UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              ---------------------

                                    FORM 10-Q


 [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 for the quarterly period ended June 30, 2001,

                                       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 000-31973

                            Beacon Power Corporation
             (Exact name of registrant as specified in its charter)




         Delaware                                         04-3372365
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                         Identification No.)



 234 Ballardvale Street
 Wilmington, Massachusetts                                   01887-1032
(Address of principal executive offices)                      (Zip code)

                              (978) 694-9121 Phone
                               (978) 694-9127 Fax
              (Registrant's telephone number, including area code)
                            ------------------------

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

     The number of shares of the  Registrant's  common stock, par value $.01 per
share, outstanding as of August 13, 2001 was 42,739,700.

<PAGE>



                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                                Table of Contents


                                                                           Page

PART I.  Financial Information

  Item 1. Financial Statements:

    Consolidated Balance Sheets at June 30, 2001
     and December 31, 2000.                                                   2

    Consolidated Statements of Operations for the
     three and six months ended June 30, 2001 and
     2000 and for the Period May 8, 1997 (date of
     inception) to June 30, 2001.                                             3

    Consolidated Statements of Cash Flows for six
     months ended June 30, 2001 and 2000 and for
     the Period May 8, 1997 (date of inception)
     to June 30, 2001.                                                        4

    Notes to Consolidated Financial Statements.                             5-7

  Item 2.  Management's Discussion and Analysis
   of Consolidated Financial Condition and
   Results of Operations.                                                  8-12


PART II.  Other Information

     Item 1.  Legal Proceedings                                              13
     Item 2.  Changes in Securities                                          13
     Item 3.  Defaults on Senior Securities                                  13
     Item 4.  Submission of Matters to a Vote
               of Security Holders                                           13
     Item 5.  Other Information                                              13
     Item 6.  Exhibits, Financial Statements
              Schedules and Reports on Form 8-K                              13

Signatures                                                                   14

<PAGE>


                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                              (Unaudited)
                                                                               June 30,         December 31,
                                                                                 2001               2000
                                                                          ---------------------------------------
<S>                                                                             <C>               <C>

Assets
Current assets:
    Cash and cash equivalents                                                   $ 47,906,404       $ 62,497,102
    Inventory                                                                        445,910            207,613
    Prepaid expenses and other current assets                                        593,956            857,137
                                                                          ---------------------------------------

        Total current assets                                                      48,946,270         63,561,852

Property and equipment, net  (Note 3)                                              6,118,755          3,417,884
Deposits                                                                             184,485            673,278
Other assets                                                                          80,645             84,992
                                                                          ---------------------------------------

Total assets                                                                    $ 55,330,155       $ 67,738,006
                                                                          =======================================

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                                                               $ 735,293         $1,728,330
    Accrued compensation and benefits                                              1,080,397            277,086
    Due to related party                                                              98,430             52,725
    Dividends payable                                                                      -          1,159,373
    Other accrued expenses                                                           893,425            981,671
    Current portion of capital lease obligations                                     126,158            138,648
                                                                          ---------------------------------------

        Total current liabilities                                                  2,933,703          4,337,833

Capital lease obligations, net of current portion                                     37,070             92,245
Commitments (Note 4)

Stockholders' equity:
    Preferred stock, $.01 par value; 10,000,000 shares authorized; no
    shares issued or outstanding                                                           -                  -
    Common stock, $.01 par value; 110,000,000 shares authorized;
    42,738,700 and 42,033,314 shares issued and outstanding at June
    30, 2001 and December 31, 2000, respectively                                     427,387            420,333
    Deferred stock compensation                                                  (1,428,100)        (2,070,659)
    Additional paid-in capital                                                   133,462,123        132,958,758
    Deficit accumulated during the development stage                            (80,102,028)       (68,000,504)
                                                                          ---------------------------------------

        Total stockholders' equity                                                52,359,382         63,307,928
                                                                          ---------------------------------------

Total liabilities and stockholders' equity                                      $ 55,330,155       $ 67,738,006
                                                                          =======================================

</TABLE>

                 See notes to consolidated financial statements.


<PAGE>


                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                          Cumulative from
                                                                                                            May 8, 1997
                                                                                                       (date of inception,)
                                          Three months ended June 30,      Six months ended June 30,      through June 30
                                             2001            2000            2001            2000              2001
                                       --------------------------------------------------------------------------------------
<S>                                       <C>              <C>              <C>           <C>               <C>

Revenue                                   $          -     $          -     $        -     $         -       $    551,184

Operating expenses:
 Selling, general and administrative         2,356,717          943,417      3,851,597       1,395,421         12,527,030
 Research and development                    4,209,885        1,597,918      8,756,596       2,762,998         30,664,000
 Loss on sales commitments                           -        (320,000)              -         880,000            375,974
 Depreciation and amortization                 302,715           73,719        557,196         150,332          1,255,010
                                       --------------------------------------------------------------------------------------

  Total operating expenses                   6,869,317        2,295,054     13,165,389       5,188,751         44,822,014
                                       --------------------------------------------------------------------------------------

Loss from operations                       (6,869,317)      (2,295,054)   (13,165,389)     (5,188,751)       (44,270,830)

Other income (expense):
 Interest income                              595,152            3,743      1,454,887           3,743          2,355,131
 Interest expense                              (7,236)        (235,587)       (14,926)       (360,625)          (756,824)
 Other expense                                (20,683)                -      (376,092)               -          (423,307)
                                       --------------------------------------------------------------------------------------

  Total other income (expense), net            567,233        (231,844)      1,063,869       (356,882)          1,175,000
                                       --------------------------------------------------------------------------------------
Net loss                                   (6,302,084)      (2,526,898)   (12,101,520)     (5,545,633)       (43,095,830)

Preferred stock dividends                            -      (1,704,522)              -     (1,876,365)       (36,825,680)
Accretion of redeemable convertible
preferred stock                                      -         (19,727)              -        (30,145)          (113,014)
                                       --------------------------------------------------------------------------------------

Loss to common shareholders              $ (6,302,084)    $ (4,251,147)  $(12,101,520)   $ (7,452,143)     $ (80,034,524)
                                       ======================================================================================

Loss per share - basic and diluted          $   (0.15)      $  (123.47)     $   (0.29)      $ (396.12)
                                       =================================================================

Weighted-average common shares
outstanding                                 42,523,462           34,430     42,347,529          18,813
                                       =================================================================
</TABLE>

                 See notes to consolidated financial statements.

<PAGE>


                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                  Cumulative from
                                                                                                    May 8, 1997
                                                                                                     (Date of
                                                                                                    Inception)
                                                                                                      through
                                                                    Six months ended June 30,        June 30,
                                                                       2001           2000             2001
                                                                 ---------------------------------------------------
<S>                                                               <C>              <C>              <C>
Cash flows from operating activities:
 Net loss                                                          $(12,101,520)   $( 5,545,633)    $ (43,095,830)
 Adjustments to reconcile net loss to net cash used in
 operating activities:
  Depreciation and amortization                                          557,196         150,332         1,255,011
  Loss on sale of fixed assets                                            86,523               -           133,939
  Interest expense relating to issuance of warrants                            -         201,000           371,000
  Amortization of deferred consulting expense, net                             -         189,500         1,160,784
  Amortization of deferred stock compensation                             48,273          18,895           978,911
  Warrants issued for consulting services                                      -               -         1,569,366
  Accrued loss on sales commitments                                            -         880,000                 -
  Non-cash charge for settlement of lawsuit                              303,160               -           303,160
  Services and interest expense paid in preferred stock                        -                -             11,485
 Changes in operating assets and liabilities:
  Inventory                                                             (238,297)              -         (445,910)
  Prepaid expenses and other current assets                               263,181       (83,824)         (593,956)
  Accounts payable                                                      (993,037)        134,643           735,293
  Accrued compensation and benefits                                       803,311        111,397         1,080,397
  Due to related party                                                     45,705         34,104            98,430
  Other accrued expenses and current liabilities                         (88,246)        454,661         1,177,655
                                                                 ---------------------------------------------------
  Net cash used in operating activities                              (11,313,751)    (3,454,925)      (35,260,265)

Cash flows from investing activities:
 Increase in other assets                                                 488,793      (228,117)         (351,411)
 Purchases of property and equipment                                  (3,340,243)      (251,471)       (6,967,813)
                                                                 ---------------------------------------------------
  Net cash used in investing activities                               (2,851,450)      (479,588)       (7,319,224)

Cash flows from financing activities:
 Initial public stock offering, net of expenses                                 -              -        49,341,537
 Exercise of employee stock options                                       801,541         56,960         1,258,018
 Issuance of preferred stock                                                    -     28,351,792        32,868,028
 Repayment of subscription receivable                                           -              -         5,000,000
 Repayment of capital leases                                             (67,665)       (65,777)         (372,317)
 Dividends paid                                                       (1,159,373)              -       (1,159,373)
 Proceeds from notes payable issued to investors                                -        400,000         3,550,000
                                                                 ---------------------------------------------------
  Net cash (used in) provided by financing activities                  (425,497)      28,742,975        90,485,893

(Decrease) increase in cash and cash equivalents                    (14,590,698)      24,808,462        47,906,404

Cash and cash equivalents, beginning of period                        62,497,102         234,350                 -
                                                                 ---------------------------------------------------
Cash and cash equivalents, end of period                             $47,906,404     $25,042,812      $ 47,906,404
                                                                 ===================================================
</TABLE>
                 See notes to consolidated financial statements.


<PAGE>



                     BEACON POWER CORPORATION AND SUBSIDIARY
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements


Note 1.  Nature of Business and Operations

Nature of Business.  Beacon Power  Corporation (a development stage company) was
incorporated  on May 8, 1997 as a wholly owned  subsidiary of SatCon  Technology
Corporation  ("SatCon").  Since its inception,  Beacon Power Corporation and its
subsidiary  ("Beacon" or "the Company") have been engaged in the  development of
flywheel  devices for storing  kinetic energy that is transferred  into electric
power. Because the Company has not yet generated a significant amount of revenue
from  its  principal  operations,  it is  continuing  to be  accounted  for as a
development stage company under Statement of Financial  Accounting Standards No.
7. The Company has a single operating segment,  manufacturing  alternative power
sources. The Company has no organizational  structure dictated by product lines,
geography or customer type.

Operations.  The Company has  experienced net losses since its inception and, as
of June 30, 2001, had an accumulated deficit of approximately $80.0 million. The
ongoing  development  and  refinement  of the  Company's  commercial  product is
expected to require significant outlays of capital. During the fourth quarter of
2000, the Company  completed an initial public  offering of its common stock and
raised approximately $49.3 million net of offering expenses. Management believes
that its cash on hand at June 30, 2001 is sufficient to continue its  operations
for at least the next 18 months.

Note 2.  Basis of Presentation and Summary of Significant Accounting Policies

The accompanying  unaudited consolidated financial statements have been prepared
using accounting  principles  generally accepted in the United States of America
for interim financial information and with Regulation S-X. Accordingly,  they do
not include all of the information and footnotes  required by generally accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments,  consisting of normal recurring accruals considered
necessary  for a fair  presentation,  have  been  included  in the  accompanying
unaudited financial  statements.  Operating results for the three and six months
ended June 30, 2001 are not  necessarily  indicative  of the results that may be
expected for the full year ending  December 31, 2001.  Certain  information  and
footnote  disclosure  normally  included in  consolidated  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
condensed  or  omitted.  It  is  suggested  that  these  consolidated  financial
statements   presented   herein  be  read  in  conjunction  with  the  Company's
consolidated  financial  statements and notes thereto  included in the Company's
annual report on Form 10-K, for the year ended December 31, 2000.

There have been no significant additions to or changes in accounting policies of
the Company since December 31, 2000. For a complete description of the Company's
accounting  policies,  see Note 3 to  Consolidated  Financial  Statements in the
Company's 2000 Annual Report on Form 10-K.

Inventory. Inventory consists of raw materials at June 30, 2001 and December 31,
2000 and is  carried  at the  lower of cost or  market  utilizing  the  first-in
first-out ("FIFO") method.

Reclassifications.  Certain amounts in prior year financial statements have been
reclassified to conform to their 2001 presentation.


<PAGE>


3.  Property and Equipment

Property and equipment consist of the following:
<TABLE>
<CAPTION>
<S>                                                   <C>              <C>              <C>
                                                        Estimated
                                                         Useful         June 30,         December 31,
                                                          Lives           2001               2000
                                                     -------------------------------------------------
Machinery and equipment                                  5 years        $ 1,843,180        $ 694,486
Service vehicles                                         5 years             63,792                -
Furniture and fixtures                                   7 years            865,847           54,433
Office equipment                                         3 years          1,887,161        1,217,263
Leasehold improvements                                 Lease term         2,009,541        1,489,569
Equipment under capital lease obligations              Lease term           533,699          535,450
                                                                    ----------------------------------

    Total                                                                 7,203,220        3,991,201
Less accumulated depreciation and amortization                          (1,084,465)        (573,317)
                                                                    ----------------------------------

    Property and equipment, net                                         $ 6,118,755      $3,417,884
                                                                    ==================================
</TABLE>

4.  Commitments

The Company leases office and light manufacturing space under an operating lease
through  September  30,  2007 and has an  operating  lease  for  certain  office
equipment  expiring October 2001. At June 30, 2001, the Company has provided the
lessor with an  irrevocable  letter of credit in the amount of $450,000.  A cash
deposit  secures  this  letter of credit.  The letter of credit  will  reduce to
approximately  $400,000 on the 1st  anniversary  of the Term  Commencement  date
which is October 1, 2001.

5.  Common Stock

Reserved  Shares.  At June 30,  2001  and  December  31,  2000,  13,270,349  and
13,722,268 shares of common stock were reserved for issuance under the Company's
stock option plan and outstanding warrants.

Stock  Warrants.  Deferred  compensation  relating to stock warrants at June 30,
2001  and  December  31,  2000  is   approximately   $810,000  and   $1,100,000,
respectively. The warrants were issued to an investor under an agreement that an
affiliate of that  investor will provide the Company with  technical  expertise.
One  half of the  warrants  vested  immediately  upon  their  issuance  with the
remaining  warrants to vest ratably as the services  are  provided.  No services
have been  provided  through June 20, 2001.  The  agreement  terminates  and any
unvested warrants are forfeited on November 1, 2003.

6.  Related Party Transactions

Consulting  Agreements.   During  1998,  the  Company  entered  into  consulting
agreements  with three  investors.  The contracts  were  seven-year  agreements,
renewable  annually  thereafter,  for consulting  services to be provided by the
investors in exchange for annual  issuances of shares of the  Company's  Class A
Stock.  During  the three and six  months  ending  June 30,  2000,  $75,000  was
recorded as consulting expense relating to these agreements.  No shares of Class
A Stock were issued as compensation  under these contracts  during the first six
months of 2000. The services  provided by the investors were recorded based upon
the  value of the  securities  issued.  These  contracts  all  expired  upon the
completion  of the initial  public  offering of the  Company's  common  stock in
November 2000. As such no expense was recorded  related to these  agreements for
the three or six months ending June 30, 2001.

Services  Agreements.  Prior to the Company's initial public offering during the
fourth  quarter of 2000,  SatCon  performed  certain  research and  development,
administrative and other services for the Company.  The administrative  services
ended  upon  completion  of the  Company's  initial  public  offering.  Under  a
collaboration  agreement,  Beacon will continue to use SatCon to perform certain
research and development and marketing services. Amounts paid to SatCon for such
services rendered amounted to approximately  $93,000 for the first six months of
2000 nearly all of which was paid in the first three months of 2000. No payments
were  made  during  2001.  For the  period  from  inception  to June  30,  2001,
$2,404,000  was paid to SatCon for such  services.  No amounts  were  payable to
SatCon relating to such services at either June 30, 2001 or December 31, 2000.

Inventory.  The Company uses SatCon as a supplier to perform certain engineering
and manufacturing of certain power electronics for its product. At June 30, 2001
and December 31, 2000,  the Company had  approximately  $118,000 and $153,500 of
its inventory at SatCon for processing.


7.  Summary of Non-cash Investing and Financing Activities:

During the six months  ended June 30, 2001 and 2000,  cash paid for interest was
approximately $16,000 and $11,000, respectively.

During the six  months  ended  June 30,  2001 and 2000,  cash paid for taxes was
approximately $1,000 and $1,300, respectively.

During the six months  ended June 30, 2001,  the Company  recorded a decrease in
deferred  compensation from the issuance of non-qualified stock options to third
parties of $642,559.  This was offset by a charge to additional paid in capital.
During the six months ended June 30, 2000,  the Company  recorded an increase in
deferred  compensation from the issuance of non-qualified stock options to third
parties of $321,752,  respectively. This was offset by credit to additional paid
in capital.

During the six months ended June 30, 2000, the Company  acquired assets totaling
$165,425 under capital leases.

During the six months  ended June 30, 2000,  the Company had a non-cash  expense
for the accretion of redeemable preferred stock to redemption value of $30,145.

During the six months  ended June 30,  2000,  the  Company  issued  warrants  in
conjunction with financing totaling $1,671,000.

During the six months ended June 30, 2000,  the Company  converted  bridge loans
and accrued interest to Class E redeemable preferred stock totaling $3,825,559.

Note 8.  Recent Accounting Pronouncements.

For United States generally accepted accounting principles reporting purposes we
adopted Statement of Financial Accounting Standards ("SFAS") 133 "Accounting for
Derivative  Instruments  and Hedging  Activities"  for the 2001 fiscal year. The
adoption of SFAS 133 did not have a material  impact on our financial  condition
or results of operations  nor do we believe that it will have a material  impact
in the future.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase  method of accounting  for business  combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method. We
do not believe that the adoption of SFAS 141 will have a  significant  impact on
our financial statements.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142 ("SFAS 142"),  "Goodwill and Other  Intangible  Assets",  which is effective
January 1, 2002. SFAS 142 requires,  among other things,  the  discontinuance of
goodwill  amortization.  In addition,  the standard includes  provisions for the
reclassification  of  certain  existing  recognized   intangibles  as  goodwill,
reassessment   of  the  useful   lives  of  existing   recognized   intangibles,
reclassification  of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments  of goodwill.  SFAS 142 also requires us to complete a  transitional
goodwill impairment test six months from the date of adoption.  We are currently
assessing  but have not yet  determined  the impact of SFAS 142 on our financial
position and results of operations.

<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

Note Regarding Forward Looking Statements:

This  Quarterly  Report  on  Form  10-Q  contains   forward-looking   statements
concerning,   among  other  things,  the  Company's  expected  future  revenues,
operations  and  expenditures  and  estimates of the  potential  markets for the
Company's services.  Such statements made by the Company fall within the meaning
of the Private  Securities  Litigation Reform act of 1995, as amended.  All such
forward-looking  statements are necessarily only estimates of future results and
the actual  results  achieved by the Company  may differ  materially  from these
projections  due to a number of factors as  discussed  in the  section  entitled
"Certain Factors Affecting Future Operating Results" of this Form 10-Q.

Overview

We design and develop  flywheel  energy  storage  systems  that we believe  will
provide  highly  reliable,  high-quality,  uninterruptible  electric  power  for
communications and computer networks,  the Internet,  industrial  manufacturing,
commercial  facilities and  distributed  generation  products.  The broad use of
digital electronics and computers  throughout the information economy is causing
a dramatic  increase  in the demand for more  reliable,  higher  quality  power.
Distributed  power is also emerging to overcome  deficiencies  in  grid-supplied
power.  Alternative  energy  storage  technologies,  including  flywheel  energy
storage, are emerging to meet this need.

Flywheel systems draw electrical  energy from a primary power source such as the
electric grid or fuel cells,  store that energy, and then convert that energy to
immediately  provide peak power,  voltage support and  uninterruptible  electric
power when the  primary  power  source  fails or is  disrupted.  We believe  our
flywheels will offer  significant  advantages  over  conventional  back-up power
systems that primarily use lead-acid batteries.  The expected advantages include
improved certainty of operations, more reliable monitoring,  higher reliability,
longer life, lower  life-cycle cost,  improved  recharging  capability,  reduced
maintenance, more reliable monitoring, and greater environmental friendliness.

We have  designed  our  initial  products  to  specifically  address the back-up
powering needs of the communications markets. Over the longer term, we intend to
capitalize on our strengths in the  communications  markets to expand into other
markets  such as back-up  power for  computers,  internet  services,  industrial
manufacturing and commercial facilities. We will also target our future products
toward  enhancing the performance of distributed  generation  products,  such as
gasoline or diesel generators, fuel cells and microturbines. We believe that our
flywheel systems will be used in conjunction with these  distributed  generation
products to provide  benefits that are not available from these products  alone,
such as an instant-on  capability  and the ability to manage  sudden  changes in
power.  We expect to  continue  to  develop  our family of  products  to offer a
wide-range of power/energy units to meet the broad base of customer needs.

From  our  inception   through  June  30,  2001  we  have  incurred   losses  of
approximately  $80.0 million. We expect to continue to incur losses as we expand
our  product  development  and  commercialization  program  and  prepare for the
commencement  of full  manufacturing  operations.  We expect  that  losses  will
fluctuate from quarter to quarter and that such  fluctuations may be substantial
as a result of, among other  factors,  the number of systems we produce and sell
to our customers.

Results of operations:

Comparison of three and six months ended June 30, 2001 and 2000

Revenues.  We did not record any revenue for the three or six months  ended June
30, 2001 and 2000. We have placed several development  prototypes with potential
customers  and shipped  pre-production  units.  These  products were provided to
potential  customers to  demonstrate  the  application of our  technologies.  We
believe  that  through  the  performance  of these  field  units we will  obtain
additional  commercial orders. We shipped 4 units in the second quarter of 2001,
but  deferred  revenue from these  shipments  into future  quarters  when we are
better able to estimate future warranty costs associated with these units.

Selling,  General and Administrative  Expenses. Our sales and marketing expenses
consist  primarily of  compensation  and  benefits  for our sales and  marketing
personnel and related business  development  expenses.  Beacon is endeavoring to
emerge from pure research and development as we transition to manufacturing  our
2kWh flywheel system. We have relied primarily on technical personnel to provide
specifications and product overviews to our potential customer base. Our general
and  administrative  expenses  consist  primarily of  compensation  and benefits
related to our corporate staff,  professional fees, and related travel. Selling,
general  and  administrative  expenses  totaled  approximately   $2,357,000  and
$943,000 for the three months  ended June 30, 2001 and 2000,  respectively.  The
increase  of  approximately  $1,414,000  is  primarily  the result of  increased
compensation  and  benefit  costs due to the  increased  staffing  required  for
infrastructure  development and expansion of our sales and marketing  effort. In
addition,  we had higher costs for professional fees, including legal, audit and
investor  relations'  fees during the second  three  months of 2001  compared to
2000,  as well as, higher costs for insurance and travel during 2001 compared to
2000.  Selling,   general  and  administrative  expenses  totaled  approximately
$3,852,000  and  $1,395,000  for the six months  ended  June 30,  2001 and 2000,
respectively.  The increase of approximately  $2,457,000 is primarily the result
of  increased  compensation  and  benefit  costs due to the  increased  staffing
required for infrastructure development and expansion of our sales and marketing
effort.  We expect our general and  administrative  expenses,  particularly  our
sales and  marketing  expenses  to  continue  to  increase  significantly  as we
continue to expand our sales and  marketing  effort and  continue our ramp up to
commercial production throughout 2001 and into 2002.

Research  and  Development.  Our  cost  of  research  and  development  consists
primarily of the cost of compensation and benefits for research and development,
manufacturing  and support staff,  as well as materials and supplies used in the
engineering  design  process.  We expect our cost of research and development to
continue to increase as we develop  additional product designs with higher power
output,  refine existing  products and expand our analytic  capabilities,  which
provide  customers  with  extended  monitoring  and  analysis  of  our  system's
performance.  We have  significantly  expanded our  manufacturing  capacity as a
result of our  relocation  to our new  facility in January  2001.  Research  and
development  expenses  totaled  approximately  $4,210,000 and $1,598,000 for the
three  months  ended  June 30,  2001 and 2000,  respectively.  The  increase  of
$2,612,000 is primarily the result of increased  compensation  and benefit costs
related to an increase in the number of engineering and manufacturing  personnel
and an  increase  in the  amount  of  materials  used for  product  development.
Research  and  development   expenses  totaled   approximately   $8,757,000  and
$2,763,000  for the six months ended June 30, 2001 and 2000,  respectively.  The
increase of  $5,994,000 is primarily  the result of increased  compensation  and
benefit  costs  related  to  an  increase  in  the  number  of  engineering  and
manufacturing  personnel  and an  increase in the amount of  materials  used for
product development. During the first quarter of 2001, we began development of a
6kWh unit. This  development  effort expanded during the second quarter of 2001.
We expect to incur  increased  expenses  throughout  the remainder of 2001 as we
complete  the  final  design  of our  2kWh  and the  6kWh  unit  and  begin  the
development of higher-powered products.

Loss on Sales Commitments.  We will establish reserves for anticipated losses on
sales  commitments  if our cost estimates  indicate a loss will be incurred.  We
accrued such losses  during 2000,  including the six months ended June 30, 2000,
based on our estimated costs to complete delivery  commitments of our 2kWh units
during  2000 and 2001.  We  adjusted  our  delivery  schedule  during the fourth
quarter of 2000 and do not expect to incur the losses  contemplated  earlier. We
expect  to  decrease  our cost  per unit  through  engineering  design  changes,
operating efficiencies, and volume purchasing discounts. As a result, no loss on
sales  commitments  was recorded for the six months ended June 30, 2001. Loss on
sales  commitments  for the three  months  ended June 30,  2000  represents  the
reversal of an estimate  booked in a previous  quarter of $320,000.  For the six
months ended June 30, 2000 loss on sales commitments was approximately $880,000.

Depreciation  and  Amortization.  Our depreciation and amortization is primarily
related to depreciation on capital  expenditures  and the  amortization of lease
and leasehold costs related to our  facilities.  Depreciation  and  amortization
totaled  approximately  $303,000 and $74,000 for the three months ended June 30,
2001 and 2000,  respectively.  The  increase  of  $229,000  is  attributable  to
increases  in  leasehold   improvements  and  capital  equipment   expenditures.
Depreciation and amortization  totaled  approximately  $557,000 and $150,000 for
the six months  ended June 30,  2001 and 2000,  respectively.  The  increase  of
$407,000 is  attributable  to increases in  leasehold  improvements  and capital
equipment expenditures.

Interest and Other  Income/Expense,  net. Our non-operating  income and expenses
are primarily  attributable to interest income  resulting from cash on hand from
our  private  financings  and  initial  public  offering  and  interest  expense
associated  with our notes  payable to  investors.  Our interest  income for the
three months ended June 30, 2001 was approximately $595,000,  compared to $3,700
for the same period in 2000.  Our interest  income for the six months ended June
30, 2001 was approximately $1,455,000, compared to $3,700 for the same period in
2000.  The  increase in both the three and six months ended June 30, 2001 is the
result of higher cash balances in 2001 from our initial  public  offering in the
fourth quarter of 2000.

Interest expense  decreased to  approximately  $7,200 for the three months ended
June 30, 2001 from approximately  $236,000 for the same period in 2000. Interest
expense  decreased  to  approximately  $15,000 for the six months ended June 30,
2001 from approximately  $361,000 for the same period in 2000.  Interest expense
for the first six months of 2000 related to notes  payable to  investors.  These
notes were converted  into Class E redeemable  convertible  preferred  stock and
subsequently  converted into common stock in conjunction with the initial public
offering of our common  stock  during the fourth  quarter of 2000.  The interest
expense in 2001 relates to assets leased under capital leases.

Other expense of approximately  $21,000 for the three months ended June 30, 2001
relates to the  write-off of certain  tooling  costs.  Other expense for the six
months  ending June 30, 2001 of  approximately  $355,000  relates to  additional
write offs of $52,000  for  certain  tooling  costs  associated  with an earlier
version of our  product and a non-cash  charge  related to the  settlement  of a
lawsuit brought by a former employee of approximately $303,000.  Under the terms
of the  settlement,  we  permitted  the former  employee to exercise  options to
purchase  53,000 shares of our common stock at a price of $1.78 when the current
market price was $7.50.  We incurred a charge of $5.72,  the difference  between
the market price and the exercise price, for each share exercised.

Preferred  Stock  Dividends.  During the six months ended June 30, 2000,  we had
Class D redeemable  convertible  preferred stock outstanding  ("Class D Stock").
This  Class  D stock  accrued  dividends  at  12.5%.  As a  result  we  recorded
approximately $1,705,000 of dividend expense related to the Class D Stock during
the three months ended June 30, 2000. No redeemable convertible preferred stock,
or other preferred stock, was outstanding during the first six months of 2001.

Liquidity and Capital Resources

Our cash  requirements  depend  on many  factors,  including  our  research  and
development  activities,  expansion  of our  manufacturing  facilities,  planned
growth of  operations  and  related  infrastructure  and  continued  efforts  to
commercialize our products,  including market development. We expect to continue
to make  significant  expenditures  to fund our  working  capital,  develop  our
technologies and expand our manufacturing capabilities.

Net cash  used in  operating  activities  was  approximately  ($11,314,000)  and
($3,455,000) for the six months ended June 30, 2001 and 2000, respectively.  The
primary  component to the  negative  cash flow from  operations  is from the net
losses.  For the first six  months of 2001,  we had a net loss of  approximately
($12,102,000).   This  included  non-cash  charges  of  approximately   $995,000
including  a charge  related to the  settlement  of a lawsuit  of  approximately
$303,000;  approximately  $48,000 related to stock options issued for consulting
services;  $87,000 for the write-off of tooling related to older versions of our
flywheel; and depreciation and amortization of approximately  $557,000.  Changes
in operating assets and liabilities used approximately ($207,000) of cash during
the first six months of 2001. The primary components were a decrease in accounts
payable  of   approximately   ($993,000)   offset  by  an  increase  in  accrued
compensation and benefits of  approximately  $803,000 and an increase in prepaid
expense and other current  assets of  approximately  $263,000.  Changes in other
working  capital  accounts used cash of  approximately  ($280,000).  For the six
months  ended  June 30,  2000 we had a net loss of  approximately  ($5,546,000),
including non-cash expenses of approximately $1,440,000,  including accrued loss
on sales commitments of approximately $880,000; approximately $19,000 related to
stock options issued for consulting  services; a non-cash charge of $201,000 for
warrants  issued in  connection  with  issuance of preferred  stock;  a non-cash
charge for warrants issued in connection  with  consulting  services of $189,500
and  depreciation  and  amortization  of  approximately  $150,000.   Changes  in
operating assets and liabilities  reduced cash needs by  approximately  $651,000
during the first six months of 2000.  The primary  components  were increases in
accounts payable and accrued expenses of  approximately  $589,000;  increases in
accrued compensation and benefits of approximately $111,000 offset by a decrease
in other working capital accounts of approximately ($49,000).

Net  cash  used in  investing  activities  was  approximately  ($2,851,000)  and
($480,000)  for the six months ended June 30, 2001 and 2000,  respectively.  The
principal  uses of cash  during  the first six  months of 2001 were  related  to
purchases  totaling  approximately  ($3,340,000)  for machinery  and  equipment,
furniture and fixtures and leasehold improvements to the new operating facility.
Other  assets  increased  by  approximately  $489,000 as deposits  made in prior
quarters  relating  to  long-term  assets  were  reclassified  to  property  and
equipment.  The  principal  uses of cash  during  the first  six  months of 2000
related to the purchase of property and equipment  and costs  incurred to obtain
patents for our products.

Net cash used by financing  activities during the six months ended June 30, 2001
was  approximately  ($425,000).  The  primary use of cash was for the payment of
dividends on our various classes of preferred stock of approximately $1,159,000.
These  dividends were accrued during 2000,  prior to our initial public offering
of our common stock. In addition, we made principal payments against our capital
leases of approximately ($68,000). These uses were offset by proceeds from stock
options  exercised of  approximately  $802,000.  Net cash  provided by financing
activities  during  the  six  months  ended  June  30,  2000  was  approximately
$28,743,000  resulting  from the  issuance of preferred  stock of  approximately
$28,352,000;  by proceeds from stock options exercised of approximately $57,000;
and from proceeds of notes payable to investors of $400,000; offset by principal
repayments of capital leases of ($66,000).

Based  upon our  operating  plan,  and as a result  of cash  available  from our
initial  public  offering,  we believe  that our cash and cash  equivalents  and
future cash flow from  operations  will satisfy the  Company's  working  capital
needs for the next 18 months.

Impact of Recently Issued Accounting Standards Not Yet Implemented

For United States generally accepted accounting principles reporting purposes we
adopted Statement of Financial Accounting Standards ("SFAS") 133 "Accounting for
Derivative  Instruments  and Hedging  Activities"  for the 2001 fiscal year. The
adoption of SFAS 133 did not have a material  impact on our financial  condition
or results of operations  nor do we believe that it will have a material  impact
in the future.

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations."
SFAS 141 requires the purchase  method of accounting  for business  combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method. We
do not believe that the adoption of SFAS 141 will have a  significant  impact on
our financial statements.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142 ("SFAS 142"),  "Goodwill and Other  Intangible  Assets",  which is effective
January 1, 2002. SFAS 142 requires,  among other things,  the  discontinuance of
goodwill  amortization.  In addition,  the standard includes  provisions for the
reclassification  of  certain  existing  recognized   intangibles  as  goodwill,
reassessment   of  the  useful   lives  of  existing   recognized   intangibles,
reclassification  of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments  of goodwill.  SFAS 142 also requires us to complete a  transitional
goodwill impairment test six months from the date of adoption.  We are currently
assessing  but have not yet  determined  the impact of SFAS 142 on our financial
position and results of operations.

Certain Factors Affecting Future Operating Results

The  following  factors,  as well as others  mentioned in the  Company's  Annual
Report on Form 10-K for the year ended  December 31, 2000 (filed April 2, 2001),
could  cause  actual  results  to differ  materially  from  those  indicated  by
forward-looking statements made in this Quarterly Report on Form 10-Q:

     o    Because our short operating  history makes the basis for evaluating us
          limited, our future financial performance may disappoint investors and
          result in a decline in our stock price.

     o    We have incurred  losses since our inception and anticipate  continued
          losses through at least 2002.

     o    We have  limited  experience  manufacturing  flywheel  energy  storage
          systems  on a  commercial  basis,  and  we may be  unable  to  achieve
          profitability.

     o    If we are unable to meet our product development and commercialization
          milestones, we could lose sales.

     o    We cannot assure commercial viability of our products, and if they are
          not accepted commercially,  our competitive position and profitability
          would decline.

     o    Our sales or  potential  sales in foreign  countries  may be adversely
          affected by the  uncertainty of the political and economic  climate of
          the countries into which we may sell our products,  the uncertainty of
          enforcing  contracts in those countries and the potential  substantial
          fluctuation in currency exchange rates.

     o    Our  failure  to meet  the  significant  technological  challenges  to
          develop a commercially viable product could cause us to lose revenues.

     o    Because we depend on  third-party  suppliers for the  development  and
          supply of key components for our products,  and because we do not have
          contracts with these  suppliers,  we could  experience  disruptions in
          supply that could delay or decrease our revenues.

     o    We face intense  competition  and our revenue  could decline if we are
          unable to compete successfully.

     o    Government regulation may impair our ability to market our product.

     o    Product  liability  claims  against  us could  result  in  substantial
          expenses  and  negative  publicity,   which  could  impair  successful
          marketing of our products.

     o    Safety  failures  by our  products or those of our  competitors  could
          reduce market demand or acceptance for flywheels in general.

     o    We expect to need additional financing that may not be available to us
          on acceptable  terms or at all,  which could cause us to fail to reach
          our future goals.

     o    The market  price of our common stock may decline in the event that we
          obtain additional financing.

     o    We may have  difficulty  managing the expansion of our  operations and
          our business operations could be interrupted.

     o    Our financial  performance could be adversely  affected by our need to
          hire  and  retain  key  executive   officers  and  skilled   technical
          personnel.

     o    We will rely on a limited  number of large  customers and our business
          may be adversely affected by the loss of, or reduced purchases by, any
          one of those customers.

     o    If we are unable to  successfully  market,  distribute and service our
          products  internationally  we may  experience  a shortfall in expected
          revenues  and  profitability,  which could lead to a reduction  in our
          stock price.

     o    Any  failure to protect  our  intellectual  property  could  seriously
          impair our competitive position.

     o    Our  majority  stockholders  will  control  all  matters  requiring  a
          stockholder  vote,  which  will  limit  other  investors'  ability  to
          influence the outcome of matters requiring stockholder approval.

     o    The share prices of companies in our sector have been highly  volatile
          and our share price could be subject to extreme price fluctuations.

     o    Our initial target market,  the  communications  industry,  may not be
          able to sustain its current growth rate,  which may affect  investors'
          expectations  regarding our financial performance and adversely affect
          our stock price.

     o    Provisions  of Delaware law and of our charter and by-laws may inhibit
          a takeover that stockholders consider favorable.

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk

Our cash equivalents and investments,  all of which have maturities of less than
one  year,  may  expose us to  interest  rate  risk.  At June 30,  2001,  we had
approximately  $74,000  of cash  equivalents  that were  held in a  non-interest
bearing checking account. Also at June 30, 2001, we had approximately $2,900,000
of cash  equivalents  that  were held in  interest  bearing  checking  accounts,
$6,989,000 invested in interest-bearing  money market accounts and approximately
$37,943,000 in high-grade  commercial  paper and corporate bonds. The fair value
of these  investments  approximates  their cost. A 10% change in interest  rates
would change the investment  income realized on an annual basis by approximately
$300,000.


<PAGE>

                                     PART II

Item 1.  Legal Proceedings

We are not currently  involved in any legal  proceedings.  However,  we may from
time to time be  involved in legal  proceedings  in the  ordinary  course of our
business.

Item 2.  Changes in Securities

On November 16,  2000,  the  Securities  and  Exchange  Commission  declared our
Registration  Statement  on Form S-1  (File  No.  333-43386)  effective.  In our
initial  public  offering  during the fourth  quarter of 2000, we sold 9,200,000
shares of our common stock, inclusive of the underwriters' over allotment, at an
initial public  offering price of $6.00 per share. We received net proceeds from
our initial public offering of  approximately  $49.3 million,  reflecting  gross
proceeds of $55.2 million net of underwriter  commissions of approximately  $3.9
million and other  offering  costs payable to persons,  other than  directors or
officers, of approximately $2.0 million.

From November 16, 2000 to June 30, 2001, we spent approximately $6.0 million for
inventory and materials  used in research and  development  and $5.3 million for
property  and  equipment,  including  the  build-out  of our new facility at 234
Ballardvale Street in Wilmington,  MA. In addition,  we spent approximately $1.2
million to pay  dividends  that accrued  through the date of our initial  public
offering.  We have spent  approximately  $10.2 million for other working capital
needs.  The  remainder  of the  net  offering  proceeds  has  been  invested  in
short-term, income producing bank deposits pending their use for the purchase of
property and equipment  and working  capital  needs.  None of these amounts were
direct or  indirect  payments  to  directors  or officers of the issuer or their
associates or to persons owning 10% or more of our common stock or to any of our
affiliates.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

The Annual Meeting of the  Stockholders of the Company was held on May 24, 2001.
The  stockholders  of the Company  elected members of the Board of Directors and
ratified  the  selection of Deloitte & Touche LLP as the  Company's  independent
auditors for the current  fiscal year. The number of  affirmative,  negative and
abstained  votes  cast  with  respect  to each of the  matters  voted on were as
follows:

The tabulation of votes for the nominees for directors were as follows:
                                                 For              Withheld
  William E. Stanton                         37,931,597             4,610
  David B. Eisenhaure                        37,931,402             4,610
  Kenneth M. Socha                           37,931,597             4,610
  Philip J. Deutch                           37,931,597             4,610
  Eric R. Stoltz                             37,931,597             4,610
  Alan P. Goldberg                           37,931,645             4,610
  Nancy Hawthorne                            37,930,645             4,610


                                                 For         Against    Abstain
Selection of Deloitte & Touche
LLP as auditor                               37,927,185       8,132      990

There were no broker non-votes on any such matters.

Item 5.  Other Information

         None.

Item 6.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)     Exhibit        Description
             -------        -----------
              10.1        Consulting Agreement between Beacon Power Corporation
                          and International Investment Management, Inc.

     (b)     None.


<PAGE>



                                   SIGNATURES

Pursuant to the  requirements  of Section 13 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.

                            BEACON POWER CORPORATION

   Date:  August 14, 2001        By:  /s/ William E. Stanton
                                      ----------------------
                                      William E. Stanton
                                      President and Chief Executive Officer


          August 14, 2001             /s/ James M. Spiezio
                                      --------------------
                                      James M. Spiezio
                                      Vice President of Finance and Chief
                                      Financial Officer
                                      (Principal Financial Officer)