shares of our common stock. In addition, in order to raise capital
that we may need at today's stock prices, we will need to issue securities which
are convertible into or exercisable for a significant amount of our common
stock. For example, in connection with the February 2003 financing, we issued
securities which are convertible into or exercisable for up to 30% of the shares
of our common stock (or 35% if we are required to use the alternative conversion
price). If the investors were to dispose of their shares in a rapid or
unexpected manner, this could depress the value of our common stock. The market
price of our common stock could decline as a result of sales of a large number
of shares of our common stock in the market, or the

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perception that these sales could occur. These sales might also make it more
difficult for us to sell equity securities in the future at a price that we
think is appropriate, or at all.

     FINANCIAL INVESTORS MAY HAVE INTERESTS DIFFERENT THAN YOU OR SATCON, AND
MAY BE ABLE TO IMPACT CORPORATE ACTIONS REQUIRING STOCKHOLDER APPROVAL BECAUSE
THEY OWN A SIGNIFICANT AMOUNT OF OUR COMMON STOCK.

     In connection with the February 2003 financing, we issued securities which
are convertible into or exercisable for up to 50% or more of the number of
shares of our outstanding common stock. In future financings, we may also issue
securities which are convertible into or exercisable for a significant number of
shares of our outstanding common stock. Financial investors may have short-term
financial interests different from SatCon's long-term goals and the long-term
goals of our management and other stockholders. In addition, based on the
significant ownership of our outstanding common stock, financial investors may
be able to impact corporate actions requiring stockholder approval. The terms of
the new securities could also include provisions that would make it difficult,
if not impossible, to sell SatCon to a third party or to sell non-core assets
without the consent of the security holders.

     OUR RECENT STOCK PRICE HAS DROPPED BELOW $1.00 PER SHARE WHICH EXPOSES US
TO THE RISK OF DELISTING FROM THE NASDAQ NATIONAL MARKET.

     Our stock is listed on the Nasdaq National Market which affords us an
opportunity to relatively broad exposure to a wide spectrum of prospective
investors. Our common stock traded below $1.00 per share for a period of 30
consecutive trading days between February 5, 2003 and March 18, 2003. Nasdaq has
informed us by telephone and in a letter dated March 19, 2003 that we are not in
compliance with Marketplace Rule 4450(a)(5). In order to avoid delisting under
this rule, our common stock must close over $1.00 per share for ten consecutive
trading days during the period prior to September 15, 2003. If this does not
occur, our common stock could be delisted from the Nasdaq National Market. We
would then be required to consider listing our common stock on other exchanges
or trading systems. If our common stock is delisted from the Nasdaq National
Market, this could result in a number of negative implications, including
continued reduced liquidity in our common stock as a result of the loss of
market efficiencies associated with the Nasdaq National Market and the loss of
federal preemption of state securities laws as well as the potential loss of
confidence by suppliers, customers and employees, the loss of analyst coverage
and institutional investor interest, fewer business development opportunities
and greater difficulty in obtaining financing. As of June 30, 2003, we had not
yet met the requirement for the ten consecutive trading days at above $1.00 per
share. In addition, the increased number of shares issuable in connection with
this offering might result in more available stock for sale than previously has
been the case. This could negatively impact the price of our common stock and
may adversely impact our ability to meet the requirement for the ten consecutive
trading days at over $1.00 per share by applying a downward pressure on the
stock price.

     WE HAVE RECENT AND ANTICIPATED OPERATING LOSSES.

     We have recorded annual net losses for each of the fiscal years ended
September 30, 1995 through September 30, 2002 and for the six months ended March
29, 2003. In order to achieve profitability, we must achieve all or some
combination of the following:

     -    successfully compete in the market for critical power products
          including distributed power generation, UPS and power quality;

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     -    develop new products for our existing markets;

     -    sell these products to existing and new customers;

     -    increase gross margins through higher volumes and manufacturing
          efficiencies;

     -    control our operating expenses; and

     -    develop and manage our distribution capability.

     If our revenue does not increase significantly or the increase in our
expenses is greater than expected, we may not achieve or sustain profitability
or generate positive cash flow in the future.

     WE EXPECT TO GENERATE A SIGNIFICANT PORTION OF OUR FUTURE REVENUES FROM
SALES OF OUR CRITICAL POWER PRODUCTS AND CANNOT ASSURE MARKET ACCEPTANCE OR
COMMERCIAL VIABILITY OF OUR CRITICAL POWER PRODUCTS.

     We intend to continue to expand development of our critical power products.
We cannot assure you that potential customers will select SatCon's products to
incorporate into their systems or that our customers' products will realize
market acceptance, that they will meet the technical demands of their end users
or that they will offer cost-effective advantages over existing products. Our
marketing efforts to date involve development contracts with several customers,
identification of specific market segments for power and energy management
systems and the continuation of marketing efforts of recently acquired
businesses. We cannot know if our commercial marketing efforts will be
successful in the future. Furthermore, we cannot assure you that our products,
in their current form, will be suitable for specific commercial applications or
that further design modifications, beyond anticipated changes to accommodate
different markets, will not be necessary. Additionally, we may not be able to
develop competitive products, our products may not receive market acceptance,
and we may not be able to profitably compete in this market even if market
acceptance is achieved. If our products do not gain market acceptance or
commercial viability, we will not achieve our anticipated levels of
profitability and growth.

     WE HAVE LIMITED EXPERIENCE MANUFACTURING PRODUCTS FOR UNINTERRUPTIBLE POWER
SUPPLIES OR UPS, POWER QUALITY AND DISTRIBUTED POWER SYSTEMS ON A COMMERCIAL
BASIS.

     To date, we have focused primarily on research and development and have
limited experience manufacturing products for distributed power and power
quality systems on a commercial basis. We have limited manufacturing
capabilities, and are continuing to develop our manufacturing capabilities and
processes. We do not know whether or when we will be able to fully develop
efficient, low-cost manufacturing capability and processes that will enable us
to meet the quality, price, engineering, design and production standards or
production volumes required to successfully mass market our UPS, power quality
and distributed power products. Even if we are successful in developing our
manufacturing capability and processes, we do not know whether we will do so in
time to meet our product commercialization schedule or to satisfy the
requirements of our customers.

     IF WE ARE UNABLE TO MAINTAIN OUR TECHNOLOGICAL EXPERTISE IN DESIGN AND
MANUFACTURING PROCESSES, WE WILL NOT BE ABLE TO SUCCESSFULLY COMPETE.

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

     WE ARE HEAVILY DEPENDENT ON CONTRACTS WITH THE U.S. GOVERNMENT AND ITS
AGENCIES OR FROM SUBCONTRACTS WITH THE U.S. GOVERNMENT'S PRIME CONTRACTORS FOR
REVENUE TO DEVELOP OUR PRODUCTS, AND THE LOSS OF ONE OR MORE OF OUR GOVERNMENT
CONTRACTS COULD PRECLUDE US FROM ACHIEVING OUR ANTICIPATED LEVELS OF GROWTH AND
REVENUES.

     Our ability to develop and market our products is heavily dependent upon
maintaining our U.S. government contract revenue and research grants. Most of
our U.S. government contracts are funded incrementally on a year-to-year basis.
Approximately 25% of our revenue during fiscal year 2002 was derived from
government contracts and subcontracts with the U.S. government's prime
contractors. Any change in our relationship with the U.S. government or its
agencies whether as a result of market, economic, or competitive pressures,
including any decision by the U.S. government to alter its commitment to our
research and development efforts, could harm our business and financial
condition by depriving us of the resources necessary to develop our products. In
addition there can be no assurance that once a government contract is completed
that it will lead to follow-on contracts for additional research and
development, prototype build and test, or production. Furthermore, contracts
with the U.S. government may be terminated or suspended by the U.S. government
at any time, with or without cause. There can be no assurance that our U.S.
government contracts will not be terminated or suspended in the future, or that
contract suspensions or terminations will not result in unreimbursable expenses
or charges or other adverse effects on us.

     The accuracy and appropriateness of our direct and indirect costs and
expenses under our contracts with the U.S. government are subject to extensive
regulation and audit by the Defense Contract Audit Agency or by other
appropriate agencies of the U.S. government. These agencies have the right to
challenge our cost estimates or allocations with respect to any such contract.
Additionally, a substantial portion of the payments to us under U.S. government
contracts are provisional payments that are subject to potential adjustment upon
audit by such agencies. Adjustments that result from inquiries or audits of our
contracts could have a material adverse impact on our financial condition or
results of operations.

     Since our inception, we have not experienced any material adjustments as a
result of any inquiries or audits, but there can be no assurance that our
contracts will not be subject to material adjustments in the future.

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     In the event that any of our government contracts are terminated for cause,
it could significantly affect our ability to obtain future government contracts
which could seriously harm our ability to develop our technologies and products.
In addition, our participation in various government business programs depends
upon our continuing eligibility under the regulations of the United States Small
Business Administration. Qualification under these regulations is based upon the
standard industrial classification of the product or service that is the subject
of the program and the level of our revenues and the number of our employees.
Although our current awards under government programs such as the Small Business
Innovative Research, or SBIR, program and small business procurement set-asides
and preferences will not be affected by increases in the level of our revenues
or the number of our employees, as we grow, we may lose our ability to
participate in these programs in the future. Under these circumstances, although
we will still be able to participate in general government contract and
cooperative agreement programs, we will lose our ability to benefit in the
future from many of the programs in which we have historically participated.
During our fiscal years ended September 30, 2002 and 2001, less than 5% of our
revenues have been obtained under the SBIR program.

     A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM CONTRACTS WITH THE
U.S. GOVERNMENT AND ITS AGENCIES OR FROM SUBCONTRACTS WITH THE U.S. GOVERNMENT'S
PRIME CONTRACTORS, AND A SLOWDOWN IN GOVERNMENT SPENDING MAY ADVERSELY AFFECT
OUR ABILITY TO OBTAIN ANTICIPATED REVENUES.

     Changes in government policies, priorities or funding levels through agency
or program budget reductions by the U.S. Congress or executive agencies or the
imposition of budgetary constraints could significantly impair our ability to
achieve this level of revenue going forward. Any reductions or slowdowns in
government spending could also severely inhibit our ability to successfully
complete the development and commercialization of our products. Changes in
funding levels could cause the government to cancel existing contracts or
eliminate follow-on phases in the future.

     THE U.S. GOVERNMENT HAS CERTAIN RIGHTS RELATING TO OUR INTELLECTUAL
PROPERTY.

     Many of our patents are the result of retaining ownership 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." 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. If we refuse, the government can grant the license itself,
provided that it determines that such action is necessary because we have not
achieved practical application of the invention, or to alleviate health or
safety needs, or to meet requirements for public use specified by federal
regulations, or because products using such inventions are not being produced
substantially in the United States. The exercise of these rights by the
government could create potential competitors for us if we later determine to
further develop the technologies and utilize the inventions in which the
government has exercised these rights.

     OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
PATENTS AND PROPRIETARY TECHNOLOGY.

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     As of June 30, 2003, we held 75 U.S. patents and had 10 patent applications
pending with the U.S. Patent and Trademark Office. We have also obtained
corresponding patents in the rest of North America, Europe, and Asia. The
expiration date of our patents range from 2007 to 2021, with the majority
expiring after 2016. 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, it would divert funds and resources which
otherwise could be used in our operations and there can be no assurance that we
would be successful in enforcing our intellectual property rights. Because we
intend to enforce our patents, trademarks and copyrights and protect our trade
secrets, we may be involved from time to time in litigation to determine the
enforceability, scope and validity of these rights. This litigation could result
in substantial costs to us and divert efforts by our management and technical
personnel. 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.

     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 and upon confidentiality agreements, which all of
our employees are required to sign, assigning to us all patent rights and
technical or other information developed by the employees during their
employment with us. We also rely, in part, on contractual provisions to protect
our trade secrets and proprietary knowledge. Our employees have also agreed not
to disclose any trade secrets or confidential information without our prior
written consent. 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. Our inability
to maintain the proprietary nature of our technology and information could harm
our business, results of operations and financial condition by adversely
affecting our ability to compete in our markets.

     OTHERS MAY ASSERT THAT OUR TECHNOLOGY INFRINGES THEIR INTELLECTUAL PROPERTY
RIGHTS.

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

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     LOSS OF ANY OF OUR KEY PERSONNEL, AND PARTICULARLY OUR CHIEF EXECUTIVE
OFFICER, COULD HURT OUR BUSINESS BECAUSE OF THEIR EXPERIENCE, CONTACTS AND
TECHNOLOGICAL EXPERTISE.

     The loss of the services of one or more of our key employees or an
inability to attract, train and retain qualified and skilled employees,
specifically engineering and sales personnel, could result in the loss of
customers or otherwise inhibit our ability to operate and grow our business
successfully. In addition, our ability to successfully integrate acquired
facilities or businesses depends, in part, on our ability to retain and motivate
key management and employees hired by us in connection with these acquisitions.
We are particularly dependent upon the services of David B. Eisenhaure, our
president, chief executive officer, chairman of the board and founder, as a
result of his business and academic relationships, understanding of government
contracts and technical expertise. The loss of Mr. Eisenhaure's services would
have a material adverse effect on our business and results of operations,
including our ability to attract employees and obtain future contract research
and development.

     WE EXPECT SIGNIFICANT COMPETITION FROM OUR PRODUCTS AND SERVICES.

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

     -    Manufacturers of converters and inverters for alternative energy such
          as Trace Engineering, a division of Xantrex Technology, Inc., Asea
          Brown Boveri Ltd., Siemens Corporation and Alstom S.A.;

     -    Manufacturers of electronic modules such as Omnirel L.L.C., Aeroflex
          Inc., Teledyne Inc. and DDC&R, Inc.; manufacturers of thin film
          substrates such as MIC Technology, an Aeroflex Company and
          Ultrasource, Inc.;

     -    Manufacturers of motors such as MCG Inc., Reliance Electric CO/DE, CMC
          Industries, Inc. and other regional and specialty motor manufacturers;

     -    Manufacturers of shaker vibration test systems such as Ling Dynamics
          Systems, Ltd. and Unholtz-Dickie, Corp.;

     -    Manufacturers of Uninterruptible Power Supplies such as Piller, Inc.
          and Hitech Power Protection bv.; and

     -    Developers of advanced power electronics and machines such as Moog,
          Semikron, Eaton and Silicon Power.

<Page>

     PRICE INCREASES OF MATERIALS OR COMPONENTS USED BY US COULD ADVERSELY
AFFECT THE VOLUME OF OUR SALES.

     We use materials and components obtained from third-party suppliers to
manufacture many of our products. We expect this to continue as we increase our
manufacturing capabilities and move into high volume production. If prices of
materials and components that we use were to increase, we may not be able to
afford them or to pass these costs on to our customers. In addition, if we were
required to raise the price of our products as a result of increases in the
price of materials or components that we use, demand for our products may
decrease which would reduce our sales.

     WE ARE DEPENDENT ON THIRD-PARTY SUPPLIERS FOR THE DEVELOPMENT AND SUPPLY OF
KEY COMPONENTS FOR OUR PRODUCTS.

     We use third-party suppliers for components in many of our systems. Some
key components in our UPS product are also supplied by third-party suppliers,
including the diesel engine, motor-generator and flywheel. 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 develop and 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 manufacture our products.
If alternative sources are identified, we may not be able to successfully
integrate those components into our system without incurring additional cost and
risk. In addition, to the extent the processes that our suppliers use to
manufacture components are proprietary, we may be unable to obtain comparable
components from alternative suppliers.

     Our rotary UPS product consists of a diesel generator, a flywheel energy
storage system, electronics and a proprietary control system. We currently
contract the manufacturing of the diesel generator component to Cummins Inc., an
independent manufacturer. Our reliance on a single manufacturer exposes us to a
number of risks, including reduced control over manufacturing capacity, product
development, completion and delivery times, product quality and manufacturing
costs. Once development of our rotary UPS product is complete, if we experience
significant demand for our products, the challenges we face in managing our
relationship with Cummins Inc. will be increased. Furthermore, Cummins Inc. has
the right to terminate its relationship with us without notice. If Cummins Inc.
is unable or unwilling to manufacture a sufficient quantity of diesel generators
for us, on the time schedule and with the quality that we demand, we may be
forced to seek to engage additional or replacement manufacturers, which could
result in additional expenses and delays in product development or shipment.

     LONG-TERM CONTRACTS ARE NOT TYPICAL IN OUR BUSINESS, AND REDUCTIONS,
CANCELLATIONS OR DELAYS IN CUSTOMER ORDERS WOULD ADVERSELY AFFECT OUR OPERATING
RESULTS.

     We do not usually obtain long-term purchase orders or commitments from our
customers. Instead, we work closely with our customers to develop non-binding
forecasts of the future volume of orders. Customers may cancel their orders,
change production quantities from forecasted volumes or delay production for a
number of reasons beyond our control. Significant or numerous cancellations,
reductions or delays in orders by our customers would reduce our net sales. From
time to time, we make capital investments in anticipation of future business
opportunities. There can be no assurance that we will receive the anticipated
business that

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supports these investments. Delays in anticipated orders for fuel cell power
conversion systems as well as the delay in anticipated orders for our
Uninterruptible Power Supply Systems have reduced revenue expectations and
operating results and may result in liquidity shortfalls. If we are unable to
obtain this anticipated business, we may not be able to successfully compete in
our markets.

     IF WE EXPERIENCE A PERIOD OF SIGNIFICANT GROWTH OR EXPANSION, IT COULD
PLACE A SUBSTANTIAL STRAIN ON OUR RESOURCES.

     If we are successful in obtaining rapid market penetration of our products,
we will be required to deliver large volumes of quality products or components
to our customers and licensees on a timely basis and at reasonable costs to us.
We have limited experience in delivering large volumes of our products and have
limited capacity to meet wide-scale production requirements. We cannot assure
you that our efforts to expand our manufacturing and quality assurance
activities will be successful, that we will be able to satisfy large-scale
commercial production on a timely and cost-effective basis or that growth will
not strain our management, operational and technical resources. We will also be
required to continue to improve our operational, management and financial
systems and controls to meet anticipated growth. Failure to manage our growth
could damage our relationships with our customers and our investors and be
extremely costly to try to resolve.

     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 low 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 of hazardous materials into the air and water as well as the
handling, storage and disposal of these materials. These laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource, Conservation and
Recovery Act, and the Comprehensive Environmental Response, Compensation and
Liability Act, as well as analogous state and foreign laws. Because we use
hazardous materials in 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 any 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. In the event of a violation of
environmental laws, we could be held liable for damages and for the costs of
remedial actions. Environmental laws could also become more stringent over time,
imposing greater compliance costs and increasing risks

<Page>

and penalties associated with any violation, although, to-date, we have not been
cited for any material contaminations.

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

     On-site distributed power generation solutions, such as fuel cell and
microturbine systems, which utilize our products, provide an alternative means
for obtaining electricity and are relatively new methods of obtaining
electricity and other forms of 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 less upon
traditional means of purchasing electricity, and market participants must be
willing to produce products for alternative methods of power distribution. We
cannot assure you that businesses, consumers or market participants will choose
to utilize or service this on-site distributed power market at levels sufficient
to sustain our business. The development of a mass market for our products may
be impacted by many factors which are out of our control, including:

     -    market acceptance of fuel cell and microturbine systems that
          incorporate our products;

     -    the cost competitiveness of fuel cells that incorporate our products;

     -    the future costs of natural gas, propane and other fuels used by our
          customers' products versus future costs of other forms of fuel and/or
          power;

     -    consumer reluctance to try a new product;

     -    consumer perceptions regarding the safety of our customers' products;

     -    regulatory requirements; and

     -    the emergence of newer, more competitive technologies and products.

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.

     THE DISTRIBUTED POWER GENERATION INDUSTRY MAY BECOME SUBJECT TO FUTURE
GOVERNMENT REGULATION WHICH MAY IMPACT OUR ABILITY TO MARKET OUR PRODUCTS.

     We do not believe that our products will be subject to existing federal and
state regulations governing traditional electric utilities and other regulated
entities. We do believe that our products will be subject to oversight and
regulation at the federal, state or local level in accordance with state and
local ordinances relating to building codes, safety, pipeline connections and
related matters. This regulation may depend, in part, upon whether an on-site
distributed powersystem is placed outside or inside a home. At this time, we do
not know which jurisdictions, if any, will impose regulations upon our products.
We also do not know the extent to which any existing or new regulations may
impact our ability to sell and service our products. Once our customers'
products reach the commercialization stage and they begin distributing systems
to their target markets, federal, state or local government entities may seek to
impose

<Page>

additional regulations. Any new government regulation of our products, whether
at the federal, state or local level, including any regulations relating to
installation and servicing of our products, may increase our costs and the price
of our products and may have a negative impact on our revenue and profitability.

     UNCERTAINTIES AND ADVERSE TRENDS AFFECTING THE DEREGULATION OF THE ELECTRIC
UTILITY INDUSTRY OR ANY OF OUR MAJOR CUSTOMERS MAY HARM OUR OPERATING RESULTS.

     The growth of our distributed power generation business depends in large
part on the continued deregulation of the electric utility industry. Existing
utility companies, which have historically operated without competition, may
attempt to deter or delay the deregulation process. In addition, our customers
may not be able to compete effectively against existing utility companies in a
deregulated market. Changes in federal and state regulation may also have the
effect of deterring further investment in research and development of
alternative energy sources, including fuel cells and microturbines. Any changes
in the deregulation process or procedures, the inability of our customers to
compete effectively against existing utility companies or changes in federal or
state regulation which deter further investment in alternative energy sources
would significantly limit the demand for our products and our ability to
generate anticipated levels of revenue.

     OUR SHARE PRICE HAS BEEN SUBJECT TO EXTREME PRICE FLUCTUATIONS.

     The markets for equity securities in general, and for those of other
companies in our industry, have been volatile, and the market price of our
common stock, which is traded on the Nasdaq National Market under the symbol
SATC, is subject to significant fluctuations. This could be in response to
operating results, announcements of technological innovations or new products by
us, our competitors or our customers, patent or proprietary rights developments
and market conditions for alternative energy and high technology stocks in
general. In addition, the stock market in recent years has experienced extreme
price and volume fluctuations that often have been unrelated or disproportionate
to the operating performance of individual companies. These market fluctuations,
as well as general economic conditions, may adversely affect the market price of
our common stock. Past fluctuations have coincided with fluctuations of other
public companies in the alternative energy sector, market responses to national
issues, public release of information regarding the introduction of new
products, the award of significant contracts, analyst downgrades of our
projected stock price and investment community enthusiasm for the alternative
energy sector.

     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, and may not meet the
expectations of securities analysts or investors. If this occurs, the price of
our stock could decline. Past material quarterly fluctuations have been caused
by:

     -    variations in the timing and volume of customer orders relative to our
          manufacturing capacity and staffing levels;

     -    the timing of our expenditures in anticipation of future orders;

     -    introduction and market acceptance of our new products; and

<Page>

     -    the level of research and development expenses incurred by us which
          are unreimbursed.

     Future quarterly fluctuations could be caused by these factors and:

     -    our effectiveness in managing our manufacturing processes;

     -    changes in competitive and economic conditions generally or in our
          customers' markets;

     -    the timing of, and the price we pay for, acquisitions and related
          integration costs;

     -    changes in the cost or availability of components or skilled labor;
          and

     -    general economic conditions.

     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.

     EXISTING STOCKHOLDERS CAN EXERT CONSIDERABLE CONTROL OVER US.

     Our officers and directors, and their affiliates, beneficially hold
approximately one-quarter of our outstanding shares of common stock, a majority
of which is beneficially held by Mr. Eisenhaure, our president, chief executive
officer, chairman of the board and founder. If all of these stockholders were to
vote together as a group, they would have the ability to exert significant
influence over our board of directors and its policies. As a practical matter,
Mr. Eisenhaure may have the ability to elect our directors and to determine the
outcome of corporate actions requiring stockholder approval, including votes
concerning director elections, bylaw amendments and possible mergers, corporate
control contests and other significant corporate transactions, irrespective of
how some of our other stockholders may vote. Accordingly, such concentration of
ownership may have the effect of delaying, deterring or preventing a change in
control, impeding a merger, consolidation, takeover or other business
combination involving us, or discouraging a potential acquirer from making a
tender offer or otherwise attempting to obtain control of us, which in turn
could have an adverse effect on the market price of our common stock. As of
January 23, 2003, Mr. Eisenhaure beneficially owned 3,799,345 shares of our
common stock, representing 21.9% of our common stock. As a group, the executive
officers and directors beneficially owned 25.0% of our common stock as of such
date.

     PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY, DETER OR
PREVENT THE ACQUISITION OF SATCON, WHICH COULD DECREASE THE VALUE OF YOUR
SHARES.

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

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

<Page>

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

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

     -    limitations on who may call special meetings of stockholders.

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

     WE ARE SUBJECT TO RISKS INHERENT IN INTERNATIONAL OPERATIONS.

     We market and sell our products both inside and outside the United States.
We are currently selling our products in China, Canada and Europe. Revenue from
sales to our international customers for our fiscal years ended September 30,
2002 and 2001 were $7,179,333 and $6,071,107, respectively. Our success depends,
in part, on our ability to secure 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, fluctuations in currency exchange rates,
longer accounts receivable cycles, difficulties in managing international
operations, potentially adverse tax consequences and the challenges of complying
with a wide variety of foreign laws.

     YOU ARE UNLIKELY TO BE ABLE TO EXERCISE EFFECTIVE REMEDIES AGAINST ARTHUR
ANDERSEN LLP, OUR FORMER INDEPENDENT PUBLIC ACCOUNTANTS.

     Although we have dismissed Arthur Andersen LLP as our independent public
accountants and have engaged Grant Thornton LLP, our financial statements for
the fiscal years ended September 30, 2000 and 2001, which are incorporated by
reference into this prospectus, were audited by Arthur Andersen. On March 14,
2002, Arthur Andersen was indicted on federal obstruction of justice charges
arising from the government's investigation of Enron Corporation. On June 15,
2002, a jury in Houston, Texas found Arthur Andersen guilty of these federal
obstruction of justice charges. In light of the jury verdict and the underlying
events, Arthur Andersen subsequently substantially discontinued operations and
dismissed essentially its entire workforce. You are therefore unlikely to be
able to exercise effective remedies or collect judgments against Arthur
Andersen. In addition, Arthur Andersen has not consented to the inclusion of its
report in this prospectus, and the requirement to file its consent has been
dispensed with in reliance on Rule 437a promulgated under the Securities Act of
1933. Because Arthur Andersen has not consented to the inclusion of its report
in this prospectus, you will not be able to recover against Arthur Andersen
under Section 11 of the Securities Act for any untrue statement of a material
fact contained in the financial statements audited by Arthur Andersen or any
omissions to state a material fact required to be stated in those financial
statements.