SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 1-8403
ENERGY CONVERSION DEVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 38-1749884
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1675 West Maple Road, Troy, Michigan 48084
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (248) 280-1900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x].
The aggregate market value of stock held by non-affiliates (based upon the
last sale price of such stock on the NASDAQ National Market System on September
12, 1997) was approximately $173 million. As of September 12, 1997, there were
219,913 shares of the Company's Class A Common Stock and 10,608,763 shares of
the Company's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1: Business
OVERVIEW
Energy Conversion Devices, Inc. (the "Company") is a leader in the
synthesis of new materials and the development of advanced production technology
and innovative products. The Company was founded by Stanford R. Ovshinsky and
Iris M. Ovshinsky. Under the direction of Stanford R. Ovshinsky, principal
inventor, the Company has pioneered the development of products and production
technology based on amorphous and related materials, with an emphasis on
alternative energy and advanced information technologies. Unlike the simple,
ordered, three-dimensional arrays found in most crystalline materials, the
Company's proprietary synthetic materials--Ovonic materials--are designed to
exploit unique properties that result from engineered chemical and structural
disorder. The complex chemical and structural composition of Ovonic materials
makes possible the development and commercialization of new products with unique
chemical, electrical, mechanical and optical properties and superior performance
characteristics.
The Company has used an integrated approach to product development that
seeks to minimize the customary barriers between research and development,
production design and product planning. The Company's strategy has been to
develop products that have technological advantages over available alternatives
and that are capable of being produced commercially on an economically
competitive basis. The Company is also continuing its development efforts,
funded in part through contracts with U.S. Government agencies, the Company's
licensees and industrial partners, to broaden and build upon its product and
technological base.
The Company has established a multi-disciplinary business, scientific and
technical organization to commercialize products based on its technologies, and
has developed proprietary products and technology which have established its
leadership in three industry sectors: non-fossil fuel energy generation, energy
storage and information. The Company is currently engaged in manufacturing and
selling its proprietary products on its own, through its joint venture companies
as well as through licensing arrangements with major companies throughout the
world. In addition, in support of these activities, the Company is engaged in
research and development as well as designing and building production machinery.
The Company has recognized the need to protect its technology and maintains an
extensive patent portfolio consisting currently of 352 issued United States
patents and 825 foreign counterparts. The patent portfolio includes numerous
basic and fundamental patents covering amorphous and related materials as well
as patents covering products, including a recently-issued basic patent in Japan
recognizing the fundamentals that make nickel metal hydride ("NiMH") batteries
commercially feasible, and production technologies.
The Company conducts its battery business through its 93.5%-owned
subsidiary, Ovonic Battery Company, Inc. ("Ovonic Battery"). Sanoh Industrial
Co., Ltd. ("Sanoh") and
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Honda Motor Company, Ltd. ("Honda") own approximately 6.5% of the
outstanding stock of Ovonic Battery. Sanoh has been a shareholder in Ovonic
Battery since 1993 and Honda acquired its interest in 1996.
The Company formed two significant joint ventures in the field of
alternative energy, GM Ovonic L.L.C. ("GM Ovonic") and United Solar Systems
Corp. ("United Solar"). GM Ovonic was established to manufacture and
commercialize Ovonic NiMH batteries for electric vehicle ("EV") applications.
Ovonic Battery owns a 40% equity interest in GM Ovonic and General Motors
Corporation ("General Motors") owns a 60% equity interest. The Company and Canon
Inc. of Japan ("Canon") each own a 49.98% equity interest in United Solar, a
joint venture formed for the continued development, manufacture and sale of
photovoltaic ("solar energy") products under license from the Company. Mrs. Haru
Reischauer, a director of both the Company and United Solar, owns the balance of
the outstanding shares of United Solar.
In the field of information technology, the Company's Ovonic phase-change
rewritable optical memory technology, already being used in phase-change dual
("PD") and compact disk-rewritable ("CD-RW") systems, has been chosen for use in
the emerging digital versatile disk-random access memory ("DVD-RAM") rewritable
optical disk systems. The international standards for DVD-RAM and DVD-Rewritable
("DVD-RW") systems, designed by major optical disk manufacturers, specify the
use of the Company's phase-change optical memory technology. The Company's
licensees in this area include Matsushita Electric Industrial Co., Ltd.
("Matsushita"), Toshiba Corporation ("Toshiba"), Asahi Chemical Industry Co.,
Ltd. ("Asahi"), Hitachi, Ltd. ("Hitachi"), Plasmon Limited ("Plasmon"), Sony
Corporation ("Sony"), Toray Industries, Inc. ("Toray") and TDK Corporation
("TDK").
The Company is also developing thin-film semiconductor memory technology
which can have a wide variety of computer applications and is intended to
replace conventional DRAM, SRAM and flash EEPROM semiconductor memory devices.
The Company has entered into a variety of other strategic alliances and
license agreements for the commercialization of its technologies.
Certain technical terms used herein are defined in the section captioned
"Glossary of Technical Terms" appearing at the end of this Item 1.
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MAJOR BUSINESSES
The Company has invented and developed Ovonic materials, products and
production technology for use in the fields of energy, information technology
and synthetic materials. The Company's goals have been to develop unique,
proprietary and cost-effective products to address important environmental,
energy and new materials needs.
Energy Generation and Storage.
Energy activities, specifically in the areas of rechargeable batteries and
photovoltaic systems, represent a major element of the Company's business
strategy. Environmentally-safe methods of generating and storing energy have
become critical in today's world. The Company's battery photovoltaic
technologies continue to gain worldwide recognition, particularly in light of
recent concerns about air pollution, global climate change, ozone layer
depletion, dependence on imported oil and related concerns involving military
action and international stability, balance of payments and economic
development.
Rechargeable Batteries. The Company's Ovonic Battery subsidiary has
developed a proprietary NiMH battery technology using Ovonic materials which has
achieved recognition by major battery manufacturers throughout the world. The
Company believes that all commercial NiMH batteries are covered by the Company's
basic patents. Ovonic Battery currently has over a dozen consumer battery
licensees and has established a dominant patent position in the field of Ovonic
NiMH batteries, with 47 issued United States patents and 214 foreign
counterparts, including a recently-issued patent in Japan specifying the
fundamentals that make NiMH batteries commercially feasible. Additional United
States and foreign patent applications are in various stages of preparation and
prosecution.
The Ovonic NiMH batteries are being manufactured and sold throughout the
world under licensing and joint venture arrangements. Ovonic Battery is also in
volume production of the NiMH battery negative electrodes for sale to its
licensees and its GM Ovonic joint venture.
Ovonic NiMH batteries store over twice as much energy as standard nickel
cadmium ("Ni-Cd") or lead acid batteries of equivalent weight. In addition,
Ovonic NiMH batteries have high power, long cycle life, are maintenance free and
have no memory effect. Moreover, Ovonic NiMH batteries do not contain cadmium or
lead, both environmentally hazardous substances. Ovonic NiMH batteries can be
made in a wide range of sizes and have a wide range of applications, including
hand-held consumer electronics, power tools, utility applications, EVs and
hybrid electric vehicles ("HEVs"), including electric two- and three-wheeled
vehicles, and industrial batteries.
During the fiscal year ended June 30, 1997, Ovonic Battery produced
negative and positive electrodes for sale to certain licensees for assembly into
complete batteries for consumer, EV and HEV applications. Additionally, Ovonic
Battery has produced batteries for EV and HEV applications engineered and
designed for volume production. The Ovonic
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NiMH battery, by virtue of its engineered materials, possesses superior
performance characteristics without the limitations of conventional batteries.
Ovonic Battery continues to further improve the performance characteristics of
its Ovonic NiMH batteries.
Ovonic Battery is currently focusing on three principal battery markets:
rechargeable batteries for portable electronics and consumer applications, EV
and HEV propulsion batteries, and batteries for the propulsion of two- and
three-wheeled vehicles. These batteries can also serve industrial applications
such as energy storage for remote power generation and battery-operated
industrial equipment.
Rechargeable Portable Electronics and Consumer Batteries. The need for
high energy density rechargeable batteries has continued to grow in recent
years. The push toward portable electronic products--such as cellular
telephones, portable computers and cordless tools--has created a large market
for rechargeable batteries and has fueled research to investigate new, higher
energy density battery systems. Although conventional storage batteries, such as
Ni-Cd, have been further improved in design and packaging in recent years, the
demand for higher performance batteries continues to increase. At present,
conventional Ni-Cd batteries have an energy density of 30-35 watt-
hours/kilogram. Ovonic NiMH batteries have an energy density of over 80 watt-
hours/kilogram. Technology improvements have demonstrated an energy density of
over 95 watt-hours/kilogram in prototype batteries with even higher energy
densities in the process of development.
Ovonic NiMH batteries offer a convenient "drop in" replacement for Ni-Cd
batteries in portable electronic and household appliances. Consumer and
governmental awareness that cadmium from Ni-Cd batteries represents a serious
health problem, if improperly disposed of, has begun to move the industry away
from Ni-Cd batteries. The desire of the battery industry to be cadmium-free is
also a major factor in the growing interest in Ovonic NiMH batteries.
Ovonic Battery has licensing arrangements with many of the world's largest
battery manufacturing companies. Ovonic Battery's proprietary battery technology
has been licensed for consumer battery applications to GP Batteries
International Limited ("GP Batteries") (formerly Sylva Industries, Ltd.) in Hong
Kong, one of the world's largest manufacturers of 9-volt batteries and button
cells; Varta Batterie AG ("Varta"), Europe's largest battery company; Sovlux Co.
Ltd. ("Sovlux"), the Company's joint venture in Russia; Harding Energy Inc.
("Harding"); Eveready Battery Company, Inc. ("Eveready") (formerly Gates Energy
Products, Inc.), the largest United States rechargeable consumer battery
company; Walsin Technology Corporation ("Walsin") and Asia Pacific Investment
Co. ("APIC"), both leading Taiwanese companies; Samsung Electronics Co., Ltd.
("Samsung") and LG Chemical, Ltd. ("LG Chem"), leading Korean companies; Canon,
Hitachi Maxell, Ltd. ("Hitachi Maxell"), Furukawa Battery Co., Ltd. ("Furukawa")
and Matsushita Battery Industrial Co., Ltd. ("MBI"), all leading Japanese
companies. In addition, the Ovonic battery technology is being used in consumer
applications by three consumer battery manufacturers based in Japan.
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Electric and Hybrid Electric Vehicle Batteries. The strategic importance
of EVs and HEVs both in the United States and worldwide has increased greatly in
recent years. This heightened interest is due to many concerns such as air
pollution, global climate change, ozone layer depletion and dependence on
imported oil.
Several major automobile manufacturers have active programs underway to
develop and commercially market EVs and HEVs. General Motors introduced the EV1,
the first modern limited-production car designed from the ground up to be an
electric vehicle, in the Fall of 1996 at Saturn dealerships in the Los Angeles
and San Diego, California, and Phoenix and Tucson, Arizona, areas. General
Motors has announced that Ovonic NiMH batteries manufactured by GM Ovonic will
become available in limited quantities in the EV1 and the Chevrolet S-10 elec-
tric pickup in late 1997. Since Ovonic NiMH battery technology provides two to
two-and-a-half times the driving range as the same mass of lead acid batteries,
several major automobile manufacturers are testing and validating Ovonic NiMH
battery technology as they prepare to commercialize and market EVs and HEVs.
Honda, in addition to its investment in Ovonic Battery, used Ovonic NiMH
batteries in a test fleet of EVs during 1997 and Hyundai Motor Co. Ltd. of Korea
("Hyundai") introduced a test vehicle in 1997 powered by Ovonic NiMH batteries.
GM Ovonic. In June 1994, Ovonic Battery and General Motors formed a joint
venture, GM Ovonic, to manufacture and sell Ovonic Battery's proprietary NiMH
batteries for four-wheeled electric propulsion applications to vehicle
manufacturers on a worldwide basis. GM Ovonic is owned 40% by Ovonic Battery and
60% by General Motors. Ovonic Battery has contributed intellectual property,
licenses, production processes, know-how, personnel and engineering services
pertaining to Ovonic NiMH battery technology to the joint venture. General
Motors' contribution consists of operating capital, plant, equipment and
management personnel necessary for the production of batteries.
GM Ovonic is currently engaged in low-volume manufacturing of NiMH
batteries at its facility in Troy, Michigan. Production volume is expected to
increase during 1998 at a larger facility.
Other EV Business Agreements. In addition to its GM Ovonic joint venture,
Ovonic Battery has entered into royalty-bearing license agreements for the
manufacture of EV batteries and related products outside of the United States
with Hyundai, Varta, APIC, GP Batteries and Sovlux. Hyundai, GP Batteries and
Sovlux have restricted rights to sell EV batteries in North America. Varta's
license includes the right to manufacture EV batteries subject to certain
limitations on access to technology and restrictions on manufacturing in North
America.
The United States Advanced Battery Consortium ("USABC"), a partnership
among Ford Motor Company, General Motors and Chrysler Corporation, with funding
participation from the United States Department of Energy ("DOE") and the
Electric Power Research Institute, was formed in 1991 to develop promising
battery technologies for EVs. In 1992,
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Ovonic Battery was awarded a cost-sharing contract by USABC for development of a
"mid-term" NiMH battery for EVs. This contract has been amended and extended
several times since 1992 and was completed in May 1996. Ovonic Battery and GM
Ovonic have also collaborated in a program funded by USABC to reduce the costs
of manufacturing NiMH EV batteries.
During the past year, Ovonic Battery developed a "Family of Batteries"
that covers the full spectrum of EVs and HEVs, including bicycles, two- and
three-wheel scooters, cars, trucks and vans. This Company-sponsored development
was based on the demonstrated ability of NiMH batteries to be engineered for
different energy and power densities in a wide range of capacities. The
automotive industry has expressed considerable interest in batteries for the
emerging HEV market and Ovonic Battery is positioning itself to offer the
industry a high power, durable, high charge/discharge rate NiMH battery. Ovonic
NiMH batteries for HEVs are being reviewed with a variety of potential
customers. This "Family of Batteries" was presented to General Motors and has
led to an Ovonic Battery production development program that is a multi-year,
multi-task activity of significant value to the Company. This program is
intended to provide next- and future-generation NiMH batteries that will be
manufactured by GM Ovonic. Both EV and HEV types of NiMH batteries are included
in the program with the objective of increasing the energy density of future
batteries as well as reducing their size and cost.
Ovonic Battery's HEV battery, developed under its "Family of Batteries"
program, meets specifications set by the Partnership for Next Generation of
Vehicles ("PNGV"), a program among Chrysler, Ford, General Motors and the U.S.
Department of Commerce. Ovonic NiMH batteries tested for HEVs have the following
present performance characteristics with the ability to be increased, if
desired:
Specific Energy: 70 watt-hours/kg.
Peak Power: 625 watts/kg.
Regenerative Power: 600 watts/kg.
USABC has stated that the only battery technology with the capability to
meet or exceed USABC's mid-term goals for EV battery performance is NiMH. Ovonic
Battery has been designing and building cells and modules for independent
evaluation by USABC as well as testing advanced prototype batteries with
favorable results.
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USABC Mid-Term
Major Technical Current Ovonic Next Generation Battery
Characteristic Goals Performance(1) Performance(2)(3)
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Energy Density 80 watt-hours/kg. 80 watt-hours/kg. 90-95 watt-hours/kg.
Power Density 150 watts/kg. 180 watts/kg. > 200 watts/kg.
Cycle Life 600 cycles 600 cycles 1000 cycles
Life 5 years 10 years 10 years
100% Recharge 6 hours or less 1 hour (60% in 15 1 hour (60% in 15
Time minutes) minutes)
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(1) Indicates independently verified performance with the exception of life,
which is projected based on cycle life results and history of small
portable batteries using the same materials and manufacturing process.
Based on this battery performance, purpose-built EVs have already
achieved:
- More than 370 miles on a single charge
- 0 to 60 mph acceleration in 8 seconds
- Battery lifetime projected to be equal to the life of
the vehicle
- Battery quick charge to 60% of its capacity in 15 minutes
Moreover, the Ovonic NiMH battery is robust, free of lead, cadmium and
other environmentally hazardous substances and maintenance free.
(2) Indicates performance already achieved on a prototype level at Ovonic
Battery.
(3) With respect to energy density, Ovonic Battery believes that significant
potential for even higher performance exists. Based upon laboratory
measurements of advanced materials, optimized construction and designs,
Ovonic Battery projects that energy density can be improved to as high as
120-150 watt-hours/kilogram.
EVs powered by Ovonic NiMH batteries continue to set records and win
electric vehicle races. The Ovonic NiMH battery powered the first-place winning
Solectria Force electric vehicle to a range of 249 miles on a single charge
during the May 1997 American Tour de Sol race, outdistancing all other
production competitors and surpassing the year-earlier first-place winning
range, also set with the Ovonic NiMH battery.
In July 1997, the Chevrolet S-10 electric pickup, powered by GM Ovonic
NiMH batteries, set a record for electric vehicles in winning the Pikes Peak
International Hill Climb in 15 minutes and 32 seconds, surpassing previous
records.
Two- and Three-Wheeled Vehicles. Ovonic Battery has installed Ovonic NiMH
batteries in scooters converted to electric power and successfully demonstrated
the application of its battery for two- and three-wheeled electric vehicles.
Ovonic Battery considers two- and three-wheeled electric vehicles a potential
large-volume market since
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these types of vehicles are the primary mode of transportation in many European
and developing countries throughout the world, such as India, China and Taiwan.
Electric two-and three-wheeled vehicles using Ovonic NiMH batteries should
improve the acute air pollution problems in these regions caused by conventional
two- and three-wheeled vehicles.
The Company has entered into royalty-bearing license agreements for the
manufacture and sale of Ovonic NiMH batteries for two- and three-wheeled
vehicles with Walsin, Sanoh and APIC, an affiliate of Taiwan's largest
industrial conglomerate, the Formosa Plastics Group.
Sanoh, a licensee in Japan, is accelerating its production of NiMH
batteries for electric scooter applications. Among Sanoh's customers are several
large manufacturers of electric scooters and bicycles such as Honda and Yamaha
Motor Co. Ltd., who have announced plans to introduce new products.
Ovonic Battery and Sanoh are also engaged in the planning of a joint
venture to manufacture NiMH batteries for two- and three-wheeled electric
vehicles in Europe.
Other Large Battery Applications. Several licensees of Ovonic NiMH battery
technology, such as Sovlux, Canon and GM Ovonic, have been granted rights to
manufacture and sell large batteries for energy storage applications for
electricity generated by photovoltaics, remote power generation, utility
applications and battery- operated industrial equipment.
Photovoltaic Technology.
Photovoltaic ("PV") systems provide a clean and simple solid-state method
for direct conversion of sunlight into electrical energy. The major barrier to
the widespread use of direct solar-to-electrical energy conversion has been the
lack of an inexpensive solar cell technology. The Company and its American joint
venture, United Solar, are leaders in thin-film amorphous photovoltaic
technology and have pioneered a unique approach to the manufacture of
photovoltaic products. Compared to PV products produced by other PV
technologies, the ECD/United Solar PV products are substantially lighter, more
rugged, require much less energy to produce and can be produced in high volume
at significantly lower cost. The Company's proprietary position in photovoltaics
ranges from the invention of materials and the development of products to the
design and manufacture of production equipment. The Company and United Solar
have more than 165 U.S. patents and numerous foreign counterpart patents.
Crystalline silicon was the original materials technology used by the
photovoltaic industry. First widely used in space satellites, conventional
crystalline silicon solar cells are fabricated in a step-and-repeat, batch
process from small wafers of single crystal or polycrystalline silicon
semiconductor materials. Notwithstanding the substantial advances that have been
made in the development of this technology, the cost of crystalline photovoltaic
modules still is high because of high materials costs and because many
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processing steps are needed to manufacture the modules. Crystalline silicon
solar cell modules also are bulky and break easily.
The Company has developed technology to reduce the materials cost in a
solar cell using the Company's proprietary thin film, vapor-deposited amorphous
silicon ("a-Si") alloy materials. Because a-Si absorbs light more efficiently
than its crystalline counterpart, the a-Si solar cell thickness can be 50 to 100
times less, thereby significantly reducing material cost. Amorphous cells with
different light absorption properties also can be deposited one on top of
another to capture the broad solar spectrum more effectively, which increases
the energy-conversion efficiency of the multi-cell device and improves
performance stability.
The Company and its United Solar joint venture hold current world records
for both large- and small-area conversion efficiency for amorphous silicon solar
cells, as measured by the DOE's National Renewable Energy Laboratory ("NREL").
Conversion efficiency is the percentage of sunlight that is converted into
electricity. In 1994, the DOE and United Solar announced that United Solar had
set a world record of 10.2% stabilized energy conversion efficiency for large
area (one-square foot) amorphous silicon alloy photovoltaic modules, which the
DOE characterizes as a major breakthrough. In April 1997, United Solar announced
the laboratory achievement of a new world record solar-to-electricity stabilized
efficiency of 13% for small-area amorphous silicon alloy photovoltaic cells,
surpassing its earlier record.
To further reduce the manufacturing cost of photovoltaic modules, the
Company has pioneered the development and has the fundamental patents on a
unique approach utilizing proprietary continuous roll-to-roll solar cell
deposition process. Using a roll of flexible stainless steel that is typically a
half-mile long and 14 inches wide, nine thin-film layers of a-Si alloy are
deposited sequentially in a high yield, automated machine to make a continuous,
stacked three-cell structure. The roll of solar cell material then is processed
further for use in a variety of photovoltaic products. This basic approach that
the Company has pioneered is unique in the industry and has significant
manufacturing cost advantages. The Company believes that in high-volume
production its photovoltaic modules will be significantly less expensive than
conventional crystalline silicon and other thin-film solar modules produced on
glass and can be cost competitive with fossil fuels. The importance of the
Company's and United Solar's work in this field has been recognized by the U.S.
Department of Energy.
The Company has formed two joint ventures to manufacture photovoltaic
modules and systems and to sell them throughout the world.
In 1990, the Company and Canon formed United Solar for the continued
development, manufacture and sale of Ovonic solar cells under license from the
Company. United Solar is owned 49.98% by the Company and 49.98% by Canon.
Canon has invested over $55 million in United Solar, provided $10 million
in loan guarantees and in 1997 entered into an agreement with United Solar
whereby, in
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consideration of an $11.5 million payment to United Solar, Canon has been
permitted, in addition to its rights under a 1986 agreement between Canon and
the Company whereby Canon was granted exclusive rights to manufacture
photovoltaic products in Japan, to expand its rights to manufacture photovoltaic
products on a non-exclusive basis in Australia and one country of Europe as
determined by Canon.
The Company and United Solar have been producing a variety of PV products
and selling PV modules and systems throughout the world. United Solar presently
manufactures products for remote power applications, telecommunications,
PV-powered lighting systems, building-integrated photovoltaic systems, marine
applications and grid-integrated systems at its facilities in Troy, Michigan.
The Company and United Solar have also developed, and are making and selling,
unique products for the building industry such as PV shingles and metal roofing
products which emulate conventional roofing materials in form, construction,
function and installation.
In 1996 and 1997, United Solar upgraded its manufacturing facility and has
more than tripled its production capacity. The new machinery and equipment,
which was designed and built by the Company under an $8 million order from
United Solar, became operational in early 1997. This new machinery and
equipment, now in commercial production, incorporates advanced technology and
has production capacity of solar cells capable of producing 5 megawatts of
electricity on an annual basis.
In 1996, United Solar received the Popular Science's 1996 "Best of What's
New" Grand Award and, in 1997, received the Discover Magazine's 1997 Technology
Innovation Award for its flexible solar shingles.
In 1990, the Company also formed Sovlux, a joint venture with Kvant, to
manufacture the Company's photovoltaic products in the countries of the former
Soviet Union. Sovlux is owned 50% by the Company. In 1990, Kvant entered into
machine- building contracts with the Company for the construction of
2MW-capacity photovoltaic manufacturing equipment. The equipment has been
installed in Sovlux's plant in Moscow. Kvant contributed this equipment to the
joint venture in exchange for its ownership interest in Sovlux. In July 1996,
the Russian Ministry of Atomic Energy ("MINATOM") agreed to become an equity
partner in Sovlux. MINATOM has agreed to provide operating capital to enable
Sovlux to commence production of photovoltaic products as well as provide
capital for new production equipment to be built by the Company's Production
Technology and Machine Building Division. Because of economic conditions in
Russia, MINATOM has been unable to fulfil its obligations. The Company's
contribution to the venture consists solely of the technology necessary to
support Sovlux's operations. Sovlux has conducted pre-production activities
consisting of manufacturing plant preparation and machinery optimization. Sovlux
had no significant activity in 1997 due to current economic conditions in
Russia.
For more than 11 years, the Company has been engaged in research contracts
awarded by the DOE and NREL aimed at further development of high-efficiency
amorphous silicon-based alloy thin-film solar cells, improvement of photovoltaic
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manufacturing technologies, and the development and demonstration of
photovoltaic systems to be used in roof-top construction in lieu of shingles and
other roofing materials. The building industry offers a large opportunity for PV
applications. The Company believes that the PV roofing products represent an
important opportunity for large-volume production and sale to the building
industry, both domestically and abroad.
Other Energy Technologies. The Company is conducting various research
programs sponsored by U.S. Government agencies to continue work on the
development of high-performance materials for the storage of hydrogen, the
design of prototype metal hydride hydrogen storage devices, and the development
of integrated renewable hydrogen-generation storage systems. The prototype
hydrogen storage devices utilize the Company's proprietary high-performance
metal hydride materials and are designed to work with applications such as
hydrogen-oxygen fuel cells as well as other applications.
Under a DOE-sponsored program, the Company is investigating an integrated
renewable hydrogen-generation storage system. This system uses water
electrolysis to convert the electricity produced by the Company's multi-junction
PV products to hydrogen and stores the produced hydrogen in metal hydride
hydrogen storage devices.
Information Technologies.
The Company has developed a number of key proprietary products and
processes in the field of information technology. In the past, products have
been developed by the Company for data input (image scanners); data output
(copier and laser printer drums); data display (active matrix flat panel
displays); and data storage (optical and semiconductor memory devices).
Optical Memory. The Company is the originator of phase-change rewritable
optical memory disk technology. The Company's Ovonic phase-change rewritable
optical memory technology makes it possible to store, in a convenient, removable
disk format, many times the amount of data as a conventional, removable rigid
magnetic disk of the same size. The Company has licensed its phase-change
rewritable optical memory technology to Matsushita, Toshiba, Plasmon, Asahi,
Hitachi, Sony, Toray and TDK. The license agreements provide for royalty
payments to the Company based upon sales of phase-change rewritable optical
memory disks.
The international standards designed by the major optical disk
manufacturers specify the use of phase-change materials. Under its Panasonic
brand name, Matsushita introduced PD function disk drive in mid 1995, which uses
rewritable optical disk media that employ the Company's Ovonic phase-change
rewritable optical memory technology. The Matsushita drive can read conventional
CD-ROM disks now widely used for software distribution and multimedia
applications as well as read and write to 650-megabyte capacity phase-change
optical memory disks. Toray, Plasmon and Asahi have been manufacturing and
selling PD storage media which have been met with enthusiastic industry and
consumer acceptance. Commercial manufacturing and sales of CD-RW
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storage media, also incorporating Ovonic phase-change rewritable optical memory
technology, began in mid-1997.
An even higher capacity data storage rewritable optical memory product,
the DVD- RAM disk, is planned for commercial introduction in late calendar 1997.
The Company's optical memory licensees now producing PD and CD-RW media, as well
as other storage media manufacturers, are expected to become manufacturers of
DVD-RAM products. The DVD Forum, comprised of leading manufacturers in the
optical disk industry, is targeting a wide range of computer and information
technology applications for DVD-RAM disks, including digital television
recording, due to their high data storage capacity.
The Company is working toward commercialization of its technology for high
storage capacity rewritable optical memory material produced by low-cost
continuous web- embossing processes. In a related activity, the Company, along
with several industry partners, is participating in a U.S. Department of
Commerce, National Institute of Standards and Technology, multi-year,
multi-million dollar cost-sharing program for the development of tape-based
rapid access affordable mass storage products. The Company's optical memory
materials technology is being utilized in this program due to its high storage
capacity and low-cost manufacturability.
Non-Volatile Semiconductor Memory. The Company, on the basis of its
pioneering technology, developed the first non-volatile semiconductor memory,
the Ovonic EEPROM, for computer data storage in the 1960s. The Company has
advanced and extended that early work and is now developing a proprietary family
of high-performance non-volatile semiconductor memory and information processing
devices. This technology is designed to provide non-volatile computer data
storage with the speed of current, volatile DRAM semiconductor system memory as
well as to decrease the cost of production. The technology also offers an
opportunity to develop new, fast computer architectures that eliminate the data
transfer bottlenecks caused by the current computer memory hierarchy. The
Company believes its Ovonic memory can, in a single device, replace the multiple
memory types of devices which are used in today's personal computers. Another
application of the technology is intended for use in the rapidly growing flash
EEPROM market. Flash EEPROMs are used in portable electronic devices such as
laptop computers, pagers, and cellular telephones as all-solid-state, low-power
replacements for magnetic hard disk storage. Still another application of the
Company's non-volatile semiconductor memory technology can provide a basis for
practical, highly complex, three-dimensional neural network systems for use in
advanced artificial intelligence and speech- and image-pattern recognition.
While the Company licensed its previous flat panel display and image
processing technology to its former subsidiary, OIS Optical Imaging Systems,
Inc., the Company intends to continue its activities in this field employing new
technology.
-13-
Synthetic Materials.
The Company has developed a new low-cost, transparent vapor barrier
coating for flexible plastic beverage containers and packaging films. The
Company has also developed and demonstrated manufacturing technology and
processes for depositing these coatings with cost-effective, roll-to-roll
continuous production. The Company's vapor barrier coating technology is
environmentally friendly and can be used to extend the shelf life of food,
beverages, pharmaceutical and other types of sensitive commercial products. The
vapor barrier coating production process deposits an amorphous film that
significantly improves the barrier properties of commodity polymer films. The
Company has expanded the scope of this technology to optical coating
applications.
In April 1997, the Company entered into a license agreement with Southwall
Technologies, Inc., a leading supplier of high performance coatings on flexible
substrates. This royalty-bearing license also provides for a joint development
program for high-volume production of high-performance coatings on flexible
substrates.
PRODUCTION TECHNOLOGY AND MACHINE BUILDING DIVISION
AND CENTRAL ANALYTICAL LABORATORY
The Production Technology and Machine Building Division operates as a
profit center for the Company's machine-building and engineering activities. It
has extensive experience in designing and building proprietary automated
production equipment. The Production Technology and Machine Building Division
has designed and built for the Company and its licensees five generations of
photovoltaic production lines, including United Solar's machinery and equipment
for solar cells capable of producing 5 megawatts of electricity on an annual
basis, as well as research, development and manufacturing equipment for
batteries, vapor barrier coating and other materials technology.
The Company's Central Analytical Laboratory conducts analysis of materials
produced by the Company and its joint venture partners and licensees as well as
materials produced by other companies. The Company also maintains an advanced
materials technology group that supports the efforts of each of the Company's
business areas.
RESEARCH AND DEVELOPMENT
The nature of the Company's business has required, and will continue to
require, expenditures for research and development to support the commercial
activities of the Company. Such funds have been forthcoming from United States
government agencies and the Company's licensees and industrial partners to
partially fund these activities. The materials, production technologies and
products being developed and produced by the Company, Ovonic Battery and the
Company's joint venture partners are technologically sophisticated and are
designed for markets characterized by rapid technological change and competition
based, in large part, upon technological and product performance advantages.
-14-
The following is a summary of the Company's consolidated direct
expenditures, excluding the allocation of patents, depreciation and general and
administrative expenses, for product research and development for the five years
ended June 30, 1997. All of the Company's research and development costs are
expensed as incurred.
Direct Research and Development Expenditures
Year Ended June 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Sponsored $ 4,996,632 $ 6,732,570 $ 9,154,263 $6,927,883 $5,306,030
by Licensees,
Government
Agencies and
Industrial Partners
Sponsored by
the Company $11,735,861 6,214,848 2,808,219 1,357,341 1,958,328
----------- ----------- ---------- ---------- ---------
$16,732,493 $12,947,418 $11,962,482 $8,285,224 $7,264,358
=========== =========== =========== ========== ==========
SOURCES AND AVAILABILITY OF RAW MATERIALS
Materials, parts, supplies and services used in the Company's business are
generally available from a variety of sources. However, interruptions in
production or delivery of these goods and services could have an adverse impact
on the Company's manufacturing operations.
PATENTS AND PROPRIETARY RIGHTS
Since its founding in 1960, the Company's research and development efforts
have focused on amorphous, disordered and related materials. The Company has
established a multi-disciplinary business, scientific and technical organization
ranging from research and development to manufacturing and selling products as
well as designing and building production machinery. The Company has recognized
the need to protect carefully those activities. The Company's extensive patent
portfolio consists of 352 United States patents and 825 foreign counterparts,
including a recently issued patent in Japan specifying the fundamentals that
make NiMH batteries commercially feasible. The Company's patent portfolio
includes numerous basic and fundamental patents applicable to the field of
amorphous and related materials. The Company invents not only materials but also
develops low-cost production technologies and high-performance products. The
Company's patents, therefore, cover not only materials but also the production
technology and products developed by the Company.
-15-
The Company believes that worldwide patent protection is important for it
to compete effectively in the marketplace. Certain of the Company's patents have
been the subject of legal actions, two of which have been resolved favorably to
the Company prior to trial. See "Item 3: Legal Proceedings" on pages 22 of this
Report. Because the validity of the Company's patents has not to date been
confirmed through legal proceedings, no assurance can be given as to either the
validity or scope of the Company's patent protection.
CONCENTRATION OF REVENUES
See Note B of the Notes to Consolidated Financial Statements on page 47 of
this Report.
BACKLOG
The Company has a $3,700,000 backlog of orders as of August 31, 1997 for
electrodes. The backlog at August 31, 1996 was $6,300,000 for battery packs,
electrodes and machine-building contracts. The Company expects to fill all of
its current backlog within the current fiscal year.
COMPETITION
The principal competitive advantages of the Company include its products,
production technology, extensive patent portfolio, inventions and research and
development activities. In the areas of consumer rechargeable batteries, EV
batteries, large batteries, photovoltaics and information technologies, the
Company has entered into joint venture or licensing agreements with established
industrial companies that the Company believes possess the financial resources
and manufacturing and marketing capabilities to commercialize products based on
the Company's technologies.
The Company competes with firms, both domestic and foreign, that
manufacture and sell products, as well as firms that perform research and
development. Some of these firms are among the largest industrial companies in
the world and have well-established product lines, extensive resources and large
research and development staffs and facilities.
The Company is currently engaged in manufacturing and selling its
proprietary products through joint ventures and licensing arrangements, as well
as through its own divisions and internal production operations. The ability of
the Company to maintain its competitive leadership in the future will depend not
only on continuing product and technological advances but also on the strength
and ability of the Company's licensees and joint venture partners.
-16-
EMPLOYEES
As of September 12, 1997, the Company had a total of 345 employees,
including 183 Ovonic Battery employees. The aforementioned numbers do not
include employees of the Company's joint ventures or licensees. The Company
considers its relations with its employees to be excellent.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 concerning,
among other things, the Company's expectations, plans and strategies for the
development and commercialization of products based on its technologies. These
forward-looking statements are generally identified by the use of such terms as
"intends," "expects," "plans," "projects," "estimates," "anticipates," "should"
and "believes."
All of such forward-looking statements are based on assumptions which the
Company, as of the date of this Annual Report, believes to be reasonable and
appropriate. The Company cautions, however, that the actual facts and conditions
that may exist in the future could vary materially from the assumed facts and
conditions upon which such forward-looking statements are based.
The Company's future business prospects are substantially dependent upon
the ability of the Company, its joint venture partners and licensees to develop,
manufacture and sell products based on the Company's technologies. Additional
development efforts will be required before certain products based on the
Company's technologies can be manufactured and sold commercially. There can be
no assurance that certain products based on the Company's technologies can be
manufactured cost effectively on a commercial scale, that such products will
gain market acceptance or that competing products and technologies will not
render products based on the Company's technologies obsolete or noncompetitive.
In certain fields, the Company has entered into licensing or joint venture
agreements with established companies. Any revenues or profits which may be
derived by the Company from these arrangements will be substantially dependent
upon the willingness and ability of the Company's licensees and joint venture
partners to devote their financial resources and manufacturing and marketing
capabilities to commercialize products based on the Company's technologies.
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to protect and maintain the proprietary nature
of its technology. There can be no assurance that the Company's patents or other
proprietary rights will be determined to be valid or enforceable if challenged
in court or administrative proceedings or that the Company patents or other
proprietary rights, even if determined to be valid, will be broad enough in
scope to enable the Company to prevent third parties from producing
-17-
products using similar technologies or processes. See "Item 3: Legal
Proceedings." There can also be no assurance that the Company will not become
involved in disputes with respect to the patents or proprietary rights of third
parties.
The foregoing factors, as well as other factors discussed in this Annual
Report and in other documents and reports filed by the Company with the
Securities and Exchange Commission pursuant to the requirements of the federal
securities laws, could cause the actual facts and conditions that may exist in
the future to vary materially from the assumed facts and conditions upon which
the forward-looking statements contained herein are based.
-18-
GLOSSARY OF TECHNICAL TERMS
Certain technical terms used herein have the following meanings:
Amorphous - having an atomic structure that is not periodic.
Battery Memory Effect - an undesirable phenomenon in Ni-Cd batteries where
repeated shallow discharge cycles adversely affect battery performance.
CD-ROM (CD-Read Only Memory) - a type of data-storage media using a CD
format with pre-recorded data which cannot be recorded by the user.
CD-RW (CD-Rewritable Memory) - a type of data storage media using a CD
format employing ECD's proprietary phase-change rewritable optical memory
technology capable of being recorded and re-recorded many times.
Crystalline - having a repeating atomic structure in all three dimensions.
Cycle Life - the number of times a rechargeable battery can be charged and
discharged.
Disordered - lacking order. Order is defined over some scale of length
such as short range, intermediate range or long-range and may refer to
atomic position (structural order), type of atom (compositional order), or
other physical properties such as magnetic and electric polarization and
others.
DRAM (Dynamic Random Access Memory) - a type of semiconductor memory
device used for the main system memory in most computers.
Electrode (battery) - the chemically active portions of a battery.
Energy Density - the amount of energy stored in a specific volume or
weight.
EV (Electric Vehicle) - a vehicle propelled exclusively by an electric
drive system powered by an electrochemical energy storage device,
typically a rechargeable battery.
Flash EEPROM (Electrically Erasable Programmable Read Only Memory) - a
type of semiconductor memory device that retains stored data even with the
power off.
HEV (Hybrid Electric Vehicle) - a vehicle that is propelled both by an
electrochemical energy storage device coupled to an electric drive and an
auxiliary power unit powered by a conventional fuel such as reformulated
gasoline, direct injection diesel or compressed natural gas.
Hydrides - solid materials that store hydrogen.
-19-
Non-Volatile - a property of some types of computer memory which retain
stored data even when power is removed.
Optical Memory - a computer memory technology that uses lasers to record
and play back data stored on a rotating disc.
Ovonic - the term used to describe the Company's proprietary materials,
products and technologies.
PD (Phase-Change Dual) - a type of data-storage format using ECD's phase-
change rewritable optical memory technology for use in PD drives.
Phase-Change Rewritable - an optical memory technology in which data is
stored or erased on memory media by means of a laser beam that switches
the structural phase of a thin-film material between crystalline and
amorphous states.
Photovoltaic (PV) - direct conversion of light into electrical energy.
Power Density - the amount of power a battery can deliver per unit volume
or weight.
Roll-to-Roll Process - a process where a roll of substrate is continuously
converted into a roll of product.
SRAM (Static Random Access Memory) - A type of very fast semiconductor
memory device used for high speed transfers of relatively small data
blocks to the main processor in a computer.
Semiconductor - a class of materials with special electrical properties
used to fabricate solar cells, transistors, integrated circuits and other
electronic devices.
Stabilized Energy Conversion Efficiency - the long-term ratio of
electrical output to light input.
Thin Film - a very thin layer of material formed on a substrate.
Vapor Permeation Barrier Coating - a coating that prevents the passage of
oxygen and water vapor.
-20-
Item 2: Properties
A summary of the principal facilities of the Company and Ovonic Battery
follows:
No. Of Date
Square Leased Or
Location Feet Acquired
-------- ---- --------
The Company:
1675 West Maple Road, Troy, MI 31,550 October 1965
1050 East Square Lake Road, 11,000 August 1981
Bloomfield Township, MI
1621 Northwood, Troy, MI 24,900 January 1991
Ovonic Battery:
1864 Northwood, Troy, MI 12,480 March 1982
1826 Northwood, Troy, MI 12,480 October 1982
1707 Northwood, Troy, MI 27,400 October 1992
1334 Maplelawn, Troy, MI 28,100 December 1994
1414 Combermere, Troy, MI 9,870 February 1997
----------
TOTAL 157,780
==========
The foregoing properties, which are generally of brick and block
construction, are devoted primarily to the product development, pre-production
and production activities and administrative and other operations of the Company
and Ovonic Battery. The Company's Bloomfield Township facility is currently
leased to a third party on a month-to-month basis as an educational facility
with the Company retaining rights to use this facility. Management believes that
the above facilities are generally adequate for present operations.
The Company and Ovonic Battery utilize a variety of testing, analytical,
research and development and production equipment in their operations. During
the fiscal year ended June 30, 1997, the Company and Ovonic Battery had
$3,600,000 of capital expenditures, primarily for expansion and improvement of
electrode manufacturing, laboratory equipment, environmental and safety
equipment and a pilot nickel hydroxide manufacturing plant. The testing,
analytical and research and development equipment used in the Company's and
Ovonic Battery's development programs are being fully utilized.
-21-
Item 3: Legal Proceedings
The Company is involved in litigation initiated by MBI, Toyota Motor
Corporation and Toyota Motor Sales, U.S.A., Inc. (collectively "Toyota")
concerning certain Ovonic Battery U.S. patents which MBI thought the Company
might assert against it, including U.S. Patent No. 5,348,822 (the "'822 Patent")
covering advanced electrodes for NiMH batteries. MBI and Toyota initiated the
litigation seeking to have the Ovonic Battery patents declared invalid,
unenforceable and/or not infringed. Prior to the initiation of the litigation by
MBI and Toyota, the Company had been engaged in discussions with MBI regarding
electric vehicle batteries and had informed MBI that the Company intended to
enforce its patents. Toyota is involved in the litigation in view of the
importation and use in the United States of Toyota electric vehicles using MBI
NiMH batteries.
The Company filed a counterclaim charging MBI and Toyota with infringement
of the '822 Patent. After an extended delay of about one year after the filing
of the action, MBI produced samples of a nickel metal hydride battery design
which it represented is the only nickel metal hydride battery design it intends
to sell in the United States for electric vehicle propulsion applications.
Testing by the Company's experts of these samples produced by MBI has revealed
them to be of a conventional design which does not utilize any of the advanced
features covered by the '822 Patent.
The Company has therefore moved to dismiss the litigation initiated by MBI
based on MBI's representations that the design embodied in the samples produced
by MBI is the only NiMH electric vehicle battery design which MBI intends to
sell in the United States and the Company's finding that this design does not
utilize any of the advanced features covered by the '822 Patent.
MBI has opposed in part the Company's motion to dismiss the case and has
asked the Court to award costs and attorneys' fees to MBI. The Company believes
that MBI's opposition to the Company's motion to dismiss and MBI's request for
damages and attorneys' fees are without merit and that the Company's motion to
dismiss the case will ultimately be granted. The Company has cross-claimed for
an award of its costs and attorneys' fees based on, among other matters, MBI's
prolonged delay in the production of its battery samples.
There are no other legal proceedings to which the Company is a party which
management believes to be material.
-22-
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable.
-23-
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
Shares of the Company's Common Stock, par value $.01 per share ("Common
Stock"), trade on the NASDAQ National Market System under the symbol "ENER."
Shares of the Company's Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), are not publicly As of September 12, 1997, there were
approximately 2860 holders of record of Common Stock and four holders of record
of Class A Common Stock.
The following table sets forth the reported high and low price on the
NASDAQ National Market System for the Company's Common Stock for the following
quarters:
For the Fiscal Year Ended June 30
(in Dollars Per Share)
1998 1997 1996
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter $17.00 $10.50 $22.75 $15.50 $20.125 $16.25
through
September 12,
1997
Second Quarter $17.00 $12.375 $18.875 $15.625
Third Quarter $15.50 $11.25 $22.875 $16.25
Fourth Quarter $17.25 $ 7.25 $30.625 $19.50
The Company has paid no cash dividends in the past and no cash dividends
are expected to be paid in the forseeable future.
-24-
Item 6: Selected Financial Data
Set forth below is certain financial information taken from the Company's
audited consolidated financial statements (See Item 1: Description of Business).
June 30,
----------------------------------------------------------------
Revenues: 1997 1996 1995 1994 1993
- --------- ---- ---- ---- ---- ----
Product sales $ 14,897,144 $14,828,133 $10,298,019 $ 7,366,668 $ 2,731,342
Royalties 1,394,872 1,321,117 1,205,036 228,630 103,224
Revenues from R&D agreements 5,738,877 7,349,195 11,365,708 9,608,224 6,773,192
Revenues from license agreements 5,828,648 12,524,262 17,931,852 1,925,000 2,475,000
Other 1,718,933 1,289,667 543,143 228,853 315,620
------------ ----------- ----------- ----------- -----------
TOTAL REVENUES 29,578,474 37,312,374 41,343,758 19,357,375 12,398,378
------------ ----------- ----------- ----------- -----------
Net Income(Loss) $(17,954,612) $ 1,054,269 $ 5,605,664 $(3,892,656) $(5,520,606)
============ =========== =========== =========== ===========
Net Income(Loss) per Common Share
and Common Equivalent Share $ (1.67) $ .10 $ .63 $ (.51) $ (.75)
Net Income(Loss) per Common Share
Assuming Full Dilution $ (1.67) $ .10 $ .56 $ (.51) $ (.75)
At year end:
Total Assets $ 37,729,097 $57,129,439 $23,331,019 $10,494,363 $ 8,746,932
Capitalized Lease Obligations $ 585,795 $ 1,853,728 $ 3,012,079 $ 3,484,234 $ 3,183,528
Working Capital (Deficit) $ 23,161,108 $43,524,927 $ 9,310,685 $(2,330,209) $(3,120,850)
Stockholders' Equity (Deficit) $ 26,418,659 $43,734,040 $ 7,899,667 $(4,930,135) $(7,500,323)
-25-
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
The Company had a net loss in the year ended June 30, 1997 of $17,955,000
compared to net income of $1,054,000 for the year ended June 30, 1996. The
change in profitability was primarily due to the gain on the sale of $4,500,000
of Ovonic Battery Company stock in the prior year, the approximate $6,700,000
reduction in one time license fees in the year ended June 30, 1997 and the
investment by the company of its own funds in the current year to develop a new
family of Ovonic Nickel Metal Hydride ("NiMH") batteries.
The net loss in the year ended June 30, 1997 resulted primarily from (1)
investment of company funds for development of electric and hybrid vehicle
batteries; (2) decreased revenues for such development work; (3) costs related
to start up and expansion of negative electrode production equipment and
initiation of positive electrode production and equipment; (4) expenses of
additional technical, manufacturing and engineering support for the GM Ovonic
manufacturing joint venture in furtherance of initial NiMH battery production
and ongoing technical assistance to other customers; (5) development of
multi-state electrical memory; and (6) costs related to defending the Company's
patents. When revenue from license fees, which are non-recurring and sporadic,
and the gain on the sale of Ovonic Battery stock in 1996, are excluded, the
decrease in profitability from 1996 to 1997 is approximately $7,800,000.
Product sales increased slightly from $14,828,000 in the year ended June
30, 1996 to $14,897,000 in the year ended June 30, 1997 due to a $5,900,000
increase in 1997 from sales of negative and positive electrodes, offset by a
$5,900,000 decrease in machine building revenues as a result of completion of
production machinery for GM Ovonic and United Solar.
Royalties increased from $1,321,000 in the year ended June 30, 1996 to
$1,395,000 in the year ended June 30, 1997, primarily due to increases in
royalties from battery technology, partially offset by decreases in royalties
from phase-change rewritable optical memory products, as prices of the products
decreased. (See Note B - Notes to Consolidated Financial Statements). Royalties
from licensees based in Japan were also negatively impacted by the weakness in
the Japanese yen. The Company has audit rights to verify the amounts of
royalties being reported and paid by its licensees. The Company plans to enforce
these audit rights.
Revenues from research and development agreements ("R&D Agreements)
decreased 22% to $5,739,000 in the year ended June 30, 1997 from $7,349,000 in
the year ended June 30, 1996 due to reductions in 1997 revenues recognized in
government sponsored programs in photovoltaic and battery technologies. This
decrease was a result
-26-
of the U.S. government spending reduction program. (See NOTE B - Notes to
Consolidated Financial Statements.)
Revenues from license agreements decreased 53% to $5,829,000 in the year
ended June 30, 1997 from $12,524,000 in the year ended June 30, 1996 due to the
reduction in 1997 of battery license agreements. (See NOTE B - Notes to
Consolidated Financial Statements.) Revenues from license agreements are
non-recurring, sporadic, and are based upon developing new business
relationships. The Company is actively pursuing its strategy to form strategic
alliances to commercialize its products. It is in negotiations with a number of
companies which could provide additional license fees to the Company in the
coming year.
The increase in other revenues was due to increased billings in 1997 for
services performed by ECD's Central Analytical Laboratory, Production Technology
and Machine Building Division, as well as miscellaneous work performed for
Ovonic Battery licensees.
The increase in the cost of product sales from $15,504,000 in the year
ended June 30, 1996 to $16,964,000 in the year ended June 30, 1997 was
principally due to $945,000 in inventory adjustments for Ovonic Battery,
principally related to obsolescence and changed customer specifications, higher
costs related to start-up and expansion of negative electrode production
equipment and initiation of positive electrode production in 1997. The Company
is taking steps to address this trend of negative margins.
The decrease in cost of revenues from R&D Agreements in the year ended June
30, 1997 compared to the year ended June 30, 1996 was principally due to
decreases in activities during 1997 under the agreements with United States
Advanced Battery Consortium ("USABC"), National Renewable Energy Laboratory
("NREL") and Department of Energy ("DOE").
The increase in product development and research expenses from $9,151,000
in the year ended June 30, 1996 to $15,551,000 in the year ended June 30, 1997
was due to the aforementioned reduced funding under the agreements with USABC
and related increased Ovonic Battery product development and research expenses.
Patent defense costs were $2,467,000 in the year ended June 30, 1996 and
$3,011,000 in the year ended June 30, 1997. In 1997, patent defense costs were
incurred for litigation with Matsushita Battery Industrial Co., Ltd. ("MBI")
with respect to certain of Ovonic Battery's United States patents covering its
proprietary technology for NiMH batteries. In 1996, patent defense costs
primarily related to the defense and prosecution of litigation involving SAFT
America, Inc. and certain related companies or entities ("SAFT") and MBI.
The change from other income-net of $5,233,000 in the year ended June 30,
1996 compared to $1,073,000 of other income-net in the year ended June 30, 1997
was due principally to the $4,500,000 gain on the sale of Ovonic Battery common
stock in 1996.
-27-
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
The Company had net income in the year ended June 30, 1996 of $1,054,000
compared to net income of $5,606,000 for the year ended June 30, 1995. The
change in profitability was primarily due to reduced license fees in 1996,
partially offset by a gain on the sale of Ovonic Battery common stock of
$4,500,000. Net income for the year ended June 30, 1995 was due principally to
$10,500,000 of non-recurring payments received by the Company under three
consumer battery agreements entered into in 1995 in settlement of an action
initiated by the Company with the International Trade Commission ("ITC"), as
well as agreements with other major companies.
Product sales increased 44% from $10,298,000 in the year ended June 30,
1995 to $14,828,000 in the year ended June 30, 1996 due to increased
machine-building revenues for both ECD and Ovonic Battery and increased sales by
Ovonic Battery of negative electrodes and battery packs to GM Ovonic.
Royalties increased from $1,205,000 (which included $390,000 of royalties
reported by a licensee in 1995 relating to prior periods) in the year ended June
30, 1995 to $1,321,000 in the year ended June 30, 1996, primarily due to
royalties earned for use of ECD's phase-change rewritable optical memory
technology. The Company has audit rights to verify the amounts of royalties
being reported and paid by its licensees. The Company, based on information
received, plans to enforce these audit rights.
Revenues from R&D Agreements decreased 35% to $7,349,000 in the year ended
June 30, 1996 from $11,366,000 in the year ended June 30, 1995 due to reductions
in 1996 revenues recognized under agreements in the photovoltaic and battery
technologies. (See NOTE B - Notes to Consolidated Financial Statements.) The
reduction in 1996 in revenues under government contracts is due to the
completion of R&D agreements and the U.S. Government's deficit reduction
program.
Revenues from license agreements decreased 30% to $12,524,000 in the year
ended June 30, 1996 from $17,932,000 in the year ended June 30, 1995 due to
non-recurring revenues related to agreements with three consumer battery
manufacturers in settlement of the aforementioned ITC action in 1995. (See NOTE
B - Notes to Consolidated Financial Statements.)
The increase in other revenues was due to increased billings in 1996 for
services performed by the ECD's Production Technology and Machine Building
Division, as well as miscellaneous work performed for Ovonic Battery licensees.
The increase in the cost of product sales from $10,391,000 in the year
ended June 30, 1995 to $15,504,000 in the year ended June 30, 1996 was
principally due to the increased machine-building activities for ECD and
increased sales of Ovonic negative electrodes.
-28-
The decrease in cost of revenues from R&D agreements in the year ended June
30, 1996 compared to the year ended June 30, 1995 was principally due to
decreases in activities in 1996 under the agreements with USABC, NREL and DOE.
The increase in product development and research expenses from $4,636,000
in the year ended June 30, 1995 to $9,151,000 in the year ended June 30, 1996
was due to the aforementioned reduced funding under the agreements with USABC
and related increased Ovonic Battery product development and research expenses.
Patent defense costs of $2,625,000 in the year ended June 30, 1995 and
$2,467,000 in the year ended June 30, 1996 was due to payment in 1995 of the
contingent fees paid to the law firm representing the Company in the ITC action,
which led to the three consumer battery agreements in 1995, and expenses
incurred in 1996 in connection with the defense and prosecution of litigation
involving SAFT and MBI with respect to certain of Ovonic Battery's United States
patents covering its proprietary technology for NiMH batteries. The litigation
involving SAFT was settled in June 1996.
The change from other expense-net of $190,000 in the year ended June 30,
1995 compared to other income-net of $5,233,000 in the year ended June 30, 1996
was due principally to the $4,500,000 gain on the sale of Ovonic Battery common
stock in 1996.
Liquidity and Capital Resources
As of June 30, 1997, the Company had unrestricted consolidated cash and
cash equivalents and investments, consisting of commercial paper maturing in
four to six months, of $15,040,000, a decrease of $19,061,000 from June 30,
1996. In addition, the Company had accounts receivable at June 30, 1997 of
$10,801,000 compared to $9,986,000 at June 30, 1996. As of June 30, 1997, the
Company had consolidated working capital of $23,161,000, compared with a
consolidated working capital of $43,525,000 as of June 30, 1996.
During the year ended June 30, 1997, $14,023,000 of cash was used in
operations. The difference between the net loss of $17,955,000 and the net cash
used in operations was principally due to depreciation expense. In addition,
during this period $3,577,000 of machinery and equipment was purchased or
constructed for the Company's operations.
During the next 12 months, Ovonic Battery is considering the purchase of up
to $1,900,000 of machinery and equipment. The machinery and equipment would be
utilized principally for Ovonic Battery's manufacturing operation.
The Company expects increased revenues related to R&D Agreements that are
entered into by the Company with U.S. government agencies and with industry
partners to develop the Company's products and production technology including a
multi-year, multi-task program with General Motors, that is of significant value
to the Company, intended to provide next and future generation NiMH batteries
that will be manufactured by GM Ovonic. Generally, the agreed-upon fees for
these R&D Agreements reimburse the Company for its direct costs associated with
these projects, together with a portion of
-29-
indirect costs (patents, operating, general and administrative expenses and
depreciation). Based on contracts currently in hand, the Company expects
significantly higher revenues from R&D agreements in the coming year, thereby
improving cashflow.
The Company is actively pursuing its strategy to form strategic alliances
to commercialize its products. It is in negotiations with a number of companies
which could provide additional license fees to the Company in the coming year.
The Company has recently been issued a patent in Japan specifying the
fundamentals that make NiMH batteries commercially feasible. The issuance of
this patent is expected to result in the payment of additional retrospective
royalties, as well as higher running royalties in the future.
The Company is also actively negotiating additional machine-building
contracts that could provide revenues in the coming year and beyond.
Machine-building is cyclical but a growing part of the Company's business.
The Company is dependent upon a relatively few customers for its revenues
(See Note B - Notes to Consolidated Financial Statements).
The Company has entered into a third-party leasing arrangement with a third
party leasing company for the financing for certain equipment used by the
Company. As of June 30, 1997, the Company has remaining lease payments totaling
$1,910,000. The Company has agreed to purchase certain equipment leased upon the
expiration of the applicable leases for 10% of the lessor's acquisition cost.
For other equipment, the Company has an option to purchase the equipment for its
then market value (but no less than 10% nor more than 20% of its acquisition
cost). The Company has an option to purchase certain other leased equipment upon
the expiration of the applicable leases for its then fair market value. If the
Company exercises the option to purchase all of the equipment for leases
expiring during the next 12 months, the capital requirement is from $268,000 to
$537,000.
While certain programs have a limited term, the equipment being utilized
for these programs has alternative future uses for other programs if, in fact,
the programs are not continued beyond their respective terms.
Management believes that funds generated from operations and existing cash
and investment balances will be adequate to support and finance planned growth,
capital expenditures and company-sponsored research and development programs
over the coming year. Additional sources of cash are, however, required to
sustain the Company for the long-term and to build the business in the future.
-30-
Item 8: Consolidated Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
Board of Directors
Energy Conversion Devices, Inc.
Troy, Michigan
We have audited the accompanying consolidated balance sheets of Energy
Conversion Devices, Inc. and subsidiary (the "Company") as of June 30, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for each of the three years in the period ended
June 30, 1997. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of June 30, 1997 and
1996, and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 1997 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Detroit, Michigan
September 26, 1997
-31-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
----------------------------
1997 1996
---- ----
CURRENT ASSETS (NOTE A)
Cash, including cash equivalents of
$14,265,000 as of June 30, 1997 and
$23,769,000 as of June 30, 1996 $ 14,270,145 $ 23,773,742
Investments (including restricted investments
of $290,000 at June 30, 1997) 1,059,933 10,327,352
Accounts receivable (net of allowance for
uncollectible accounts of approximately
$140,000 at June 30, 1997 and $29,000
at June 30, 1996) 10,800,813 9,985,722
Amounts due from related parties 1,809,414 2,901,509
Inventories 1,626,065 3,275,135
Prepaid expenses and other current assets 404,204 362,558
------------ ------------
TOTAL CURRENT ASSETS 29,970,574 50,626,018
PROPERTY, PLANT AND EQUIPMENT (NOTE E)
Land and land improvements 312,588 312,588
Buildings and improvements 3,785,827 3,595,009
Machinery and other equipment(including
construction in progress of approximately
$1,647,000 at June 30, 1997) 19,517,585 17,249,435
Capitalized lease equipment 5,699,048 5,802,806
------------ ------------
29,315,048 26,959,838
Less accumulated depreciation
and amortization (22,346,615) (21,260,424)
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 6,968,433 5,699,414
JOINT VENTURES (NOTE D)
United Solar -- --
GM Ovonic -- --
OTHER ASSETS 790,090 804,007
------------ ------------
TOTAL ASSETS $ 37,729,097 $ 57,129,439
============ ============
See notes to consolidated financial statements.
-32-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
------------------------------
1997 1996
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 3,669,167 $ 3,911,122
Salaries, wages and amounts withheld
from employees 1,144,446 1,175,102
Deferred revenues under business
agreements (NOTE A) 671,531 711,894
Current installments on capitalized lease
obligations (NOTE E) 1,324,322 1,302,973
-------------- ---------------
TOTAL CURRENT LIABILITIES 6,809,466 7,101,091
CAPITALIZED LEASE OBLIGATIONS (NOTE E) 585,795 1,853,728
DEFERRED GAIN (NOTE E) 223,691 686,351
NON-REFUNDABLE ADVANCE ROYALTIES (NOTE C) 3,691,486 3,754,229
-------------- ---------------
TOTAL LIABILITIES 11,310,438 13,395,399
STOCKHOLDERS' EQUITY
Capital Stock (NOTES F and G)
Class A Convertible Common Stock, par value
$0.01 per share:
Authorized - 500,000 shares
Issued & outstanding - 219,913 shares 2,199 2,199
Common Stock, par value
$0.01 per share:
Authorized - 15,000,000 shares
Issued & outstanding - 10,603,251 shares
at June 30, 1997 and 10,489,591 shares
at June 30, 1996 106,033 104,896
Additional paid-in capital 202,004,599 200,757,697
Accumulated deficit (175,085,364) (157,130,752)
Treasury stock at cost - 42,000 shares (608,808) --
-------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 26,418,659 43,734,040
-------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 37,729,097 $ 57,129,439
============== ===============
See notes to consolidated financial statements.
-33-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30,
---------------------------------------------------
1997 1996 1995
---- ---- ----
REVENUES (NOTES A and B)
Product sales $ 14,897,144 $14,828,133 $10,298,019
Royalties 1,394,872 1,321,117 1,205,036
Revenues from research and development
agreements 5,738,877 7,349,195 11,365,708
Revenues from license agreements 5,828,648 12,524,262 17,931,852
Other 1,718,933 1,289,667 543,143
------------ ----------- -----------
TOTAL REVENUES 29,578,474 37,312,374 41,343,758
EXPENSES
Cost of product sales (NOTE A) 16,964,429 15,504,385 10,390,794
Cost of revenues from research and
development agreements (NOTE A) 5,870,725 7,581,904 11,013,975
Product development and research (NOTE A) 15,550,775 9,151,167 4,636,158
Patent Defense (NOTE A) 3,011,133 2,467,295 2,625,000
Patents (NOTE A) 429,980 381,186 407,583
Operating, general and administrative 6,779,003 6,405,162 6,474,064
------------ ----------- -----------
TOTAL EXPENSES 48,606,045 41,491,099 35,547,574
------------ ----------- -----------
INCOME (LOSS) FROM OPERATIONS (19,027,571) (4,178,725) 5,796,184
OTHER INCOME (EXPENSE):
Gain on sale of Ovonic Battery Company stock -- 4,500,000 --
Interest expense (384,468) (445,933) (545,738)
Interest income 1,308,344 1,090,952 244,722
Other nonoperating income - net 149,083 87,975 110,496
------------ ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 1,072,959 5,232,994 (190,520)
------------ ----------- -----------
NET INCOME (LOSS) $(17,954,612) $ 1,054,269 $ 5,605,664
============ =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE AND COMMON EQUIVALENT
SHARE (NOTE H) $ (1.67) $ .10 $ .63
============ =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE ASSUMING FULL DILUTION (NOTE H) $ (1.67) $ .10 $ .56
============ =========== ===========
See notes to consolidated financial statements.
-34-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (NOTES F and G)
Three years ended June 30, 1997
Class A
Convertible
Common Stock Common Stock Treasury Stock
--------------- ------------------- ------------------- Total
Number Number Additional Number Stockholders'
of of Paid-In Accumulated of Equity
Shares Amount Shares Amount Capital Deficit Shares Amount (Deficit)
------ ------ ------ ------ ---------- ----------- ------ ------ -------------
Balance at
July 1, 1994 219,913 $2,199 7,563,224 $ 75,632 $158,782,719 $(163,790,685) $(4,930,135)
Net income for year
ended June 30, 1995 5,605,664 5,605,664
Issuance of stock to
directors and
consultants 3,733 38 87,275 87,313
Private placement of
common stock and
warrants 175,000 1,750 2,667,425 2,669,175
Common stock issued in
connection with
exercise of stock
options and
conversion of
certain securities 336,710 3,367 4,464,283 4,467,650
------- ------ --------- -------- ------------- ------------- -------- ------- ----------
Balance at June 30,
1995 219,913 2,199 8,078,667 80,787 166,001,702 (158,185,021) 7,899,667
Net income for year
ended June 30, 1996 1,054,269 1,054,269
Issuance of stock to
directors and
consultants 6,899 69 59,395 59,464
Public Offering of
common stock 1,650,000 16,500 27,764,555 27,781,055
Common stock issued in
connection with
exercise of stock
options and warrants
and conversion of
certain securities 754,025 7,540 6,932,045 6,939,585
-------- ------ --------- -------- ------------- ------------- --------- ------- -----------
Balance at June 30,
1996 219,913 2,199 10,489,591 104,896 200,757,697 (157,130,752) 43,734,040
Net loss for year
ended June 30, 1997 (17,954,612) (17,954,612)
Issuance of stock to
directors and
consultants 3,040 31 119,172 119,203
Common stock issued in
connection with
exercise of stock
options and warrants 110,620 1,106 1,127,730 1,128,836
Purchase of treasury
stock (42,000) (608,808) (608,808)
-------- ------ ---------- -------- ------------ ------------- ------- --------- ------------
Balance at June 30,
1997 219,913 $2,199 10,603,251 $106,033 $202,004,599 $(175,085,364) (42,000) $(608,808) $ 26,418,659
======== ====== ========== ======== ============ ============= ======= ========= ============
See notes to consolidated financial statements.
-35-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
--------------------------------------------
1997 1996 1995
---- ---- ----
OPERATING ACTIVITIES:
Net income (loss) $(17,954,612) $ 1,054,269 $ 5,605,664
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 2,312,661 1,890,484 1,367,870
Gain on sale of Ovonic Battery stock -- (4,500,000) --
Non-cash revenue -- -- (330,000)
Creditable royalties (62,743) (144,148) (392,430)
Warrants issued to employees and consultants
for services rendered and employee stock options 453,000 453,000 2,053,000
Stock issued for services rendered 119,203 59,464 193,838
Loss (gain) on sale of equipment (13,544) 52,429 2,062
Amortization of deferred gain (462,660) (462,660) (254,329)
Changes in working capital:
Accounts receivable and amounts due from
related parties 277,004 (4,727,022) (5,719,477)
Inventories 1,649,070 (1,220,385) (1,630,640)
Prepaid expenses and other current assets (27,729) (72,765) 5,074
Accounts payable and accrued expenses (272,611) 81,336 (69,049)
Deferred revenues under business agreements (40,363) (172,257) 266,002
------------ ------------- -----------
NET CASH PROVIDED BY (USED IN) OPERATIONS (14,023,324) (7,708,255) 1,097,585
------------ ------------- -----------
INVESTING ACTIVITIES:
Purchases of capital equipment (3,577,478) (1,887,118) (1,138,972)
Purchase of investments (3,903,820) (10,327,352) --
Sales of investments 13,171,239 -- --
Proceeds from sale of capital equipment 9,342 7,600 1,256
------------ ------------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 5,699,283 (12,206,870) (1,137,716)
------------ ------------- -----------
FINANCING ACTIVITIES:
Purchase of treasury stock (608,808) -- --
Principal payments under short-term and long-term debt
obligations and capitalized lease obligations (1,259,511) (1,505,385) (2,043,340)
Proceeds from capital lease transactions 12,927 167,161 1,250,000
Proceeds from sale of stock of subsidiary -- 4,500,000 --
Proceeds from sale of stock and exercise of stock options
and warrants 675,836 34,267,640 4,977,300
------------ ------------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,179,556) 37,429,416 4,183,960
------------ ------------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,503,597) 17,514,291 4,143,829
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 23,773,742 6,259,451 2,115,622
------------ ------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,270,145 $ 23,773,742 $ 6,259,451
============ ============= ===========
See notes to consolidated financial statements.
-36-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30,
-------------------------------
1997 1996 1995
---- ---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 384,468 $ 445,933 $ 612,094
The Company's non-cash investing and financing activities were as follows:
Sale and lease back of
capitalized equipment
and deferred gain -- -- $1,250,000
See notes to consolidated financial statements.
-37-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies
Nature of Business
Energy Conversion Devices, Inc. ("ECD") has established a
multi-disciplinary business, scientific and technical organization to
commercialize products based on its technologies. Its activities range from
research and development to manufacturing and selling products as well as
designing and building production machinery with an emphasis on alternative
energy and advanced information technologies.
Financial Statement Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of ECD and its
93.5%- owned subsidiary (97% as of June 30, 1995) Ovonic Battery Company, Inc.
("Ovonic Battery"), a company formed to develop and commercialize ECD's Ovonic
NiMH battery technology (collectively, the "Company"). In the year ended June
30, 1996, ECD sold approximately 3.3% of its interest in Ovonic Battery to
another entity and realized a gain on this sale. Due to cumulative losses
incurred by Ovonic Battery, no minority interest is recorded in the consolidated
financial statements.
ECD also has two major investments accounted for by the equity method: (i)
United Solar Systems Corp. ("United Solar") (49.98%), ECD's photovoltaic (solar
energy) joint venture with Canon Inc. of Japan ("Canon") and (ii) GM Ovonic
L.L.C. ("GM Ovonic") (40%), Ovonic Battery's joint venture with General Motors
Corporation ("General Motors") to manufacture and sell the Company's proprietary
NiMH batteries for electric vehicle applications worldwide. See Note D for a
discussion of these ventures. In addition, ECD has a 50% owned joint venture
("Sovlux") in Russia (which had no significant activity in 1997 due to current
economic conditions in Russia) and has agreed to form a new 45% owned joint
venture in Europe with Sanoh Industrial Co. Ltd. ("Sanoh").
Upon consolidation, all intercompany accounts and transactions are
eliminated.
Certain items for the years ended June 30, 1996 and 1995 have been
reclassified to be consistent with the classification of items in the year ended
June 30, 1997.
In preparing financial statements in conformity with Generally Accepted
Accounting Principles, management is required to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual results could differ
from those estimates. In addition, the Company has certain concentrations of
revenues as described in Note B. The Company
-38-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
is impacted by other factors such as the continued receipt of contracts from the
U.S. government and industrial partners, its ability to protect and maintain the
proprietary nature of its technology, its continued product and technological
advances and the strength and ability of the Company's licensees and joint
venture partners to commercialize the Company's products and technologies.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets," which requires adoption of the disclosure
provisions no later than fiscal years beginning after December 15, 1995. The new
standard requires the impairment of property and intangibles to be considered
whenever evidence suggests a lack of recoverability. The Company adopted the new
standard in the year ended June 30, 1997. Since adoption, no impairment losses
have been incurred.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," which
requires adoption of the disclosure provisions and adoption of the recognition
and measurement provisions for nonemployee transactions no later than fiscal
years beginning after December 15, 1995. The new standard defines a fair value
method of accounting for stock options and other equity instruments. Under the
fair value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period.
Pursuant to the SFAS 123, companies are encouraged, but are not required,
to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees" but would be required to disclose in
a note to the financial statements pro forma net income and earnings per share
as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption. In
the year ended June 30, 1997, the Company determined that it will continue to
apply APB 25 to its stock-based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per share (see
Note G). This determination had no effect on the Company's financial statements.
-39-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
In February 1997, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share. The Statement simplifies the
standards for computing earnings per share (for years in which there is net
income). The Company will be required to adopt the new method of accounting in
its second quarter of fiscal 1998. Adoption of this Statement is not expected to
have a material impact on the Company's financial statements.
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. The Statement establishes standards for reporting and display of
comprehensive income and its components and requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The Company will be required to adopt the provisions of this statement in fiscal
1999. Adoption of this Statement is not expected to have a material impact on
the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosure about Segments of
an Enterprise and Related Information. This Statement requires that a public
business enterprise report financial and descriptive information about its
reportable operating segments. Operating segments are components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company has not completed
its analysis of this Statement and its impact on disclosures. In the initial
year of application, comparative information for earlier years is to be
restated. This Statement need not be applied to interim financial statements in
the initial year of its application, but comparative information for interim
periods in the initial year of application is to be reported in financial
statements for interim periods in the second year of application. The Company
will be required to adopt the provisions of this statement in fiscal 1999.
Adoption of this Statement is not expected to have a material impact on the
Company's financial statements.
Cash Equivalents
Cash equivalents consist of investments in short-term, highly liquid
securities having a maturity of three months or less from the date of
acquisition.
-40-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Investments
Investments consist of commercial paper, classified as available for sale,
maturing in four to six months from date of acquisition and are stated at cost,
which approximates fair market value.
Financial Instruments
The Company considers the carrying value of its financial instruments to
be a reasonable estimate of fair value.
Translation Gains and Losses
Since all of the Company's contracts and transactions are denominated and
settled in U.S. dollars, there are no foreign currency gains or losses.
Accounts Receivable
The following tabulation shows the component elements of accounts
receivable from long-term contracts and other programs:
June 30,
----------------------------
1997 1996
---- ----
U.S. Government:
Amounts billed $ 572,193 $ 743,482
Unbilled 797,558 453,394
------------- -------------
Total 1,369,751 1,196,876
------------- -------------
Commercial Customers:
Amounts billed 1,701,006 1,727,291
Related party billed
- United Solar 19,840 43,773
- GM Ovonic 1,072,546 997,672
Due per contracts 7,480,792 5,202,175
Related party unbilled
- United Solar -- 868,649
- GM Ovonic 717,028 991,415
Other unbilled 281,580 1,222,173
------------- -------------
Total 11,272,792 11,053,148
------------- -------------
Other 107,684 666,207
Allowance for Uncollectible Accounts (140,000) (29,000)
------------- -------------
TOTAL $ 12,610,227 $ 12,887,231
============= =============
Amounts due per contracts, related party unbilled and other unbilled from
commercial customers represent revenues recognized for the present value of
license payments to be received in future periods. They also include revenues
recognized on the percentage-of-completion method of accounting related to
machine-building contracts and amounts earned under certain commercial
contracts, which amounts are billed in subsequent months.
-41-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Certain contracts with the U.S. government require a retention that is
paid upon completion of audit of the Company's indirect rates. There are no
material retentions at June 30, 1997 and 1996. Certain U.S. government contracts
remain subject to audit. Management believes that adjustments, if any, which may
result from an audit would not be material to the financial position or results
of operations of the Company.
Inventories
Inventories of raw materials, work in process and finished goods for the
manufacture of electrodes, battery packs and other products, together with
supplies, are valued at the lower of cost (moving average) or market. Cost
elements included in inventory are materials, direct labor and manufacturing
overhead. Cost of sales are removed from inventory based on actual costs of
items shipped to customers.
Inventories (principally those of Ovonic Battery) are as follows:
Years Ended June 30,
--------------------------
1997 1996
---- ----
Finished products $ -- $ 263,525
Work in process 1,110,989 1,902,396
Raw materials 615,076 1,109,214
---------- ----------
1,726,065 3,275,135
Reserve (100,000) --
---------- ----------
$1,626,065 $3,275,135
========== ==========
During the year ended June 30, 1997, the Company had inventory
adjustments of $945,000.
Property, Plant and Equipment
All properties are recorded at cost. Plant and equipment are depreciated
on the straight-line method over the estimated useful lives of the individual
assets. The estimated lives of the principal classes of assets are as follows:
Years
Buildings and improvements 5 to 20
Machinery and other equipment 3 to 10
Capitalized lease equipment and
leasehold improvements 3 to 5
-42-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Capitalized lease equipment and leasehold improvements are amortized over
the shorter of the term of the lease or the life of the equipment or
improvement, usually three to five years. Accumulated amortization on
capitalized lease equipment as of June 30, 1997 and June 30, 1996 was $3,136,000
and $2,064,000, respectively.
Costs of machinery and other equipment acquired or constructed for a
particular research and development project, which have no alternative future
use (in other research and development projects or otherwise), are charged to
product development and research costs as incurred.
Expenditures for maintenance and repairs are charged to operations.
Expenditures for betterments or major renewals are capitalized and are
depreciated over their estimated useful lives.
Product Development and Research
Total direct product development and research costs, a portion of which
are included in cost of revenues from R&D Agreements, were $16,732,000,
$12,947,000 and $11,962,000 for the three years ended June 30, 1997, 1996 and
1995, respectively.
Patents
Patent expenditures are charged directly to expense. Total patent
expenditures, a portion of which are allocated for financial statement purposes
to cost of revenues from R&D Agreements and product development and research
were $1,002,000, $945,000 and $933,000 for the three years ended June 30, 1997,
1996 and 1995, respectively. Patent defense expenditures, which are incurred by
the Company to protect its patents and to defend or prosecute claims involving
the Company's patents, are charged directly to expense and were $3,011,000,
$2,467,000 and $2,625,000 for the three years ended June 30, 1997, 1996 and
1995, respectively.
Product Sales
Product sales include battery electrodes, revenues related to building of
battery packs, and revenues related to machine-building contracts. Revenues
related to machine- building contracts are recognized on the
percentage-of-completion method of accounting using the costs incurred to date
as a percentage of the total expected costs. All other product sales are
recognized when the product is shipped. In certain cases, costs of sales exceeds
product sales due to significant changes in products and manufacturing methods.
-43-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Royalties
Most license agreements provide for the Company to receive royalties from
the sale of products which utilize the licensed technology. Typically, the
royalties are incremental to and distinct from the license fee and are
recognized as revenue upon the sale of the respective licensed product. In
several instances, the Company has received cash payments for non-refundable
advance royalty payments which are creditable against future royalties under the
licenses. Advance royalty payments are deferred and recognized in revenues as
the creditable sales occur, the underlying agreement expires, or when the
Company has demonstrable evidence that no additional royalties will be
creditable and, accordingly, the earnings process is completed.
For both ECD and Ovonic Battery royalties, there are royalty trust or
contingent fee arrangements whereby the Company is obligated to pay a trust 25%
of optical memory royalties received and a law firm 25% of Ovonic Battery
royalties received relative to consumer battery licenses entered into in 1995 in
settlement of the ITC action.
Business Agreements
A substantial portion of revenues are derived through business agreements
for the development and/or commercialization of products based upon the
Company's proprietary technologies. Such agreements are of two types.
The first type of business agreement relates to licensing the Company's
proprietary technology. Licensing activities are tailored to provide each
licensee with the right to use the Company's technology, most of which is
patented, for a specific product application or, in some instances, for further
exploration of new product applications of such technologies. The terms of such
licenses, accordingly, are tailored to address a number of circumstances
relating to the use of such technology which have been negotiated between the
Company and the licensee. Such terms generally address whether the license will
be exclusive or nonexclusive, whether the licensee is limited to very narrowly
defined applications or to broader-based product manufacture or sale of products
using such technologies, whether the license will provide royalties for products
sold which employ such licensed technology and how such royalties will be
measured, as well as other factors specific to each negotiated arrangement. In
some cases, licenses relate directly to research and development that the
Company has undertaken pursuant to R&D Agreements; in other cases, they relate
to product development and commercialization efforts of the licensee and other
agreements combine the efforts of the Company with those of the licensee.
-44-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
License agreement fees are generally recognized as revenue at the time the
agreements are consummated, which is the completion-of-the-earnings process.
Typically, such fees are non-refundable, do not obligate the Company to incur
any future costs or require future performance by the Company and are not
related to future production or earnings of the licensee. License fees payable
in installments are recorded at the present value of the amounts to be received
taking into account the collectibility of the license fee. In some instances, a
portion of such license fees is contingent upon the commencement of production
or other uncertainties. In these cases, license fee revenues are not recognized
until commencement of production or the resolution of uncertainties. There are
no current or future direct costs associated with license fees.
In the second type of agreement, R&D Agreements, the Company conducts
specified research and development projects related to one of its principal
technology specializations for an agreed-upon fee. Some of these projects have
stipulated performance criteria and deliverables whereas others require "best
efforts" with no specified performance criteria. Revenues from R&D Agreements
that contain specific performance criteria are recognized on a
percentage-of-completion basis which matches the contract revenues to the costs
incurred on a project based on the relationship of costs incurred to estimated
total project costs. Revenue from R&D Agreements, where there are no specific
performance terms, are recognized in amounts equal to the amounts expended on
the programs. Generally, the agreed-upon fees for R&D Agreements contemplate
reimbursing the Company for costs considered associated with project activities
including expenses for direct product development and research, patents,
operating, general and administrative expenses and depreciation. Accordingly,
expenses related to R&D Agreements are recorded as cost of revenues from R&D
Agreements.
Overhead Allocations
The Company allocates overhead to product development and research
expenses and to cost of revenues from research and development agreements based
on a percentage of direct labor costs. For cost of revenues from research and
development agreements this allocation is limited to the amount of revenues,
after direct expenses, under the applicable agreements. Overhead is allocated to
cost of product sales through the application of overhead to inventory costs.
-45-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE A - Summary of Accounting Policies - (Continued)
Other Operating Revenues
Other operating revenues consist principally of third-party service
revenue realized by certain of the Company's service departments, including the
Production Technology and Machine Building Division and Central Analytical
Laboratory.
Other Non-operating Income
Other non-operating income-net consists of rental income and gains and
losses on sale of fixed assets.
-46-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE B - Product Sales, Royalties, Revenues from R&D Agreements and License
Agreements
The Company has product sales and business agreements with third parties
for which royalties and revenues are included in the consolidated statements of
operations.
A summary of revenue from such agreements follows:
Years Ended June 30,
--------------------------------------
1997 1996 1995
---- ---- ----
Product Sales:
Negative and positive electrodes $ 10,832,282 $ 4,902,836 $ 4,038,418
Battery packs 2,333,276 2,257,971 2,605,342
Machine building 1,731,586 7,667,326 3,654,259
------------ ------------ ------------
$ 14,897,144 $ 14,828,133 $ 10,298,019
============ ============ ============
Royalties:
Battery technology $ 1,258,633 $ 1,149,198 $ 1,158,623
Optical Memory 136,239 171,919 46,413
------------ ------------ ------------
$ 1,394,872 $ 1,321,117 $ 1,205,036
============ ============ ============
Revenues from R&D agreements:
Photovoltaics $ 1,168,718 $ 1,870,946 $ 4,285,364
Battery technology 2,660,342 3,823,403 6,650,543
Microelectronics 824,892 900,000 --
Hydrogen 679,174 603,056 162,975
Other 405,751 151,790 266,826
------------ ------------ ------------
$ 5,738,877 $ 7,349,195 $ 11,365,708
============ ============ ============
License Agreements:
Battery $ 4,448,004 $ 11,024,262 $ 16,556,852
Microelectronics 1,380,644 1,500,000 1,375,000
------------ ------------ ------------
$ 5,828,648 $ 12,524,262 $ 17,931,852
============ ============ ============
The Company historically has entered into agreements with a relatively
small number of major customers throughout the world. Revenues from unaffiliated
foreign customers represent approximately 58%, 41% and 53% for the years ended
June 30, 1997, 1996 and 1995, respectively. There are two major customers which
represent a total of 56% of total revenue for the year ended June 30, 1997 (26%
for GM Ovonic and 30% for GP Batteries). There are two major customers which
represent a total of 27% (11% for GM Ovonic) and 16% for Asia Pacific Investment
Co. ("APIC") of total revenue for the year ended June 30, 1996. There are four
major customers which include two major consumer battery manufacturers which
represent 12% each, GP Batteries International Ltd. ("GP Batteries") which
represents 11% and United States Advanced Battery Consortium which represents
15% of total revenue for the year ended June 30, 1995.
-47-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE C - Non-Refundable Advance Royalties
At June 30, 1997 and 1996 the Company deferred revenue relating to
non-refundable advance royalty payments which consist of the following:
June 30,
--------------------------
1997 1996
---- ----
Battery $1,647,592 $1,704,991
Optical Memory 2,043,894 2,049,238
---------- ----------
$3,691,486 $3,754,229
========== ==========
During the years ended June 30, 1997, 1996 and 1995, $62,743, $144,148 and
$392,430, respectively, of creditable royalties earned were recognized as
revenue. There are no obligations in connection with any of the advance royalty
agreements which require the Company to incur any additional costs.
NOTE D - Joint Ventures
The Company's investments in its joint ventures are recorded at zero. The
Company will continue to carry its investment in each of its joint ventures at
zero until the venture becomes profitable (based upon the venture's history of
sustainable profits), at which time the Company will start to recognize over a
period of years its share, if any, of the then equity of each of the ventures,
and will recognize its share of each venture's profits or losses on the equity
method of accounting.
Based upon the opinion of legal counsel, the Company believes that it has
no obligation to fund any losses that its joint ventures incur beyond the
Company's original investment. Additionally, the Company has no financial or
other guarantees with respect to liabilities incurred by its joint ventures.
United Solar
In 1990, ECD and Canon entered into a joint venture agreement for the
formation of United Solar. United Solar is owned 49.98% by ECD, 49.98% by Canon,
with the balance held by Mrs. Haru Reischauer, a member of the Board of
Directors of ECD. ECD has contributed to United Solar a license in the field of
photovoltaics, certain solar cell manufacturing and photovoltaic research and
development equipment, leasehold improvements, furniture and fixtures, inventory
and supplies. In return for the contribution of these assets, ECD received
49.98% equity interest in United Solar. In return for its 49.98% equity interest
in United Solar, Canon has invested $55,000,000.
-48-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
In 1997, Canon entered into an agreement with United Solar whereby, in
consideration of an $11.5 million payment to United Solar, Canon, in addition to
its rights under a 1986 agreement between Canon and the Company whereby Canon
was granted exclusive rights to manufacture photovoltaic products in Japan, has
been permitted to expand its rights to manufacture photovoltaic products on a
non-exclusive basis in Australia and one country of Europe as determined by
Canon. In addition, ECD received a $500,000 fee from Canon in connection with
this agreement.
ECD performed laboratory, shop, patent and research services for the benefit
of United Solar for which ECD received approximately $144,000, $128,000 and
$68,000 in the years ended 1997, 1996 and 1995, respectively. ECD also performed
administrative services for the benefit of United Solar for which ECD received
approximately $23,000 in the year ended 1995. These amounts are included in
other revenues. In addition, in the years ended June 30, 1997, 1996 and 1995,
United Solar billed ECD for approximately $296,000, $289,000 and $404,000,
respectively, for work performed in accordance with a U.S. Government contract.
In 1995, ECD received a $7,565,000 order (subsequently amended to
$7,996,000) from United Solar for solar cell manufacturing equipment to provide
production capacity of solar cells capable of producing 5 Megawatts of
electricity on an annual basis. In the three years ended June 30, 1997, ECD
recognized revenue of $175,000, $4,702,000 and $2,847,000, respectively, under
this order.
The following sets forth certain financial data regarding United Solar
that are derived from United Solar's financial statements.
UNITED SOLAR STATEMENTS OF OPERATIONS
Six Months
Ended June 30, Year Ended December 31,
-------------- -----------------------
1997 1996 1995
---- ---- ----
(Unaudited)
Revenues
Product sales and other revenue $ 3,637,911 $ 5,222,970 $ 5,351,573
License fees 11,500,000 -- --
----------- ----------- -----------
Total Revenues 15,137,911 5,222,970 5,351,573
Operating Expenses
Cost of sales 5,413,428 7,846,603 7,037,174
Research and development 1,437,422 2,029,297 2,000,611
General and administrative 1,024,352 1,672,706 1,610,158
Sales and marketing 821,765 1,590,200 1,594,228
------------ ----------- -----------
Total 8,696,967 13,138,806 12,242,171
------------ ----------- -----------
Other Income (Expense) (80,280) (191,577) 247,074
------------ ----------- -----------
Net Income (Loss) $ 6,360,664 $(8,107,413) $(6,643,524)
============ =========== ===========
-49-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
UNITED SOLAR BALANCE SHEETS
June 30, December 31,
------------- -------------
1997 1996
---- ----
(Unaudited)
Current Assets:
Cash and Cash Equivalents $ 2,342,628 $ 1,272,524
Accounts Receivable - Trade 738,378 537,822
Accounts Receivable - NREL 242,938 217,723
Accounts Receivable - Stockholders 4,633,757 534,169
Inventory 4,015,379 3,048,191
Other Current Assets 322,232 285,370
------------ ------------
Total Current Assets 12,295,312 5,895,799
Property, Plant and Equipment (Net) 13,676,080 13,461,135
Other Assets 225,913 234,998
------------ ------------
Total Assets $ 26,197,305 $ 19,591,932
============ ============
Current Liabilities:
Short-term bank debt $ 10,000,000 $ 11,000,000
Accounts Payable - Trade & Stockholders 3,001,352 1,558,229
Accrued Expenses and Other 376,743 575,157
------------ ------------
Total Current Liabilities 13,378,095 13,133,386
------------ ------------
Total Stockholders' Equity 12,819,210 6,458,546
------------ ------------
Total Liabilities and Stockholders'
Equity $ 26,197,305 $ 19,591,932
============ ============
GM Ovonic
In June 1994, Ovonic Battery and General Motors formed a joint venture for
the manufacture and commercialization of Ovonic NiMH batteries for electric
vehicles. General Motors has a 60% interest and Ovonic Battery has a 40%
interest in this joint venture. Ovonic Battery has contributed intellectual
property, licenses, production processes, know-how, personnel and engineering
services pertaining to Ovonic NiMH battery technology to the joint venture. The
contribution of General Motors consists of operating capital, plant, equipment
and management personnel necessary for the volume production of batteries.
GM Ovonic is currently engaged in low-volume manufacturing of NiMH
batteries at its facility in Troy, Michigan. Production volume is expected to
increase in early 1998 at a larger facility.
In October 1995, the Company received a $3,710,000 order, as amended, from
GM Ovonic for battery manufacturing equipment. As of June 30, 1997, the Company
received payments of $3,209,000 under this order and recognized revenue of
$3,577,000. A receivable in the amount of $368,000 remains to be paid at June
30, 1997.
-50-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE D - Joint Ventures - (Continued)
During the years ended June 30, 1997, 1996 and 1995, the Company had
revenues, including the aforementioned machine-building revenues, of $7,776,000,
$4,118,000 and $2,372,000, respectively, related to sales of products to GM
Ovonic, for reimbursement of services performed for GM Ovonic.
There are no financial statements currently available for GM Ovonic. GM
Ovonic is in its developmental stage and, as such, has a history of operating
losses.
The Company has recorded its investment in GM Ovonic at zero, which
represents the net book value of the Company's assets transferred to GM Ovonic.
Additionally, the Company has made no financial or other guarantees with respect
to liabilities incurred by GM Ovonic. The Company will continue to carry its
investment at zero and will recognize over a period of years its share, if any,
of the then equity of GM Ovonic and will recognize its share of the venture's
profits or losses on the equity method of accounting.
NOTE E- Capitalized Lease Obligations
A summary of the Company's capitalized lease agreements is as follows:
June 30,
--------------------------
1997 1996
---- ----
Financing Lease for headquarters building
with interest at 8.2% and monthly payments
of $19,250 $ 540,057 $ 720,383
Capitalized leases with Finova (with interest
ranging between 5% and 13%) 1,248,597 2,290,948
Other capitalized leases 121,463 145,370
---------- ----------
Total 1,910,117 3,156,701
Less amounts included in current liabilities 1,324,322 1,302,973
---------- ----------
Total Long-Term Capitalized Lease Obligation $ 585,795 $1,853,728
========== ==========
Financing Lease
In 1990, ECD entered into a 10-year financing lease transaction relating
to certain buildings and land. The terms of the transaction included an option
for ECD to purchase the buildings and land in the sixth year of the lease for
$2,150,000, increasing 5% each year thereafter. The Company has not exercised
the option.
Capitalized Leases
In 1992, the Company entered into a third-party leasing arrangement for
the financing of certain equipment. The terms of the agreement require repayment
over five years at an interest rate ranging between 5% and 13%.
-51-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE E - Capitalized Lease Obligations - (Continued)
The lease agreement is secured by Ovonic Battery's plant and equipment. In
addition, ECD has guaranteed Ovonic Battery's obligations under this agreement
and has provided a first security interest in the Company's unencumbered plant
and equipment.
In 1994, ECD entered into a $1,250,000 sale and lease-back transaction for
a vapor barrier coating machine, with a net book value of zero, at an interest
rate of approximately 13%. ECD recorded a deferred gain of $1,250,000 in the
year ended June 30, 1995 and is amortizing this deferred gain over the term of
the lease. During the years ended June 30, 1997, 1996 and 1995, ECD amortized
approximately $463,000, $417,000 and $208,000, respectively, of this deferred
gain.
The Company has agreed to purchase certain equipment leased upon
expiration of the lease for 10% of its acquisition cost. For other equipment,
the Company has an option to purchase the equipment for its then fair market
value (but no less than 10% nor more than 20% of its acquisition cost), plus any
applicable sales, excise or other taxes imposed as a result of such sale.
Other
The Company has operating lease agreements, principally for office and
research facilities and equipment. These leases, in some instances, include
renewal provisions at the option of the Company. Rent expense under such lease
agreements for the years ended June 30, 1997, 1996 and 1995 was approximately
$1,685,000, $1,623,000 and $941,000, respectively.
Future minimum payments on obligations under capital leases and
noncancellable operating leases expiring in each of the five years subsequent to
June 30, 1997 are as follows:
Capital Leases Operating Leases
-------------- ----------------
1998 $1,354,002 $1,209,232
1999 419,422 568,132
2000 165,816 416,775
2001 13,510 116,302
2002 2,290 512
---------- ----------
TOTAL 1,955,040 $2,310,953
Less interest & taxes ==========
included above 44,923
----------
Present value of minimum
payments $1,910,117
==========
-52-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE F - Capital Stock
The voting rights of ECD's two classes of stock are as follows:
Class A Convertible Common Stock - 25 votes per share
Common Stock - one vote per share
The Class A Convertible Common Stock is automatically convertible into
Common Stock on a share-for-share basis on September 14, 1999 and is convertible
at the option of the holder any time prior to that date.
As part of an employment agreement among ECD, Ovonic Battery and Mr.
Ovshinsky, ECD granted Mr. Ovshinsky the right to vote the shares of Ovonic
Battery held by ECD following a change in control of ECD. For purposes of this
agreement, change in control means (i) any sale, lease, exchange or other
transfer of all or substantially all of ECD's assets; (ii) the approval by ECD
stockholders of any plan or proposal of liquidation or dissolution of ECD; (iii)
the consummation of any consolidation or merger of ECD in which ECD is not the
surviving or continuing corporation; (iv) the acquisition by any person of 30%
or more of the combined voting power of the then outstanding securities having
the right to vote for the election of directors; (v) changes in the constitution
of the majority of the Board of Directors; (vi) the holders of the Class A
Common Stock ceasing to be entitled to exercise their preferential voting rights
other than as provided in ECD's charter and (vii) bankruptcy. In the event of
mental or physical disability or death of Mr. Ovshinsky, the foregoing power of
attorney and proxy shall be exercised by Mr. Ovshinsky's wife, Dr. Iris
Ovshinsky, a Vice President of ECD. The initial term of the employment agreement
is six years (through September, 1999) and shall be automatically renewed every
year thereafter unless terminated by the Company.
During the years ended June 30, 1997, 1996 and 1995, ECD issued restricted
shares of 3,040, 6,899 and 3,733, respectively, as compensation to employees,
consultants, contractors and directors. ECD recorded compensation expense, based
upon fair market value of these shares at the date of issuance, for the years
ended June 30, 1997, 1996 and 1995 of $119,000, $59,000 and $48,000,
respectively, relating to these restricted shares of Common Stock.
-53-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock
The Company has Common Stock reserved for issuance as follows:
Number of Shares
-------------------------------
June 30, 1997 June 30, 1996
------------- -------------
Conversion of Class A Convertible
Common Stock 219,913 219,913
Stock options 3,201,892 3,287,973
1999 Private Placement Warrants 174,966 174,966
Warrants issued in connection with
services rendered 219,000 239,000
Convertible Investment Certificates 6,233 6,233
--------- ---------
TOTAL RESERVED SHARES 3,822,004 3,928,085
========= =========
Stock Option Plans
The Company's 1976 Amended and Restated Stock Option Plan (the "Amended
Plan") which expired in November 1996, 1987 Stock Option and Incentive Plan
("1987 Stock Option Plan") and the 1995 Non-Qualified Stock Option Plan ("1995
Stock Option Plan") authorize the granting of stock options at such exercise
prices and to such employees, consultants and other persons as the Compensation
Committee appointed by the Board of Directors (the "Compensation Committee")
shall determine. All three stock option plans are administered by the
Compensation Committee.
Options under the Amended Plan and the 1987 Stock Option Plan expire six
years from the date of grant. Options under the 1995 Stock Option Plan expire no
later than 10 years from the date of grant. Stock options under all three plans
may not be exercised during the first six months of the grant. Thereafter,
options may be exercised cumulatively each year, starting at the end of six
months after grant of the option, at a predetermined rate of the number of
shares of the Common Stock subject to the option. The exercise price of all
options granted has been equal to the fair market value of the Common Stock at
the time of grant.
The purchase price and number of shares covered by the options are subject
to adjustment under certain circumstances to protect the optionholders against
dilution.
-54-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
A summary of the transactions during the years ended June 30, 1997, 1996
and 1995 with respect to the Company's Amended Plan, 1987 Stock Option Plan and
1995 Stock Option Plan follows:
1997 1996 1995
-----------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------------------- ------------------- -------------------
Outstanding July 1 2,129,856 $12.24 2,422,646 $10.42 1,043,311 $ 6.68
Granted 291,030 14.93 358,190 17.71 1,646,535 12.23
Exercised 90,420 5.99 650,650 8.46 264,299 6.96
Canceled 2,860 15.74 330 11.75 2,901 6.31
--------- ------ --------- ------ --------- ------
Outstanding June 30 2,327,606 $12.82 2,129,856 $12.24 2,422,646 $10.42
========= ====== ========= ====== ========= ======
Exercisable June 30 1,705,546 $12.19 1,046,438 $10.79 873,458 $ 8.02
========= ====== ========= ====== ========= ======
In November 1993, stock options to purchase 94,367 shares of Common Stock
held by Stanford R. Ovshinsky, and stock options to purchase 49,630 shares of
Common Stock held by Dr. Iris M. Ovshinsky, issued under the aforementioned
Amended Plan, were canceled and new stock options, covering 150,000 (adjusted to
214,235 as of June 30, 1997) shares of Common Stock in the case of Mr. Ovshinsky
and 100,000 shares (adjusted to 142,573 as of June 30, 1997) of Common Stock in
the case of Dr. Ovshinsky, were granted by ECD. The stock options canceled had
an average exercise price of approximately $18.00 per share. The weighted
average exercise price of the outstanding stock options is $10.17 per share. The
number of stock options are adjusted pursuant to the antidilution provisions of
the stock option grants. The weighted average price was arrived at based upon
(I) the option price of $7.00 per share for the original number of shares and
any additional shares as adjusted for the antidilution provisions during the 18-
month period following the grant; and (ii) thereafter, the fair market value of
any additional shares as adjusted for the antidilution provisions, determined
quarterly.
As described in Note A, the Company determined that it will continue to
apply APB 25 to its stock-based compensation awards to employees instead of
adopting SFAS 123. Had compensation cost for the Company's stock option plans
been determined based upon the fair value at the grant date for awards under
these plans consistent with the methodology prescribed under SFAS 123, the
Company's net loss and loss per share for the year ended June 30, 1997 would
have been increased by approximately $1,840,000 and $.17 per share and net
income and earnings per share for the year ended June 30, 1996 would have been
reduced by $1,883,000 and $.17 per share. The fair value of the
-55-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE G - Warrants and Options to Purchase Stock - (Continued)
options granted during 1997 and 1996 is estimated as $1,710,000 and $3,195,000
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions:
1997 1996
---- ----
Dividend Yield 0% 0%
Volatility % 57.96% 56.95%
Risk Free Interest Rate 6.26% 5.83%
Expected Life 3.54 years 3.54 years
In February 1995, the Compensation Committee of the Board of Directors
extended the exercise period of certain stock options granted in March 1989.
These options were extended on the same terms and conditions, including
continuation of the exercise price at fair market value. The Committee extended
the options in order to afford the holders of said options the six-year exercise
period which had previously been interrupted for a period of time due to the
Company's inability to issue registered shares upon exercise of options. The
difference between the aggregate exercise price and the fair market value of the
Company's stock at February 1995, totaling $1,600,000, was recorded as a
non-cash charge to operations in the year ended June 30, 1995.
Warrants
ECD has outstanding warrants to purchase 174,966 shares of Common Stock in
connection with private placements of Common Stock as well as warrants to
purchase 219,000 shares of Common Stock in connection with services rendered.
The warrants are currently exercisable at a weighted average price of $10.65 per
share. The exercise price of certain of the warrants may be reduced in the
future pursuant to certain antidilution provisions.
-56-
ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE H - Net Income (Loss) Per Share
The Company uses the treasury stock method to calculate primary and
fully-diluted earnings per share. Common stock equivalents consist of stock
options and warrants. Weighted average number of shares outstanding and primary
earnings per share for the three years ended June 30 are computed as follows:
1997 1996 1995
---- ---- ----
Weighted average number of shares
outstanding 10,729,802 9,370,841 8,003,742
Pro Forma weighted average shares
for Common Stock Equivalents N/A 1,515,067 886,020
---------- ---------- ----------
AVERAGE NUMBER OF SHARES
OUTSTANDING AND EQUIVALENTS 10,729,802 10,885,908 8,889,762
========== ========== =========
Net income (loss) $(17,954,612) $1,054,269 $5,605,664
EARNINGS (LOSS) PER SHARE $ (1.67) $ .10 $ .63
============ ========== ==========
The primary and fully-diluted earnings per share for fiscal year 1996 are
the same since the ending market value of ECD Common Stock at June 30, 1996 of
$22.75 per share approximates the average market value per share of ECD Common
Stock of $20.23 during fiscal year 1996. The use of the ending market value of
$22.75 per share results in a slightly higher pro forma weighted average number
of shares for common stock equivalents for purposes of fully-diluted earnings
per share; however, it does not result in a different earnings per share
compared to primary earnings per share.
The difference between the primary earnings per share and the
fully-diluted earnings per share for fiscal 1995 is the result of using the
ending market value of $16.375 per share versus the average market value of
$13.56. This results in pro forma weighted average shares for common stock
equivalents of 1,938,977 and a fully-diluted earnings per share of $.56.
NOTE I - Federal Taxes on Income
At June 30, 1997 and 1996, the Company has approximately $40,223,000 and
$35,639,000, respectively, of net deferred tax assets, consisting primarily of
$38,523,000 and $33,782,000, respectively, due to net operating loss
carryforwards, $1,700,000 and $1,857,000, respectively, due to tax credit
carryforwards. However, a valuation reserve of the same amount is required due
to the Company's operating history and uncertainty regarding the future
realizability of the net tax operating loss carryforwards and tax credit
carryforwards.
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE I - Federal Taxes on Income - (Continued)
The Company's valuation reserve was increased by $4,584,000 in 1997,
$818,000 in 1996 and decreased by $505,000 in 1995 for the impact of the 1997,
1996 and 1995 net operating income (losses), temporary differences and the
expiration of tax carryforwards.
At June 30, 1997, the Company's remaining net tax operating loss
carryforwards and tax credit carryforwards expire as follows:
Net Tax Operating Investment Tax R & D Credit
Loss Carryforward Credit Total Carryforward
----------------- -------------- ------------
1998 $ 3,360,000 $ 10,000 $ 436,000
1999 5,395,000 40,000 202,000
2000 8,767,000 172,000 813,000
2001 23,828,000 27,000
2002 15,900,000
2003 17,460,000
2004 1,378,000
2005 --
2006 7,075,000
2007 2,854,000
2008 1,802,000
2009 4,304,000
2010 --
2011 5,431,000
2012 15,749,000
-------------- -------- -----------
$113,303,000 $249,000 $ 1,451,000
============ ======== ===========
NOTE J - Related Party Transactions
For the three years ended June 30, 1997, 1996 and 1995, ECD incurred
expenses of $146,000, $90,514 and $36,440, respectively, for services rendered
by its directors.
For related party transactions involving United Solar and GM Ovonic see
Note D.
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ENERGY CONVERSION DEVICES, INC. and SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE K - Business Segments
The Company has two business segments, its subsidiary, Ovonic Battery, and
the parent company, ECD. Ovonic Battery is primarily involved in developing and
commercializing battery technology. ECD is primarily involved in photovoltaics,
microelectronics and machine building. General corporate expenses (except for
those expenses allocated to Ovonic Battery), interest expense and interest
income are classified in the ECD business segment.
The Company's operations by business segment were as follows:
Financial Data by Business Segment
(in thousands)
Ovonic Battery ECD Consolidated
-------------- ---------- ------------
Revenues
Year ended June 30, 1997 $ 24,183 $ 5,395 $ 29,578
Year ended June 30, 1996 26,946 10,366 37,312
Year ended June 30, 1995 31,945 9,399 41,344
Operating Income(Loss)
Year ended June 30, 1997* $(12,610) $ (6,418) $(19,028)
Year ended June 30, 1996* (2,258) (1,921) (4,179)
Year ended June 30, 1995 9,356 (3,560) 5,796
Depreciation and Amortization Expense
Year ended June 30, 1997 $ 1,065 $ 1,248 $ 2,313
Year ended June 30, 1996 811 1,079 1,890
Year ended June 30, 1995 640 728 1,368
Capital Expenditures
Year ended June 30, 1997 $ 2,807 $ 770 $ 3,577
Year ended June 30, 1996 915 972 1,887
Year ended June 30, 1995 859 280 1,139
Identifiable Assets
Year ended June 30, 1997 $ 18,643 $ 19,086 $ 37,729
Year ended June 30, 1996 17,501 39,628 57,129
Year ended June 30, 1995 13,056 10,275 23,331
* Includes intercompany interest of $2,124 for the year ended June 30, 1997 and
$432 for the period from April 1, 1996 to June 30, 1996 charged by ECD to
Ovonic Battery in accordance with the agreements between the parties.
-59-
Item 9: Changes in and Disagreements on Accounting and Financial Disclosure
Not applicable.
-60-
PART III
Item 10: Directors and Executive Officers of the Registrant
The composition of the Board of Directors of the Company is as follows:
Director
of the
Company Principal Occupation and
Name Since Office Business Experience
- ---- ----- ------ ------------------------
Stanford R. Ovshinsky 1960 President, Chief Mr. Ovshinsky, 74, the founder and Chief Executive
Executive Officer Officer of the Company, has been an executive
and Director officer and Director of the Company since its
inception in 1960. Mr. Ovshinsky is the primary
inventor of the Company's technology. Mr.
Ovshinsky also serves as: the Chief Executive
Officer of Ovonic Battery; President, CEO and
Director of United Solar; a member of the Board of
Managers of GM Ovonic; and Co-Chairman of the
Board of Directors of Sovlux. Mr. Ovshinsky is the
husband of Dr. Iris M. Ovshinsky.
Iris M. Ovshinsky 1960 Vice President Dr. Ovshinsky, 70, co-founder and Vice President
and Director of the Company, has been an executive officer and
Director of the Company since its inception in 1960.
Dr. Ovshinsky also serves as a director of Ovonic
Battery. Dr. Ovshinsky is the wife of Stanford R.
Ovshinsky.
Robert C. Stempel 1995 Chairman of the Mr. Stempel, 64, is Chairman of the Board and
Board, Executive Executive Director of the Company. Prior to his
Director and election as a Director in December 1995, Mr.
Director Stempel served as senior business and technical
advisor to Mr. Ovshinsky. Mr. Stempel is also the
Chairman of Ovonic Battery and serves on the Board
of Managers of GM Ovonic. From 1990 until his
retirement in 1992, he was the Chairman and Chief
Executive Officer of General Motors Corporation.
Prior to serving as Chairman, he had been President
since 1987. Mr. Stempel serves on the Board of
Directors of NBD Bank, N.A. Mr. Stempel serves on
the Company's Audit Committee.
Nancy M. Bacon 1977 Senior Vice Mrs. Bacon, 51, joined the Company in 1976 as its
President Vice President of Finance and Treasurer. Mrs.
and Director Bacon became the Senior Vice President of the
Company in 1993. Mrs. Bacon also serves on the
Boards of Directors of Sovlux and United Solar.
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Umberto Colombo 1995 Director Prof. Colombo, 69, is Chairman of the Scientific
Councils of the ENI Enrico Mattei Foundation and
of the Instituto Per l'Ambiente in Italy. He was
Chairman of the Italian National Agency for New
Technology, Energy and the Environment until
1993 and then served as Minister of Universities
and Scientific and Technological Research in the
Italian Government until 1994. Prof. Colombo is
also active as a consultant in international science
and technology policy institutions related to
economic growth.
Jack T. Conway 1980 Director Mr. Conway, 70, is President and Chief Executive
Officer of the Community Housing Corporation of
Sarasota. From 1985 to 1990, Mr. Conway was a
trustee of the Aspen Institute. Mr. Conway was
also formerly a management consultant to the
Company. Mr. Conway serves on the Audit and
Compensation Committees of the Board.
Hellmut Fritzsche 1969 Vice President
and Director Dr. Fritzsche, 70, was a professor of Physics at the
University of Chicago, from 1957 until his
retirement in 1996. He was also Chairman of the
Department of Physics, the University of Chicago,
until 1986. Dr. Fritzsche has been a Vice President
of the Company since 1965, acting on a part-time
basis, chiefly in the Company's research and
product development activities.
Joichi Ito 1995 Director Mr.Ito, 31, is President of Eccosys, Ltd. and
Digital Garage KK as well as President and
Representative Director of PSI Japan KK. He is an
expert on new computer technology and networked
information systems and writes and lectures
extensively in the United States, Japan and Europe.
Mr. Ito serves as a director and consultant to many
companies in the field of information technology.
Seymour Liebman 1997 Director Mr. Liebman, 48, currently an Executive Vice
President and General Counsel at Canon U.S.A.,
Inc, has held a variety of positions with Canon
since 1974, including Senior Vice President and
General Counsel from 1992-1996. Mr. Liebman is a
Director of United Solar and Zygo Corporation.
Walter J. McCarthy, Jr. 1995 Director Mr. McCarthy, 72, until his retirement in 1990, was
the Chairman and Chief Executive Officer of Detroit
Edison Company. Mr. McCarthy has served as a
consultant to the Company since 1990. Until
1995, Mr. McCarthy also served on the Boards of
Comerica Bank, Detroit Edison Company and
Federal-Mogul Corporation. Mr. McCarthy is a
member of the National Academy of Engineering.
He serves on the Audit and Compensation
Committees of the Board.
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Florence I. Metz 1995 Director Dr. Metz, 68, until her retirement in 1996, held
various executive positions with Inland Steel
Company: General Manager, New Ventures, Inland Steel
Company (1989-1991); General Manager, New Ventures,
Inland Steel Industries (1991-1992) and Advanced
Graphite Technologies (1992-1993); Program Manager
for Business and Strategic Planning at Inland Steel
(1993-1996). Dr. Metz also serves on the Board of
Directors of Ovonic Battery and is a member of the
Company's Compensation Committee.
Haru Reischauer 1990 Director Mrs. Reischauer, 82, was initially appointed as a
Director to fill the unexpired term of Edwin O.
Reischauer (former U.S. Ambassador to Japan) after
his death in September 1990, and was re-elected to
the Board of Directors in 1992. Mrs. Reischauer
also serves on the Board of Directors of United
Solar. She is an author and lecturer.
Nathan J. Robfogel 1990 Director Mr. Robfogel, 62, was, until his retirement in 1996,
a partner with the law firm of Harter, Secrest &
Emery, which he joined in 1959. Mr. Robfogel is
currently Vice President for University Relations of
the Rochester Institute of Technology where he has
been a trustee since 1985. From 1989 to 1995, Mr.
Robfogel served as Chairman of the Board of Direc-
tors of the New York State Facilities Development
Corporation, a public benefit corporation.
Stanley K. Stynes 1977 Director Dr. Stynes, 65, was Dean of the College of Engineer-
ing at Wayne State University from 1970 to August
1985, and a Professor of Engineering at Wayne State
University from 1985 until his retirement in 1992.
He has been involved in various administrative,
teaching, research and related activities. Dr.
Stynes serves as Chairman of the Audit Committee of
the Board of Directors of the Company.
* * *
Mr. Ralph F. Leach served as Chairman of the Board of Directors from 1977
to 1995 and was appointed Chairman Emeritus in December 1995. Until his
retirement in December 1977, Mr. Leach was for more than five years Chairman of
the Executive Committee of J.P. Morgan & Co. and Morgan Guaranty Trust Company
of New York, institutional bankers, and is presently a member of that company's
Directors' Advisory Council.
Dr. Robert R. Wilson, served as a director to the Company from 1978 to 1993
and was appointed Director Emeritus in January 1994. For more than 10 years,
until his retirement in 1978, Dr. Wilson was the founder and the director of the
Fermi National Accelerator Laboratory. He was formerly President of the American
Physical Society. Since retirement, Dr. Wilson has been a Professor Emeritus of
physics at Cornell University, Columbia University and the University of
Chicago.
-63-
The executive officers of the Company are as follows:
Served As An Executive
Name Age Office Officer or Director Since
- ---- --- ------ -------------------------
Stanford R. Ovshinsky 74 President, Chief Executive Officer 1960(1)
and Director
Iris M. Ovshinsky 70 Vice President and Director 1960(1)
Robert C. Stempel 64 Executive Director and Director 1995
Nancy M. Bacon 51 Senior Vice President and Director 1976
Hellmut Fritzsche 70 Vice President and Director 1969
Subhash K. Dhar 46 President and Chief Operating 1986
Officer of Ovonic Battery
Stephan W. Zumsteg 51 Treasurer 1997
- -------
(1) The predecessor of the Company was originally founded in 1960. The present
corporation was incorporated in 1964 and is the successor by merger of the
predecessor corporation.
See above for information relating to Stanford R. Ovshinsky, Iris M.
Ovshinsky, Robert C. Stempel, Nancy M. Bacon and Hellmut Fritzsche.
Subhash K. Dhar joined the Company in 1981 and has held various positions
with Ovonic Battery since its inception in October 1982. Mr. Dhar has served as
Chief Operating Officer of Ovonic Battery since 1986 and President since 1987.
Stephan W. Zumsteg joined the Company in March 1997 and was elected
Treasurer in April 1997. Prior to joining the Company, Mr. Zumsteg was Chief
Financial Officer of The Kirlin Company from July 1996 to February 1997 and Vice
President-Finance & Administration and Chief Financial Officer of Lincoln Brass
Works from July 1991 to June 1996.
-64-
Item 11: Executive Compensation
The following tables set forth the compensation paid by the Company during
its last three fiscal years to its Chief Executive Officer and each of its other
four most highly compensated executive officers for the fiscal year ended June
30, 1997.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
------------ ------------
Restricted Options All Other
Name and Principal Fiscal Stock (Number Compen-
Position Year(1) Salary(2) Bonus Award of Shares) sation(4)
- ------------------ ------- --------- -------- ----- ---------- ---------
Stanford R. Ovshinsky, 1997 $276,016 $37,981(3) -- $10,017
President and Chief 1996 $267,800 $90,741(3) -- $10,017
Executive Officer (5) 1995 $256,567 -- 294,957(6) $ 8,798
Iris M. Ovshinsky, 1997 $250,016 -- $ 8,939
Vice President 1996 $250,004 -- $ 5,726
1995 $153,846 196,888 $ 4,726
Robert C. Stempel, 1997 $270,005 -- 25,000 $ 3,159
Executive Director (7) 1996 $125,008 $50,312 125,000 $ 3,159
1995 -- -- 179,000 --
Nancy M. Bacon, 1997 $235,019 -- $ 5,796
Senior Vice President 1996 $235,472 25,000 $ 5,794
1995 $225,000 160,200 $ 4,879
Subhash K. Dhar, 1997 $200,013 -- -- $ 5,283
President and Chief 1996 $200,503 $15,000 62,040 $ 5,283
Operating Officer of 1995 $165,769 -- 3,980 $ 4,267
Ovonic Battery
- --------
(1) The Company's fiscal year is July 1 to June 30. The Company's 1997 fiscal
year ended June 30, 1997.
(2) Amounts shown include compensation deferred under the Company's 401(k)
Plan. Does not include taxable income resulting from exercise of stock
options.
(3) Computed based on net income from operations for preceding years as
provided in Mr. Ovshinsky's September 1993 Employment Agreement.
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(4) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to each of the fiscal years ended June
30, 1997, 1996 and 1995, respectively, as follows: Dr. Ovshinsky $3,269,
$2,500 and $1,500; Mrs. Bacon $4,500 (for each of 1997 and 1996) and
$4,096 (1995); Mr. Dhar $4,500 (for each of 1997 and 1996) and $3,808
(1995); (ii) the dollar value of any life insurance premiums paid by the
Company in the fiscal years ended June 30, 1997, 1996 and 1995,
respectively, with respect to term-life insurance for the benefit of each
of the named executives as follows: Mr. Ovshinsky $10,017 (for each of
1997 and 1996) and $8,798 (1995); Dr. Ovshinsky $5,670 (1997) and $3,226
(for each of 1996 and 1995); Mr. Stempel $3,159 (for each of 1997 and
1996); Mrs. Bacon $1,296, $1,294, and $783; and Mr. Dhar $783 (for each of
1997 and 1996) and $459 (1995). Under the 401 (k) Plan, which is a
qualified defined-contribution plan, the Company makes matching
contributions periodically on behalf of the participants in the amount of
50% of each such participant's contributions. These matching contributions
are limited to 3% of a participant's salary, up to $150,000 for 1997. The
contributions reported for 1997 are for the calendar year ended December
31, 1996.
(5) In September 1993, Mr. Ovshinsky entered into separate employment
agreements with the Company and Ovonic Battery. See "Employment
Agreements." The amounts indicated include compensation received by Mr.
Ovshinsky pursuant to the Employment Agreements with the Company and
Ovonic Battery.
(6) Does not include option to purchase shares of Ovonic Battery.
See "Employment Agreements." (7) Mr. Stempel joined the Company in
December 1995. The salary reported for 1996 is for the six month
period January 1996 - June 1996. Options indicated for 1995 were granted
to Mr. Stempel prior to his becoming an executive officer of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted to the named executive
officers during the fiscal year ended June 30, 1997.
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (1)
---------------------------------------------------------------- ----------------------------------
% of Total
Options
Granted Exercise
to Employees Price Expiration
Name Options in Fiscal Year ($/Sh) Date 0% 5% 10%
- ------------------ ------- -------------- ------- ---------- ---------------------------------
Robert C. Stempel 25,000 8.59% $15.125 12/18/2006 _ $237,801 $602,634
- -----------
(1) The potential realizable value amounts shown illustrate the values that
might be realized upon exercise immediately prior to the expiration of
their term using 5% and 10% appreciation rates as required to be used in
this table by the Securities and Exchange Commission, compounded annually,
and are not intended to forecast possible future appreciation, if any, of
the Company's stock price. Additionally, these values do not take into
consideration the provisions of the options providing for
nontransferability or termination of the options following termination of
employment.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 1997 and the number and value
of unexercised options held by the named executive officers at fiscal year end.
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised in-the-Money Options
on Exercise Realized Options at Fiscal Year End at Fiscal Year End
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
------ ----------- -------- -------------------------- -------------------------
Stanford R. Ovshinsky (1) _ _ 450,705/58,487 $1,158,341/$51,176
Iris M. Ovshinsky (2) _ _ 280,395/44,066 $749,485/$38,558
Robert C. Stempel (3) _ _ 236,300/113,700 $234,013/$33,863
Nancy M. Bacon (4) 27,800 $219,300(5) 182,640/52,560 $399,185/$32,865
Subhash K. Dhar (6) _ _ 49,122/19,806 $23,545/$1,045
(1) Mr. Ovshinsky's exercisable and unexercisable options are exercisable at a
weighted average price of $11.04 per share and $11.875 per share,
respectively.
(2) Dr. Ovshinsky's exercisable and unexercisable options are exercisable at a
weighted average price of $11.00 per share and $11.875 per share,
respectively.
(3) Mr. Stempel's exercisable and unexercisable options are exercisable at a
weighted average price of $13.36 and $16.46 per share, respectively.
(4) Mrs. Bacon's exercisable and unexercisable options are exercisable at a
weighted average price of $11.00 per share and $14.23 per share,
respectively.
(5) Of the approximately $219,300 value realized, approximately $133,330 was
used to cover expenses, i.e., purchase price and withholding taxes
associated with the exercise, and approximately $85,191 was used to
purchase 10,935 shares of ECD Common Stock.
(6) Mr. Dhar's exercisable and unexercisable options are exercisable at a
weighted average price of $15.81 per share and $16.46 per share,
respectively.
EMPLOYMENT AGREEMENTS
On September 2, 1993, Stanford R. Ovshinsky entered into separate
employment agreements with each of the Company and Ovonic Battery in order to
define clearly his
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duties and compensation arrangements and to provide to each company the benefits
of his management efforts and future inventions. The initial term of each
employment agreement is six years. Mr. Ovshinsky's employment agreement with the
Company provides for an annual salary of not less than $100,000, while his
agreement with Ovonic Battery provides for an annual salary of not less than
$150,000. Both agreements provide for annual increases to reflect increases in
the cost of living, discretionary annual increases as determined by the Board of
Directors of the Company and an annual bonus equal to 1% of the net income from
operations of the Company (excluding Ovonic Battery) or Ovonic Battery.
Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
provides for a right to vote the shares of Ovonic Battery held by the Company
following a change in control of the Company. For purposes of the agreement,
change in control means (i) any sale, lease, exchange or other transfer of all
or substantially all of the Company's assets; (ii) the approval by the Company's
stockholders of any plan or proposal of liquidation or dissolution of the
Company; (iii) the consummation of any consolidation or merger of the Company in
which the Company is not the surviving or continuing corporation; (iv) the
acquisition by any person of 30 percent or more of the combined voting power of
the then outstanding securities having the right to vote for the election of
directors; (v) changes in the constitution of the majority of the Board of
Directors; (vi) the holders of the Class A Common Stock ceasing to be entitled
to exercise their preferential voting rights other than as provided in the
Company's charter and (vii) bankruptcy. In the event of mental or physical
disability or death of Mr. Ovshinsky, the foregoing power of attorney and proxy
will be exercised by Dr. Iris M. Ovshinsky.
Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky
was granted stock options, exercisable at a price of $16,129 per share to
purchase 186 shares (adjusted from a price of $50,000 per share to purchase 60
shares pursuant to the anti-dilution provisions of the option agreement) of
Ovonic Battery's common stock, representing approximately 6% of Ovonic Battery's
outstanding common stock. The Ovonic Battery stock options vest on a quarterly
basis over six years commencing with the quarter beginning October 1, 1993,
subject to Mr. Ovshinsky's continued performance of his obligations to Ovonic
Battery under his employment agreement. Vesting of the stock options will
accelerate in the event of Mr. Ovshinsky's death, mental or physical disability
or termination of employment without cause and in the event of a change in
control of the Company.
COMPENSATION OF DIRECTORS
Directors who are neither employees of the Company nor otherwise
compensated by the Company are issued approximately $5,000 per year in the
Company's Common Stock based on the closing price of Common Stock on the first
business day of each year. Furthermore, as of April 18, 1996, directors who are
not employees of the Company
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receive $500 for each Board meeting attended (in person or via telephone
conference call) as well as $500 for each committee meeting if not coincident
with a Board meeting. Directors are also reimbursed for all expenses incurred
for the purpose of attending board of directors and committee meetings,
including airfare, mileage, parking, transportation and hotel.
COMPENSATION COMMITTEE REPORT
Compensation Committee.
During the fiscal year ended June 30, 1997, the Compensation Committee was
composed of Mr. Conway, Mr. McCarthy and Dr. Metz. None of the Compensation
Committee members are or were during the last fiscal year an officer or employee
of the Company or any of its subsidiaries, or had any business relationship with
the Company or any of its subsidiaries.
The Compensation Committee is responsible for administering the policies
which govern both annual compensation of executive officers and the Company's
stock option plans. The Compensation Committee meets several times during the
year to review recommendations from management regarding stock options and
compensation. Compensation and stock option recommendations are based upon
performance, current compensation, stock option ownership, and years of service
to the Company. The Company does not have a formal bonus program for executives,
although it has awarded bonuses to its executives from time to time.
Base Salary.
The Compensation Committee considers the Company's financial position and
other factors in determining the compensation of its executive officers. These
factors include remaining competitive within the relevant hiring market--whether
scientific, managerial or otherwise--so as to enable the Company to attract and
retain high quality employees, and, where appropriate, linking a component of
compensation to the performance of the Company's Common Stock--such as by a
granting of stock option or similar equity-based compensation--to instill
ownership thinking and align the employees' and stockholders' objectives. The
Company has been successful at recruiting, retaining and motivating executives
who are highly talented, performance-focused and entrepreneurial.
Stock Options.
Stock option grants to Mr. Stempel were made by the Compensation Committee
in accordance with the Compensation Committee's evaluation of his contributions
to the Company. See "Option Grants in Last Fiscal Year." While Mr. Ovshinsky and
Mr. Stempel participate in formulating the recommendation of management
regarding the grant of stock options, neither one participates in the
deliberations of the Compensation Committee.
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Ownership of stock assists in the attraction and retention of qualified
employees and provides them with additional incentives to devote their best
efforts to pursue and attain the achievement of corporate goals.
Chief Executive Officer Compensation.
In September 1993, Mr. Ovshinsky entered into separate employment
agreements with each of the Company and Ovonic Battery. The purpose of these
agreements, which provide for the payment to Mr. Ovshinsky of an annual salary
of not less than $100,000 by the Company and not less than $150,000 by Ovonic
Battery, was to define clearly Mr. Ovshinsky's duties and compensation
arrangements and to provide to each company the benefits of his management
efforts and future inventions. See "Employment Agreements." Mr. Ovshinsky's
compensation for fiscal year 1997 was determined in accordance with his
Employment Agreements with the Company and Ovonic Battery.
COMPENSATION COMMITTEE
Jack T. Conway
Walter J. McCarthy, Jr.
Florence I. Metz
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PERFORMANCE GRAPH
The line graph below compares the cumulative total stockholder return on
the Company's Common Stock over a five-year period with the return on the NASDAQ
Stock Market - US Index and the Hambrecht & Quist Technology Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG ENERGY CONVERSION DEVICES, INC., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
Cumulative Total Return
- - - - - - - - - - - - - - - - -
6/92 6/93 6/94 6/95 6/96 6/97
ENERGY CONVERSION DEVICES 100 121 136 181 253 142
NASDAQ STOCK MARKET-US 100 126 127 169 218 265
H & Q TECHNOLOGY 100 136 139 245 287 374
*$100 INVESTED ON 6/30/92 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JUNE 30.
The total return with respect to NASDAQ Stock Market - US Index and the
Hambrecht & Quist Technology Index assumes that $100 was invested on June 30,
1992, including reinvestment of dividends.
ECD has paid no cash dividends in the past and no cash dividends are
expected to be paid in the foreseeable future.
The Report of the Compensation Committee on Executive Compensation and the
Performance Graph are not deemed to be filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, or Securities Exchange
Act of 1934, as amended, or incorporated by reference in any documents so filed.
-71-
Item 12: Security Ownership of Certain Beneficial Owners and Management
CLASS A COMMON STOCK
Mr. Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky (executive
officers, Directors and founders of the Company), own of record 153,420 shares
and 65,601 shares, respectively (or approximately 69.8% and 29.8%,
respectively), of the outstanding shares of Class A Common Stock. Common Stock
is entitled to one vote per share and each share of Class A Common Stock is
entitled to 25 votes per share. Class A Common Stock is convertible into Common
Stock on a share-for-share basis at any time and from time to time at the option
of the holders, and will be deemed to be converted into Common Stock on a
share-for-share basis on September 14, 1999. As of September 12, 1997, Mr.
Ovshinsky also had the right to vote 126,500 shares of Common Stock (the "Sanoh
Shares") owned by Sanoh Industrial Co., Ltd. ("Sanoh") under the terms of an
agreement dated as of November 3, 1992 between the Company and Sanoh which,
together with the Class A Common Stock and 9,989 shares of Common Stock Mr. and
Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky voting control over shares
representing approximately 34.89% of the combined voting power of the Company.
The following table sets forth, as of June 30, 1997, information
concerning the beneficial ownership of Class A Common Stock by each Director and
all executive officers and Directors of the Company as a group. All shares are
owned directly except as otherwise indicated. Under the rules of the Securities
and Exchange Commission, Stanford R. Ovshinsky and Iris M. Ovshinsky may each be
considered to beneficially own the shares held by the other.
Class A
Common Stock
Name of Beneficially Total Number of Shares
Beneficial Owner Owned(1)(2) Beneficially Owned Percentage of Class
- ---------------- ------------ ---------------------- -------------------
Stanford R. Ovshinsky 153,420 153,420 69.8%
Iris M. Ovshinsky 65,601 65,601 29.8%
All other executive
officers and directors as
a group (16 persons) -- -- --
Total 219,021 219,021 99.6%
- --------------
(1) The balance of the 219,913 shares of Class A Common Stock outstanding, 892
shares, or approximately 0.4%, are owned by other members of Mr. and Dr.
Ovshinsky's family. Neither Mr. nor Dr. Ovshinsky has voting or investment
power with respect to such shares.
(2) On November 10, 1995, the Compensation Committee recommended, and the Board
of Directors approved, an amendment to Mr. and Dr. Ovshinsky's Stock Option
Agreements dated November 18, 1993 (the "Agreements") to permit Mr. and Dr.
Ovshinsky to exercise a portion (126,082 and 84,055 shares, respectively)
of their existing Common Stock option for Class A Common Stock on the same
terms and conditions as provided in the Agreements. The shares of Class A
Common Stock issuable upon exercise of the options under the Agreements, as
amended, are not included in the number of shares indicated.
-72-
COMMON STOCK
Directors and Executive Officers. The following table sets forth, as of
September 12, 1997, information concerning the beneficial ownership of Common
Stock by each director and executive officer and for all directors and executive
officers of the Company as a group. All shares are owned directly except as
otherwise indicated.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) % of Class(2)
- ------------------------ ----------------------- -------------
Stanford R. Ovshinsky 797,927(3) 7.0%
Iris M. Ovshinsky 392,736(4) 3.6%
Robert C. Stempel 333,404(5) 3.0%
Nancy M. Bacon 251,215(6) 2.3%
Subhash K. Dhar 50,316(7) *
Haru Reischauer 41,709(8) *
Jack T. Conway 38,027(9) *
Hellmut Fritzsche 31,490(10) *
Joichi Ito 22,534(11) *
Walter J. McCarthy, Jr. 21,660(12) *
Stanley K. Stynes 20,357(13) *
Nathan J. Robfogel 16,590(14) *
Florence I. Metz 8,857(15) *
Umberto Colombo 8,624(16) *
Seymour Liebman 4,000(17) *
Stephan W. Zumsteg 3,200(18) *
All executive officers and directors
as a group (16 persons) 2,042,646 16.4%
- -------
* Less than 1%.
(1) Under the rules and regulations of the Securities and Exchange
Commission, a person is deemed to be the beneficial owner of a security
if that person has the right to acquire beneficial ownership of such
security within sixty days, whether through the exercise of options or
warrants or through the conversion of another security.
(2) Under the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock issuable upon exercise of options and
warrants or upon conversion of securities which are deemed to be
beneficially owned by the holder thereof (see Note (1) above) are deemed
to be outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person but are not
deemed to be outstanding for the purpose of computing the percentage of
the class owned by any other person.
-73-
(3) Includes 509,192 shares (adjusted as of June 30, 1997) represented by
options exercisable within 60 days, the 126,500 Sanoh Shares over which
Mr. Ovshinsky has voting power, 153,420 shares of Class A Common Stock
which are convertible into Common Stock, and 750 shares represented by
warrants exercisable within 60 days . Under the rules and regulations of
the Securities and Exchange Commission, Mr. Ovshinsky may be deemed a
beneficial owner of the shares of Common Stock and Class A Common Stock
owned by his wife, Iris M. Ovshinsky. Such shares are not reflected in
Mr. Ovshinsky's share ownership in this table.
(4) Includes 324,461 shares (adjusted as of June 30, 1997) represented by
options exercisable within 60 days, 65,601 shares of Class A Common
Stock which are convertible into Common Stock and 750 shares represented
by warrants exercisable within 60 days. Under the rules and regulations
of the Securities and Exchange Commission, Dr. Ovshinsky may be deemed a
beneficial owner of the shares of Common Stock and Class A Common Stock
owned by her husband, Stanford R. Ovshinsky. Such shares are not
reflected in Dr. Ovshinsky's share ownership in this table.
(5) Includes 290,000 shares represented by options exercisable within 60
days and 14,000 shares represented by warrants exercisable within 60
days.
(6) Includes 227,700 shares represented by options exercisable within 60
days and 6,000 shares represented by warrants exercisable within 60
days.
(7) Includes 50,316 shares represented by options exercisable within 60
days.
(8) Includes 20,000 shares represented by options exercisable within 60
days, and 17,885 shares of Common Stock held in a trust of which Mrs.
Reischauer is trustee.
(9) Includes 27,000 shares represented by options exercisable within 60 days
and 4,000 shares represented by warrants exercisable within 60 days.
(10) Includes 18,980 shares represented by options exercisable within 60 days
and 1,980 shares represented by warrants exercisable within 60 days.
(11) Includes 21,749 shares represented by options exercisable within 60
days.
(12) Includes 10,000 shares represented by options exercisable within 60
days.
(13) Includes 9,000 shares represented by options exercisable within 60 days.
(14) Includes 15,000 shares represented by options exercisable within 60
days.
(15) Includes 5,000 shares represented by options exercisable within 60 days.
(16) Includes 7,000 shares represented by options exercisable within 60 days.
(17) Includes 4,000 shares represented by options exercisable within 60 days.
(18) Includes 3,200 share represented by options exercisable within 60 days.
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Principal Shareholders. The following table sets forth, as of September
12, 1997, to the knowledge of the Company, the beneficial holders of more than
5% of the Company's Common Stock (see footnotes for calculation used to
determine "percentage of class" category):
Name and Address of Amount and Nature of Percentage of
Beneficial Holder Beneficial Ownership Class(1)
------------------- -------------------- -------------
Stanford R. and Iris M. Ovshinsky 1,190,663(2) 10.2%
1675 West Maple Road
Troy, Michigan 48084
(1) Under the rules and regulations of the Securities and Exchange Commission,
shares of Common Stock issuable upon exercise of options and warrants or
upon conversion of securities which are deemed to be beneficially owned by
the holder thereof are deemed to be outstanding for the purpose of
computing the percentage of outstanding securities of the class owned by
such person but are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
(2) Includes 219,021 shares of Class A Common Stock owned by Mr. and Dr.
Ovshinsky (which shares are convertible at any time into Common Stock and
will be deemed to be converted into Common Stock on September 14, 1999),
9,989 shares of Common Stock owned by Mr. and Dr. Ovshinsky, 126,500
shares of Sanoh Shares over which Mr. Ovshinsky has voting rights, 833,653
shares represented by options exercisable within 60 days and 1,500 shares
represented by warrants exercisable within 60 days held by Mr. and Dr.
Ovshinsky.
Item 13: Certain Relationships and Related Transactions
Canon/United Solar. In June, 1990, the Company formed United Solar, a
joint venture with Canon, in which Canon and the Company each own 49.98% of the
outstanding shares, with the balance held by Mrs. Haru Reischauer, a member of
the Company's Board of Directors. Mrs. Reischauer is also a director of United
Solar. In the year ended June 30, 1997, the Company performed various
laboratory, shop, patent and research services for United Solar for which
United Solar was charged approximately $267,000. In the year ended June 30,
1997, United Solar billed ECD for approximately $296,000 for work performed in
accordance with the DOE PV Bonus contract.
GM Ovonic. During the years ended June 30, 1997, the Company had revenues
of $7,776,000 for sales of battery packs, electrodes, machine building and
other services performed for GM Ovonic.
Miscellaneous. Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is
employed by the Company as Director of the Production Technology and Machine
Building Division working principally in the design of manufacturing equipment.
He received $118,245 in salary during the year ended June 30, 1997.
-75-
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file reports of ownership and changes in ownership
with respect to the securities of the Company and its affiliates with the
Securities and Exchange Commission and to furnish copies of these reports to
the Company. Based on a review of these reports and written representations
from the Company's directors and officers regarding the necessity of filing a
report, the Company believes that during fiscal year ended June 30, 1997, all
filing requirements were met on a timely basis.
-76-
PART IV
Item 14: Exhibits, Financial Statement Schedules and Report on Form 8-K
(a) 1. Financial statements: Page
----
The following financial statements are included in Part II, Item 8:
Independent Auditors' Report........................................31
Consolidated balance sheets - June 30, 1997 and 1996................32
Consolidated statements of operations - years ended
June 30, 1997, 1996 and 1995..................................34
Consolidated statements of stockholders' equity (deficit)
years ended June 30, 1997, 1996 and 1995.....................35
Consolidated statements of cash flows - years ended
June 30, 1997, 1996 and 1995..................................36
Notes to consolidated financial statements..........................38
Individual financial statements and schedules of the Company have been
omitted as permitted by the instructions.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this Report.
(c) Exhibits
Page or
Reference
---------
3.1 Restated Certificate of Incorporation filed September 29, 1967 (a)
3.2 Certificate of Amendment to Certificate of Incorporation filed (b)
May 22, 1972 increasing authorized shares of the Company's Common Stock
from 2,000,000 shares to 5,000,000 shares
3.3 Certificate of Amendment to Certificate of Incorporation filed (c)
September 15, 1978 increasing and extending voting rights of the
Company's Class A Common Stock and establishing class voting with
respect to other matters
-77-
3.4 Certificate of Amendment to Certificate of Incorporation filed (d)
January 7, 1982 increasing and extending voting rights to the Company's
Class A Common Stock
3.5 Certificate of Amendment to Certificate of Incorporation filed July (e)
23, 1982 increasing authorized shares of the Company's Common Stock from
5,000,000 shares to 10,000,000 shares
3.6 Certificate of Amendment to Certificate of Incorporation filed May (f)
May 9, 1988 including various amendments, including increasing authorized
shares of the Company's Common Stock from 10,000,000 shares to
15,000,000 shares
3.7 Certificate of Incorporation of United Solar Systems Corp. (g)
3.8 Bylaws of United Solar Systems Corp. (h)
3.9 Certificate of Amendment to Certificate of Incorporation filed (i)
September 13, 1993 extending voting rights of the Company's
Class A Common Stock
3.10 Bylaws in effect as of July 17, 1997 94
4.1 Agreement among the Company, Stanford R. Ovshinsky and Iris M. (j)
Ovshinsky, relating to the automatic conversion of Class A Common Stock
into the Company's Common Stock upon the occurrence of certain events,
dated September 15, 1964
10.1 Patent License Agreement between the Company and Hitachi, (k)
Ltd. dated October 29, 1984
10.2 Patent License Agreement dated September 10, 1985 between the (l)
Company and Sony Corporation relating to optical memory technology
10.3 License Agreement effective as of June 18, 1985 between the Company (m)
and Canon Inc., as restated on September 20, 1985
10.4 Non-Assertion Agreement dated June 16, 1986 between the (n)
Company and Canon Inc.
10.5 Amendment to the Patent License Agreement dated December 5, 1986 (o)
between the Company and Matsushita Electric Industrial Co., Ltd.
10.6 Joint Venture Agreement effective as of June 1, 1987 between the (p)
Company and Canon Inc.
10.7 License Agreement dated as of June 29, 1987 between the (q)
Company and Ovonic Battery
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10.8 Energy Conversion Devices, Inc. 1987 Stock Option and Incentive (r)
Plan
10.9 Agreement dated October 24, 1983 between the Company and (s)
Asahi Chemical Industry Co. Ltd.
10.10 License Agreement and Supplemental Understanding dated February 10, (t)
1989 between Varta Batterie AG and the Company and Ovonic Battery
Company
10.11 Charter of the Soviet-American Joint Venture, Sovlux, dated (u)
January 11, 1990
10.12 Agreement on the Establishment and Activity of the Soviet- (v)
American Joint Venture, Sovlux, dated January 11, 1990
10.13 License and Joint R&D Agreement entered into as of February 20, 1990 (w)
by and between Hitachi Maxell, Ltd., the Company and Ovonic Battery
Company, Inc.
10.14 Joint Venture Agreement dated as of June 27, 1990 by and (x)
between Canon Inc. and the Company filed confidentially
pursuant to Rule 24b-2
10.15 Exclusive License Agreement dated July 6, 1990 made by and (y)
between the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2
10.16 Know-How Cross-License Agreement dated July 6, 1990 made by and (z)
between Canon Inc., the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2
10.17 Option License Agreement dated July 6, 1990 made by and (aa)
between the Company and Canon Inc. filed confidentially
pursuant to Rule 24b-2
10.18 Option License Agreement dated July 6, 1990 made by and (bb)
between the Company and United Solar Systems Corp. filed
confidentially pursuant to Rule 24b-2
10.19 License agreement by and between the Company, Ovonic Battery and (cc)
Gates Energy Products dated October 25, 1990
10.20 Amended Master Agreement made and entered into by and (dd)
between the Company and Matsushita Electric Industrial Co., Ltd.
dated January 24, 1991
10.21 Memory Patent License Agreement made and entered into by and (ee)
between the Company and Matsushita Electric Industrial Co., Ltd. dated
January 24, 1991
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10.22 Memory Patent License Agreement by and between the Company (ff)
and Asahi Chemical Industry Co., Ltd. dated April 26, 1991
10.23 License Agreement by and between the Company, Ovonic Battery (gg)
and Samsung Electronics Co., Ltd. dated June 10, 1991
10.24 License Agreement between the Company, Ovonic Battery and Sylva (hh)
Industries Limited dated June 14, 1991
10.25 License Agreement by and between the Company and Ovonic (ii)
Battery and Harding Energy Systems, Inc. dated August 28, 1991
10.26 Agreement Supplement entered into as of October 31, 1991 by and (jj)
between Hitachi Maxell, Ltd., the Company and Ovonic Battery
10.27 License Agreement made as of November 20, 1991 by and between the (kk)
Company, Ovonic Battery and Hyundai Motor Company
10.28 Agreement effective as of March 9, 1992 by and between the Company, (ll)
Ovonic Battery and Mitsubishi Materials Corporation
10.29 Memory Patent License Agreement effective as of April 1, 1992 by (mm)
and between the Company and Plasmon Limited
10.30 Option License Agreement effective as of September 8, 1992 by and (nn)
between the Company, Ovonic Battery and Sylva Industries Limited
10.31 Master Equipment Lease Agreement dated as of September 28, (oo)
1992 between Financing for Science and Industry, Inc. and
Ovonic Battery Company, Inc.
10.32 Memorandum Agreement dated as of April 22, 1993 between the Company (pp)
and Sanoh Industrial Co., Ltd. filed confidentially pursuant to Rule
24b-2
10.33 Memory Patent License Agreement dated as of February 3, 1993 (qq)
between the Company and Toshiba Corporation
10.34 Master Equipment Lease Agreement dated as of March 31, 1993 (rr)
between Ovonic Battery Company, Inc. and the Company
10.35 Joint Business Agreement dated as of May 20, 1993 among the (ss)
Company, Ovonic Synthetic Materials Company and Sanoh Industrial
Co., Ltd.
10.36 Investment Agreement dated as of July 9, 1993 among the (tt)
Company, United Solar Systems Corp. and Canon, Inc.
-80-
10.37 Amendment to Exclusive License Agreement dated as of July 22, 1993 (uu)
between the Company and United Solar Systems Corp. filed confidentially
pursuant to Rule 24b-2
10.38 License Agreement dated as of July 22, 1993 between the Company and (vv)
United Solar System Corp. filed confidentially pursuant to Rule 24b-2
10.39 Amendment to Option License Agreement dated as of July 22,1993 (ww)
between the Company and United Solar Systems Corp.
10.40 License Agreement between the Company and a Japanese Battery (xx)
Manufacturer filed confidentially pursuant to Rule 24b-2
10.41 Intercompany Services Agreement dated as of September 2, 1993 (yy)
between the Company and Ovonic Battery Company, Inc.
10.42 Amended and Restated License Agreement and Assignment dated as of (zz)
September 2, 1993 between the Company and Ovonic Battery Company, Inc.
10.43 Intercompany Agreement Concerning Battery License dated as of (aaa)
September 2, 1993 between the Company and Ovonic Battery Company, Inc.
10.44 Executive Employment Agreement dated as of September 2, 1993 (bbb)
between the Company, Ovonic Battery Company, Inc. and
Stanford R. Ovshinsky
10.45 Executive Employment Agreement dated as of September 2, 1993 (ccc)
between the Company and Stanford R. Ovshinsky
10.46 Stock Option Agreement by and between Ovonic Battery Company, Inc. (ddd)
and Stanford R. Ovshinsky dated as of November 18, 1993
10.47 Stock Option Agreement by and between the Company and (eee)
Stanford R. Ovshinsky dated as of November 18, 1993
10.48 Stock Option Agreement by and between the Company and Iris M. (fff)
Ovshinsky dated as of November 18, 1993
10.49 Stock Purchase Agreement by and between Sanoh Industrial Co., (ggg)
Ltd., the Company and Ovonic Battery dated December 31, 1993
10.50 Stakeholder Agreement between Ovonic Battery Company, Inc. (hhh)
and General Motors Corporation for the organization of GM
Ovonic L.L.C. dated June 14, 1994 filed confidentially pursuant to
Rule 24b-2
-81-
10.51 Letter Agreement dated June 20, 1994 between Sanoh Industrial (iii)
Co., Ltd. and the Company
10.52 Amendment AOO2 to United States Department of Energy (jjj)
Cooperative Agreement No. DE-FC36-93CH10571, Rooftop PV
System, dated July 5, 1994
10.53 Subcontract No. ZAN-4-13318-11 under Prime Contract No. DE- (kkk)
AC36-83CH10093 between Midwest Research Institute/National
Renewable Energy Laboratory Division and the Company dated
July 19, 1994
10.54 Consumer Battery License Agreement effective as of December 15, (lll)
1994 by and between the Company, Ovonic Battery Company, Inc. and Sanyo
Electric Co., Ltd., filed confidentially pursuant to Rule 24b-2
10.55 Consumer Battery License Agreement effective as of December 20, (mmm)
1994 by and between the Company, Ovonic Battery Company, Inc. and
Toshiba Battery Co., Ltd., filed confidentially pursuant to Rule 24b-2
10.56 Second Amendment to Sylva/ECD/OBC License Agreement effective as of (nnn)
effective as of January 1, 1995 by and between the Company, Ovonic
Battery Company, Inc. and Sylva Industries, Ltd., portions of which
have been filed confidentially pursuant to Rule 24b-2
10.57 Consumer battery agreement effective as of January 10, 1995 by and (ooo)
between the Company, Ovonic Battery Company, Inc. and a consumer battery
manufacturer, portions of which have been filed confidentially pursuant
to Rule 24b-2
10.58 Battery License Agreement dated March 28, 1995 by and between (ppp)
Ovonic Battery Company, Inc. and Walsin Technology Corp., portions of
which have been filed confidentially pursuant to Rule 24b-2
10.59 Amendment to License and Joint R&D Agreement effective as of March (qqq)
31, 1995 by and between Hitachi Maxell, Ltd., the Company and Ovonic
Battery Company, Inc., portions of which have been filed confidentially
pursuant to Rule 24b-2
10.60 Energy Conversion Devices, Inc. 1995 Non-Qualified Stock (rrr)
Option Plan
10.61 Memory Patent License Agreement by and between Toray (sss)
Industries, Inc. and the Company effective as of April 1, 1995
-82-
10.62 Amendment Agreement by and between Varta Batterie A.G., the (ttt)
Company and Ovonic Battery effective as of June 8, 1995, portions of
which have been filed confidentially pursuant to Rule 24b-2
10.63 Amendment to License Agreement by and between Samsung Display (uuu)
Devices Co., Ltd., the Company and Ovonic Battery effective as of June
23, 1995, portions of which have been filed confidentially pursuant to
Rule 24b-2
10.64 Amendment Agreement by and between Eveready Battery Company, Inc., (vvv)
the Company and Ovonic Battery effective as of June 23, 1995, portions
of which have been filed confidentially pursuant to Rule 24b-2
10.65 License Agreement effective as of September 30, 1995 by and (www)
between Ovonic Battery Company, Inc. and Sanoh Industrial Co., Ltd.,
portions of which have been filed confidentially pursuant to Rule 24b-2
10.66 Technology Transfer Agreement effective as of July 1, 1995 by (xxx)
and between Ovonic Battery Company, Inc. and Sanoh Industrial
Co., Ltd.
10.67 Consumer Battery Agreement effective as of September 29, 1995 by (yyy)
and between Ovonic Battery Company, Inc. and Furukawa Battery Co., Ltd.,
portions of which have been filed confidentially pursuant to Rule 24b-2
10.68 Battery License Agreement by and between Ovonic Battery (zzz)
Company, Inc. and Asia Pacific Investment Co. dated January 4,
1996, filed confidentially pursuant to Rule 24b-2
10.69 Amendment No. 2 to Development Agreement between United (aaaa)
States Advanced Battery Consortium, the Company and Ovonic
Battery Company, Inc. effective March 8, 1996, portions of which
have been filed confidentially pursuant to Rule 24b-2
10.70 Stock Purchase Agreement executed May 14, 1996, by and (bbbb)
among Honda Motor Co., Ltd., the Company and Ovonic Battery
Company, Inc.
10.71 Settlement Agreement effective as of March 28, 1996, by and among (cccc)
the Company, Ovonic Battery Company, Inc., Saft America, Inc. ("Saft")
and certain entities affiliated with Saft, portions of which have been
filed confidentially pursuant to Rule 24b-2
11.1 Computation of Earnings Per Share Attributable to Common Stock 110
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22.1 List of all direct and indirect subsidiaries of the Company 111
23.1 Consent of Independent Auditors 112
27.1 Financial Data Schedule 113
28.1 Decision and Order dated May 25, 1993 (dddd)
28.2 Order dated August 18, 1993 (eeee)
Notes to Exhibit List
(a) Filed as Exhibit 2-A to the Company's Form 8-A and incorporated
herein by reference.
(b) Filed as Exhibit 3-A-1 to Amendment No. 3 of the Company's
Registration Statement on Form S-1 (Registration No. 2-40597) and
incorporated herein by reference.
(c) Filed as Exhibit 3-A-2 to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-1 (Registration No.
2-61551) and incorporated herein by reference.
(d) Filed as Exhibit 1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1981 and incorporated herein by
reference.
(e) Filed as Exhibit 6 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1982 and incorporated herein by
reference.
(f) Filed as Exhibit 3.8 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1988 and incorporated herein by
reference.
(g) Filed as Exhibit 3.9 to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990, as amended, and incorporated
herein by reference.
(h) Filed as Exhibit 3.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(i) Filed as Exhibit 3.11 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(j) Filed as Exhibit 13-D to the Company's Registration Statement on
Form S-1 (Registration No. 2-26772) and incorporated herein by
reference.
(k) Filed as Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1984 and incorporated herein by
reference.
-84-
(l) Filed as Exhibit 10.33 to the Company's Annual Report on Form 10-K
for the fiscal year June 30, 1985 and incorporated herein by
reference.
(m) Filed as Exhibit 10.46 to the Company's Annual Report on Form 10-K
for the fiscal June 30, 1986 and incorporated herein by reference.
(n) Filed as Exhibit 10.6 to the Company's Current Report on Form 8-K
dated June 13, 1986 and incorporated herein by reference.
(o) Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1986 and incorporated herein by
reference.
(p) Filed as Exhibit 10.7 to the Company's Form 8 Amendment No. 2 to
Quarterly Report on Form 10-Q for the quarter ended March 31, 1987
and incorporated herein by reference.
(q) Filed as Exhibit 10.60 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(r) Filed as Exhibit 10.110 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1988 and incorporated herein by
reference.
(s) Filed as Exhibit 10.112 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1988 and incorporated herein by
reference.
(t) Filed as Exhibit 10.71 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1989, as amended, and
incorporated herein by reference.
(u) Filed as Exhibit 10.82 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(v) Filed as Exhibit 10.83 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(w) Filed as Exhibit 10.92 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(x) Filed as Exhibit 10.94 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
-85-
(y) Filed as Exhibit 10.96 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(z) Filed as Exhibit 10.97 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(aa) Filed as Exhibit 10.98 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(bb) Filed as Exhibit 10.99 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1990, as amended, and
incorporated herein by reference.
(cc) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K
dated October 25, 1990 and incorporated herein by reference.
(dd) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K
dated February 6, 1991 and incorporated herein by reference.
(ee) Filed as Exhibit 28.2 to the Company's Current Report on Form 8-K
dated February 6, 1991 and incorporated herein by reference.
(ff) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1991 and incorporated herein by
reference.
(gg) Filed as Exhibit 10.114 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(hh) Filed as Exhibit 10.115 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(ii) Filed as Exhibit 10.116 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991, as amended, and
incorporated herein by reference.
(jj) Filed as Exhibit 10.71 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
-86-
(kk) Filed as Exhibit 10.72 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992 , as amended, and
incorporated herein by reference.
(ll) Filed as Exhibit 10.73 to the Company's Annual Report on Form 10-K
for the quarter ended June 30, 1992, as amended, and incorporated
herein by reference.
(mm) Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(nn) Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992, as amended, and
incorporated herein by reference.
(oo) Filed as Exhibit 10.84 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(pp) Filed as Exhibit 10.86 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(qq) Filed as Exhibit 10.87 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(rr) Filed as Exhibit 10.88 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ss) Filed as Exhibit 10.89 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(tt) Filed as Exhibit 10.90 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(uu) Filed as Exhibit 10.91 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(vv) Filed as Exhibit 10.92 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ww) Filed as Exhibit 10.93 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(xx) Filed as Exhibit 10.94 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
-87-
(yy) Filed as Exhibit 10.96 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(zz) Filed as Exhibit 10.97 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(aaa) Filed as Exhibit 10.98 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(bbb) Filed as Exhibit 10.100 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ccc) Filed as Exhibit 10.101 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(ddd) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by
reference.
(eee) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by
reference.
(fff) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by
reference.
(ggg) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1993 and incorporated herein by
reference.
(hhh) Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(iii) Filed as Exhibit 10.76 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(jjj) Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(kkk) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated herein by
reference.
(lll) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994 and incorporated herein by
reference.
(mmm) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994 and incorporated herein by
reference.
-88-
(nnn) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 and incorporated herein by
reference.
(ooo) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 and incorporated herein by
reference.
(ppp) Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 and incorporated herein by
reference.
(qqq) Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 and incorporated herein by
reference.
(rrr) Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference.
(sss) Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference.
(ttt) Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference.
(uuu) Filed as Exhibit 10.80 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference.
(vvv) Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and incorporated herein by
reference.
(www) Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995 and incorporated herein by
reference.
(xxx) Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995 and incorporated herein by
reference.
(yyy) Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995 and incorporated herein by
reference.
(zzz) Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K
dated January 4, 1996 and incorporated herein by reference.
(aaaa) Filed as Exhibit 10.72 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated herein by
reference.
(bbbb) Filed as Exhibit 10.73 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated herein by
reference.
-89-
(cccc) Filed as Exhibit 10.74 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 and incorporated herein by
reference.
(dddd) Filed as Exhibit 28.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
(eeee) Filed as Exhibit 28.4 to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein by
reference.
-90-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ENERGY CONVERSION DEVICES, INC.
By: /s/ Stanford R. Ovshinsky
------------------------------------
Stanford R. Ovshinsky,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: September 29, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Stanford R. Ovshinsky President, Chief Executive September 29, 1997
- ------------------------- ------------------
Stanford R. Ovshinsky Officer and Director
(Principal Executive Officer)
/s/ Kenneth A. Pullis Controller (Principal September 29, 1997
- ------------------------- Acccounting Officer) ------------------
Kenneth A. Pullis
/s/ Stephan W. Zumsteg Treasurer September 29, 1997
- ------------------------- ------------------
Stephan W. Zumsteg
-91-
/s/ Nancy M. Bacon Director September 29, 1997
- ------------------------- ------------------
Nancy M. Bacon
/s/ Umberto Colombo Director September 29, 1997
- ------------------------- ------------------
Umberto Colombo
/s/ Jack T. Conway Director September 29, 1997
- ------------------------- ------------------
Jack T. Conway
/s/ Hellmut Fritzsche Director September 29, 1997
- ------------------------- ------------------
Hellmut Fritzsche
Director
- ------------------------- ------------------
Joichi Ito
/s/ Seymour Liebman Director September 29, 1997
- ------------------------- ------------------
Seymour Liebman
/s/ Walter J. McCarthy, Jr. Director September 29, 1997
- --------------------------- ------------------
Walter J. McCarthy, Jr.
/s/ Florence I. Metz Director September 29, 1997
- ------------------------- ------------------
Florence I. Metz
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/s/ Iris M. Ovshinsky Director September 29, 1997
- ------------------------- ------------------
Iris M. Ovshinsky
/s/ Haru Reischauer Director September 29, 1997
- ------------------------- ------------------
Haru Reischauer
/s/ Nathan J. Robfogel Director September 29, 1997
- ------------------------- ------------------
Nathan J. Robfogel
/s/ Robert C. Stempel Director September 29, 1997
- ------------------------- ------------------
Robert C. Stempel
/s/ Stanley K. Stynes Director September 29, 1997
- ------------------------- ------------------
Stanley K. Stynes
-93-