##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from           to           .   Commission file number
    000-31687
  EVERGREEN SOLAR, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

04-3242254(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)138 Bartlett Street
    Marlboro, Massachusetts

01752(Zip Code)(Address of principal executive
    offices)   (508) 357-2221
 (Registrants Telephone Number, Including Area Code)
 (Former Name, Former Address And Former Fiscal Year, If
    Changed Since Last Report)
  Securities registered pursuant to Section 12(g) of the
    Act:
 None
  Securities registered pursuant to Section 12(b) of the
    Act:
 Common Stock, Par Value $.01 Per Share
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-(2)
 þ o o
  Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
  
 PageDOCUMENTS INCORPORATED BY
    REFERENCEItem 1.

Business


3Item 1A.

Risk
    Factors


15Item 1B.

Unresolved Staff
    Comments


28Item 2.

Properties


28Item 3.

Legal
    Proceedings


28Item 4.

Submission of
    Matters to a Vote of Security Holders


28PART IIItem 5.

Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


29Item 6.

Selected Financial
    Data


31Item 7.

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


32Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


44Item 8.

Financial
    Statements and Supplementary Data


45Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


45Item 9A.

Controls and
    Procedures


45Item 9B.

Other
    Information


46PART
    IIIItem 10.

Directors and
    Executive Officers of the Registrant


46Item 11.

Executive
    Compensation


46Item 12.

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


46Item 13.

Certain
    Relationships and Related Transactions


46Item 14.

Principal
    Accountant Fees and Services


47PART
    IVItem 15.

Exhibits and
    Financial Statement Schedules


47Consolidated
    Balance Sheets as of December 31, 2005 and 2006


F-4Consolidated
    Statements of Operations


F-5Consolidated
    Statements of Stockholders Equity


F-6Consolidated
    Statements of Cash Flows


F-7Notes to
    Consolidated Financial Statements


F-8Signatures


II-1EX-23.1 Consent of PricewaterhouseCoopers, LLPConsent of Leipzig, Germany PricewaterhouseCoopers AGEX-31.1 Section 302 Certification of C.E.O.EX-31.2 Section 302 Certification of C.F.O.EX-32.1 Section 906 Certification of C.E.O.EX-32.2 Section 906 Certification of C.F.O.EX-99.1 EverQ GmbH balance sheet for the period ended December 31, 2006EX-99.2 EverQ GmbH income statement for the period December 20 to December 31, 2006EX-99.3 EverQ GmbH cash flow for the period December 20 to December 31, 2006EX-99.4 EverQ GmbH notes to the financial statements for the period December 20 to December 31, 2006




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DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.
  Forward-Looking
    Statements
  This Annual Report on
    Form 10-K,
    including Managements Discussion and Analysis of
    Financial Condition and Results of Operations in
    Item 7, contains forward-looking statements that involve
    risks, uncertainties and assumptions. If the risks or
    uncertainties ever materialize or the assumptions prove
    incorrect, the results of the Company may differ materially from
    those expressed or implied by such forward-looking statements
    and assumptions. All statements other than statements of
    historical fact are statements that could be deemed
    forward-looking statements, including but not limited to
    statements regarding the Companys future growth, revenue,
    earnings and gross margins improvement; future warranty
    expenses; benefits and expenses resulting from EverQ;
    contributions by our strategic partners Q-Cells AG and Renewable
    Energy Corporation to EverQ and the successful integration of
    our proprietary technologies; our future equity ownership
    position in EverQ; receipt of public grant awards; capital
    requirements to respond to competitive pressures and acquire
    complementary businesses and necessary technologies; pursuit of
    future research contracts that are not part of our current
    ongoing research activities; costs associated with research and
    development, building or improving manufacturing facilities,
    general and administrative expenses, business growth and our
    status as a public company; shifts in our geographic product
    revenue mix; international expansion of strategic partnerships,
    manufacturing operations and distribution networks; operating
    efficiency of manufacturing facilities including increases in
    manufacturing scale and technological improvements; the
    occurrence of and the use of proceeds from sales of our
    securities; the sufficiency of our cash, cash equivalents,
    marketable securities and borrowings available under our
    revolving credit facility to satisfy our anticipated cash
    requirements; sufficiency of our insurance levels for product
    liability claims; payment of cash dividends; use of derivative
    financial instruments to manage foreign currency exchange risks;
    the potential impact of our critical accounting policies and
    changes in financial accounting standards or practices; the
    Companys plans for the EverQ facility; the Companys
    goal of transitioning to thin wafer production and the expected
    timing and results of such transition; the expected timing of
    the EverQ-2
    facility or other facilities becoming fully operational; the
    expected demand for solar energy; expectations regarding product
    performance and cost and technological competitiveness;
    expectations regarding future silicon supply from Renewable
    Energy Corporation and the Companys ability to enter into
    additional contracts to secure its silicon supply; the
    anticipated benefits of the Companys String Ribbon
    technology; the making of strategic investments and the
    expectation of future benefit from them; the development of the
    quad technology platform and its potential effects on crystal
    growth; the Companys position in the solar power market;
    and the Companys ability to reduce the costs of producing
    solar products are made pursuant to the safe harbor provisions
    of the Private Securities Litigation Reform Act of 1995. These
    statements may be identified with such words as we
    expect, we believe, we anticipate
    or similar indications of future expectations. These statements
    are neither promises nor guarantees and involve risks and
    uncertainties, which could cause our actual results to differ
    materially from such forward-looking statements. Such risks and
    uncertainties may include, among other things, macroeconomic and
    geopolitical trends and events, the execution and performance of
    contracts by customers, suppliers and partners, and other risks
    and uncertainties described herein, including but not limited to
    the items discussed in Risk Factors in Item 1A
    of this report and that are otherwise described from time to
    time in our filings with the Securities and Exchange Commission
    (SEC), copies of which may be accessed through the
    SECs Web Site at http://www.sec.gov. We caution readers
    not to place undue reliance on any forward-looking statements
    contained in this Annual Report, which speak only as of the date
    of this Annual Report. We disclaim any obligation to publicly
    update or revise any such statements to reflect any change in
    our expectations, or events, conditions, or circumstances on
    which any such statements may be based, or that may affect the
    likelihood that actual results will differ from those set forth
    in such forward-looking statements.
 2




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ITEM 1.
    BUSINESS.  OVERVIEW
  tm
             3




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Accounting
    for EverQ
        RECENT
    DEVELOPMENTS
     4




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HISTORICAL
    MILESTONES
    October

1994

Evergreen Solar founded with four
    employees in a 2,500 square foot laboratory.October

1995

First String Ribbon wafers
    produced.April

1997

9,400 square foot pilot
    manufacturing facility operational.October

1997

First commercial sale of solar
    panels produced using String Ribbon technology.June

1999

Total sales of solar panels of
    2,500 units and 100 kilowatts achieved.March

2000

Leased 56,250 square foot
    manufacturing and headquarters facility located in Marlboro,
    Massachusetts.August

2000

Renovation of our Marlboro
    manufacturing facility and headquarters begun.June

2001

First shipment of solar panels
    from our new Marlboro manufacturing facility.November

2001

New distribution relationships in
    the U.S. and Europe.December

2001

Shipment of our
    10,000th solar panel.June

2002

Achieved first quarterly
    $1.0 million in product sales.December

2002

Demonstration of double ribbon
    growth to boost productivity.December

2002

Solar system installed on White
    House.December

2003

Richard M. Feldt appointed as new
    Chief Executive OfficerJanuary

2004

Shipment of our
    50,000th solar panelJanuary

2004

Demonstrated quad-ribbon growth
    processJune

2004

Close of $18.8 million
    private equity financing, net of $1.2 million in financing
    costsNovember

2004

Shipment of our 100,000 solar panalDecember

2004

Demonstrated 150 micron thick
    wafer growth capabilityDecember

2004

Achieved positive gross margins
    for the first time in Company historyJanuary

2005

Formed EverQ, a 30-megawatt solar
    wafer, cell and module manufacturing plant partnership with
    Q-Cells AGFebruary

2005

Completed a $62.3 million
    common stock public financingJune

2005

Completed a $90.0 million
    convertible subordinated note financingSeptember

2005

Shipment of our
    200,000th solar panelNovember

2005

Signed $70 million sales
    agreement with PowerLight CorporationNovember

2005

Announced addition of REC, a
    leading silicon supplier, to EverQFebruary

2006

Signed $100 million sales
    agreement with S.A.G. Solarstrom AGFebruary

2006

Signed $88 million sales
    agreement with Global Resource Options, Inc.March

2006

Signed $125 million sales
    Agreement with Donauer SolartechnikApril

2006

Introduction of Spruce line of
    solar panelsApril

2006

Volume shipments begin from EverQJune

2006

Official opening of the new EverQ
    solar plant in GermanyJuly

2006

Signed $200 million sales
    agreement with SunEdison LLCOctober

2006

Signed $100 million sales
    agreement with Mainstream Energy, LLCOctober

2006

EverQ signed Polysilicon supply
    agreement with Renewable Energy Corp. of NorwayOctober

2006

Construction begins at second
    EverQ German plantDecember

2006

German regulatory authorities
    approve amendment to EverQ joint venture agreement, equal
    ownership for Evergreen Solar, Q-Cells and Renewable Energy
    Corp.  5




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INDUSTRY
    BACKGROUND
        
    Environmental regulations.  Environmental
    regulations addressing global climate change and air quality
    seek to limit emissions by existing fossil fuel-fired generation
    plants and new generating facilities. Countries that are parties
    to international treaties such as the Kyoto Protocol have
    voluntarily submitted to reducing emissions of greenhouse gases.
    National and regional air pollution regulations also restrict
    the release of carbon dioxide and other gases by power
    generation facilities.
    Infrastructure reliability.  Investment in
    electricity transmission and distribution infrastructure has not
    kept pace with increase in demand, resulting in major service
    disruptions in the United States, such as the Northeast blackout
    in August 2003. Updating the aging infrastructure to meet
    capacity constraints will be capital intensive, time consuming
    and may be restricted by environmental concerns.
    Fossil fuel supply constraints and cost
    pressures.  The supply of fossil fuels is finite.
    While an adequate supply of coal, natural gas and oil exists for
    the foreseeable future, continued depletion of the fossil fuels
    over this century may impact prices and infrastructure
    requirements. For example, the U.S. domestic supply of
    liquefied natural gas, or LNG, is not expected to meet
    consumption requirements by 2025. Significant investments in LNG
    shipping terminal infrastructure are already being made to
    support imported fuel. Political instability, labor unrest, war
    and the threat of terrorism in oil producing regions has
    disrupted oil production, increased the volatility of fuel
    prices and raised concerns over foreign dependency in consumer
    nations.    Distributed
    Generation and Renewable Energy
  point-of-use
 6




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##### Table of Contents



Solar
    Power
    
    On-grid.  On-grid applications provide
    supplemental electricity to customers that are served by an
    electric utility grid, but choose to generate a portion of their
    electricity needs
    on-site.
    On-grid applications have been the fastest growing part of the
    solar power market. This growth is primarily driven by the
    worldwide trend toward deregulation and privatization of the
    electric power industry, as well as by government initiatives,
    including incentive programs to subsidize and promote solar
    power systems in several countries, including Japan, Germany and
    the United States. On-grid applications include residential and
    commercial rooftops, as well as ground-mounted mini-power plants.
    Off-grid.  Off-grid applications serve markets
    where access to conventional electric power is not economical or
    physically feasible. Solar power products can provide a
    cost-competitive, reliable alternative for such power
    applications as highway call boxes, microwave stations, portable
    highway road signs, remote street or billboard lights, rural
    homes in developed and developing countries, water pumps and
    battery chargers for recreational vehicles and other consumer
    applications.    
    Modularity and scalability.  From tiny solar
    cells powering a hand-held calculator, to an array of rooftop
    modules powering an entire home, to acres of modules on a
    commercial building roof or field, solar power products can be
    deployed in many sizes and configurations and can be installed
    almost anywhere in the world. Solar is among the best
    technologies for power generation in urban areas,
    environmentally sensitive areas and geographically remote areas
    in both developing and developed countries.
    Reliability.  With no moving parts and no fuel
    supply required, solar power systems reliably power some of the
    worlds most demanding applications, from space satellites,
    to maritime applications, to remote microwave stations. Solar
    modules typically carry warranties as long as 25 years.
    Dual use.  Solar modules are expected to
    increasingly serve as both a power generator and the skin of the
    building. Like architectural glass, solar modules can be
    installed on the roofs or facades of residential and commercial
    buildings.
    Environmentally cleaner.  Solar power systems
    consume no fuel and produce no air, water or noise emissions.   7




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11-year
    Solar
    Power Challenges
    
    Efficient material use.  Reduce raw materials
    waste. Efficient use of silicon is imperative for the growth of
    the industry due to the limited supply and increasing cost of
    silicon raw material expected for the near future.
    Simplified and continuous processing.  Reduce
    reliance on expensive, multi-step manufacturing processes.
    Reduced manufacturing capital costs.  Decrease
    the costs and risks associated with new plant investments as a
    result of lower capital costs per unit of production.
    Improved product design and
    performance.  Increase product conversion
    efficiency, longevity and ease of use. Conversion efficiency
    refers to the fraction of the suns energy converted to
    electricity.    
    Crystalline Silicon.  Crystalline silicon
    technology was the earliest practiced solar wafer fabrication
    technology and continues to be the dominant technology for the
    market, accounting for approximately 94% of solar market sales
    in 2005, according to Solarbuzz, a leading solar industry
    trade journal. Conventional crystalline silicon technology
    involves sawing thin wafers from solid crystalline silicon
    blocks. Crystalline silicon products are known for their
    reliability, performance and longevity. However, factors such as
    high materials waste from sawing, complex processing procedures
    and high capital costs have limited the speed at which
    conventional crystalline silicon manufacturers can reduce
    manufacturing costs. Our patented string ribbon technology
    eliminates the sawing waste allowing us to use approximately 50%
    less silicon than conventional crystalline silicon manufacturers.
    Thin Films.  While most major solar power
    manufacturers currently rely on crystalline silicon technology
    for their solar cell production, they, and other new entrants,
    are also developing alternative thin film technologies to
    achieve lower manufacturing costs. Thin film technology involves
    depositing several thin layers of silicon or more complex
    materials on a substrate to make a solar cell. Although thin
    film techniques generally use materials more efficiently than
    conventional crystalline silicon, we believe higher capital
    costs, lower manufacturing yields, lower conversion efficiency
    and reduced product performance and reliability have hindered
    commercial acceptance. According to Solarbuzz, the market
    share of thin films has declined from 12% in 1999 to
    approximately 6% in 2005. There will continue to be significant
    efforts to develop alternate solar technologies, such as
    amorphous silicon, CIS (copper indium diselenide), CIGS (copper
    indium gallium diselenide), CdTe (cadmium telluride), CSG
    (crystalline silicon on glass) and polymer and nano
    technologies. While these technologies have generally been slow
    to come to market, all of these efforts are important to
    broadening the base of products for solar to fit a greater
    number of market needs and niches. 8




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OUR
    TECHNOLOGY SOLUTION
        
    Efficient materials use.  Unlike conventional
    bulk crystalline silicon wafer technology, in which solid blocks
    of silicon are sawed into thin wafers at significant expense and
    silicon waste, our technology grows a continuous, flat ribbon to
    the desired thickness. Since our technology does not involve
    sawing solid blocks and our wafer thickness is at the
    industrys leading edge and below industry average, we
    believe we use less silicon per watt of output than any of our
    crystalline silicon competitors. We currently use approximately
    half as much silicon as the industry average and we believe we
    can further reduce silicon use in the future through production
    of thinner wafers and other manufacturing improvements. Not only
    is this an advantage in material costs, it allows us to produce
    more power from the same amount of silicon feedstock than other
    manufacturers using crystalline silicon. As long as the supply
    of silicon remains limited and expensive, higher yield from raw
    silicon is even more critical to the growth of the industry.
    Continuous processing.  Our technology permits
    the continuous growth of crystalline silicon ribbon, which can
    lead to high automation, efficient equipment use and improved
    productivity.
    Energy and environmental benefits.  String
    Ribbon uses less energy and substantially reduces the use of
    hazardous materials, particularly acids and cutting oils,
    relative to bulk crystalline technology.  Our
    Business Strategy
    
    Maintain our technology leadership through continuous
    innovation.  We believe that our String Ribbon
    technology provides critical competitive advantages. While our
    license to the underlying patents directed to the String Ribbon
    technology has expired, we own other patents directed to various
    aspects of the String Ribbon technology as well as significant
    trade secrets, and we will continue to invest in research and
    development to extend our technology leadership while vigorously
    protecting our intellectual property. Our Marlboro,
    Massachusetts facility has approximately 40,000 square feet
    dedicated to research and development and contains equipment to
    support the development, fabrication and evaluation of new solar
    power products and technologies. During 2006, we completely
    shifted our manufacturing processes in the U.S. and at EverQ in
    Germany, to approximately 200 micron thick ribbons from the
    prior platform of approximately 300 microns. We are developing a
    fourth generation technology termed quad ribbon, which allows us
    to grow four silicon ribbons simultaneously from a single
    furnace and may potentially double the output of new furnaces.
    We have also made recent 9




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advances and expect to continue to improve the conversion
    efficiency of our solar cells. Together these developments could
    dramatically reduce product and capital costs and increase
    efficiency of raw material usage. We intend to continually
    invest in improving our proprietary technologies and their
    commercial applications with the goal of reducing manufacturing
    costs without impairing product performance or reliability.  
    Lower our manufacturing costs and increase our
    capacity.  We have focused on manufacturing
    process improvements to increase output capacity and lower cost.
    In 2004, we transitioned all single ribbon furnaces to double
    ribbon technology. In 2006, we introduced thin ribbon to
    commercial production in the Marlboro and EverQ facilities and
    advanced the development of quad ribbon furnaces and higher cell
    conversion efficiency. We believe that these capabilities when
    integrated into the full production line will further lower
    manufacturing costs and enable the String Ribbon technology to
    have among the most efficient silicon utilization rates for
    production of crystalline photovoltaic products. Having
    validated the cost and product performance of our technology, we
    are rapidly scaling String Ribbon technology through a
    manufacturing expansion at EverQ that has tripled String Ribbon
    capacity in 2006 and will also double it again in 2007.
    Accelerate our cost reduction and capacity expansion through
    strategic partnerships.  We intend to quicken the
    expansion pace, secure critical supply chain and leverage our
    technology and manufacturing capabilities through strategic
    partnerships with other participants in the solar power
    industry. Beyond the core String Ribbon technology, we have
    generated significant experience and know-how in the handling of
    thin and fragile wafers and cells. This expertise is important
    in solar manufacturing and is therefore potentially attractive
    to strategic partners as other manufacturers attempt to move to
    thinner wafers. We have demonstrated that our technology is
    rapidly scalable and commercially successful though our EverQ
    partnership. Our EverQ partners, Q-Cells and REC, add size,
    operations expertise, local European presence, provide a secure
    silicon supply, global market reach and financial depth to the
    String Ribbon expansion through EverQ.
    Expand our market reach through strategic
    partnerships.  We intend to increase our
    addressable markets, boost sales and solidify our brand through
    strategic partnerships with best practice distribution and
    system integration partners worldwide. Like most manufacturers
    in the solar power business, we sell our modules through
    distributors and system integrators, which integrate our modules
    with other structural and electrical components and sell
    complete systems to end-users. To date, we have worked with a
    small number of these value-added resellers on a
    year-by-year
    purchase order basis. On November 4, 2005, we announced a
    four-year, $70 million sales agreement with PowerLight
    Corporation, a leader in developing innovative solar electric
    technologies and large-scale, grid-connected projects for
    customers worldwide. On February 21, 2006, the Company
    announced a four-year supply contract with S.A.G. Solarstrom AG
    (S.A.G.), based in Freiburg, Germany. The agreement calls for
    approximately $100 million of photovoltaic modules to be
    shipped to S.A.G. over the next four years. On February 21,
    2006, the Company announced a multi-year supply contract with
    Global Resource Options, Inc. (GRO), a Vermont-based solar power
    distributor and system integrator. The agreement calls for
    approximately $88 million of photovoltaic modules to be
    shipped to GRO over the next four years. On March 15, 2006,
    the Company announced a multi-year supply contract with Donauer
    Solartechnik (Donauer), a German-based solar power distributor.
    The agreement calls for approximately $125 million of
    photovoltaic modules to be shipped to Donauer over the next four
    years. On July 19, 2006, the company announced a multi-year
    supply agreement with SunEdison LLC (SunEdison), a Maryland
    based system integrator. The agreement calls for approximately
    $200M of photovoltaic modules to be shipped to SunEdison over
    the next four years. On October 16, 2006, the Company
    announced a multi-year supply contract with Mainstream Energy,
    LLC (Mainstream), a California based solar power distributor and
    system integrator. The agreement calls for approximately $100M
    of photovoltaic modules to be shipped to Mainstream over the
    next four years. We expect to develop additional market
    partnerships to support our expected aggressive sales growth. We
    expect to meet the requirements under these contracts with
    product manufactured by EverQ as well as from our Marlboro
    facility. Through December 19, 2006, we consolidated the
    financial results of EverQ and recognized 10




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revenues associated with the sale of EverQ product. As of
    December 20, 2006, we no longer consolidate the financial
    results of EverQ and accordingly, do not recognize revenues
    associated with the sale of EverQ product. However, under our
    sales agreement with EverQ, we will continue to market and sell
    all solar modules manufactured by EverQ under the Evergreen
    Solar brand, as well as manage customer relationships and
    contracts.  
    Diversify and differentiate our product
    lines.  In addition to core wafer and cell
    technology, our technology related to module manufacturing
    processes and components allows us to differentiate future
    products to meet market demands. We have patented methods for
    producing modules which do not require aluminum frames as is
    common practice. Such modules would be thinner and lighter than
    current standard module designs, thereby lending themselves to
    uses in ways not common today.  OUR
    PRODUCTS
  built-up
  
    Wafers.  A crystalline silicon wafer is a flat
    piece of crystalline silicon that can be processed into a solar
    cell. Our rectangular wafers currently measure 80 millimeters by
    150 millimeters and are less than 200 microns thick.
    Cells.  A solar cell is a device made from a
    wafer that converts sunlight into electricity by means of a
    process known as the photovoltaic effect. Each of our solar
    cells currently produces approximately 1.7 watts of
    power.
    Modules.  A solar module is an assembly of
    solar cells that have been electrically interconnected and
    laminated in a physically durable and weather-tight package. The
    most common modules in the market are in the range of 160 to 200
    watts each with some specialty modules smaller and larger. Our
    current solar modules range up to 190 watts in power.
    Systems.  A solar system is an assembly of one
    or more solar modules that have been physically mounted and
    electrically interconnected, often with batteries or power
    electronics, to produce electricity. Typical residential on-grid
    systems produce 2,000 to 6,000 watts of power.    Sales,
    Marketing and Distribution
     11




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Form 10-K. Form 10-K.
      MANUFACTURING
  12-14 megawatts.
      RESEARCH
    AND DEVELOPMENT
     12




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INTELLECTUAL
    PROPERTY
  Patents
    
    Crystalline Silicon Wafers.  Dr. Emanuel
    Sachs, a tenured Professor of Mechanical Engineering at the
    Massachusetts Institute of Technology, developed our core String
    Ribbon technology. Dr. Sachs has been awarded three United
    States patents for the String Ribbon technology. An additional
    patent for a related technology, invented by two employees of
    the United States National Renewable Energy Laboratory, formerly
    the Solar Energy Research Institute, was assigned to
    Dr. Sachs in 1984. In September 1994, Dr. Sachs
    granted us an irrevocable, worldwide, royalty-bearing license to
    practice the String Ribbon technology and related patents under
    a license and consulting agreement. The patents underlying this
    agreement expired during 2003 and 2004 and the agreement is now
    terminated. We have been awarded seven United States patents,
    one Indian patent and have eight United States patent
    applications pending as well as three granted European patent
    applications that have each been validated with enforceable
    rights in ten foreign jurisdictions and sixteen foreign patent
    applications pending on our own, internally developed inventions
    related to String Ribbon and wafer fabrication, including
    methods for automated, high-yield production techniques.
    Solar Cell Fabrication.  We have been awarded
    four United States patents and have two United States patent
    applications pending, relating to our solar cell processing
    technology as well as two foreign patent applications pending.
    The United States patents relate to methods for forming
    wrap-around contacts on solar cells and methods for processing
    solar cells.
    Solar Modules.  We have been awarded eight
    United States patents, five Indian patents, and one granted
    European patent application that has been validated with
    enforceable rights in ten foreign jurisdictions, and we have
    three United States patent application and thirteen foreign
    patent applications pending relating to advanced solar module
    designs. The United States patents relate to solar cell modules
    with an improved backskin, solar cell modules with an interface
    mounting system, an encapsulant material for solar cell modules,
    and a solar cell roof tile system.  Trademarks
    and Copyrights
    Trade
    Secrets and Other Confidential Information
   13




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COMPETITION
        ENVIRONMENTAL
    REGULATIONS
     14




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EMPLOYEES
    AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K, (http://www.evergreensolar.com)
  ITEM 1A.
    RISK
    FACTORS.  Certain
    Factors Which May Affect Future Results
  The factors discussed below are cautionary statements that
    identify important factors that could cause actual results to
    differ materially from those anticipated by the forward-looking
    statements contained in this report. For more information
    regarding the forward-looking statements contained in this
    report, see Forwarding Looking Statements at the
    beginning of this report. You should carefully consider the
    risks and uncertainties described below, together with all of
    the other information included in this report, in considering
    our business and prospects. The risks and uncertainties
    described below are not the only ones facing Evergreen Solar.
    Additional risks and uncertainties not presently known to us
    also may impair our business operations. The occurrence of any
    of the following risks could adversely affect our business,
    financial condition or results of operations.
  Risks
    Relating to Our Industry, Products, Financial Results and
    Operations
  Evaluating
    our business and future prospects may be difficult due to the
    rapidly changing market landscape.
     15




---



##### Table of Contents



We
    have a history of losses, expect to incur substantial further
    losses and may not achieve or maintain profitability in the
    future, which may decrease the market value of our
    stock.
    
    expand our manufacturing operations, whether domestically or
    internationally, including EverQ;
    develop our distribution network;
    continue to research and develop our products and manufacturing
    technologies;
    implement internal systems and infrastructure in conjunction
    with our growth; and
    hire additional personnel.    We may
    need to raise significant additional capital in order to fund
    our operations and to continue to grow our business, which
    subjects us to the risk that we may be unable to maintain or
    grow our business as planned and that our stockholders may be
    subject to substantial additional dilution.
      Our
    ability to expand our manufacturing capacity and therefore to
    increase revenue and achieve profitability depends to a large
    extent upon the success of EverQ. EverQ is subject to numerous
    risks, many of which are outside of our control, and we cannot
    assure you that EverQ will achieve its objective or otherwise be
    successful. If EverQ is not successful, our business would be
    materially and adversely harmed and our stock price would
    decline.
   16




---



##### Table of Contents




    government grants that have been approved may be subject to
    forfeiture or repayment in whole or in part if EverQ fails to
    continue to meet the conditions for such grants or if such
    grants for any reason become unavailable from German or European
    Union sources;
    the establishment of the facility may result in cost overruns,
    delays, equipment problems and construction,
    start-up and
    other operating difficulties, any of which could adversely
    affect the ability of EverQ to achieve or grow revenue on the
    timeframe we expect;
    as we only own one-third of EverQ, Q-Cells and REC will have the
    ability to influence the strategic direction of EverQ and other
    material decisions of EverQ; as a result, we may be unable to
    take certain actions that we believe would be in our best
    interests, which, given the expected materiality of EverQ to our
    combined operations, could significantly harm our business;
    further, we may be liable to third parties for the material
    decisions and actions of Q-Cells and REC in EverQ, which actions
    may harm EverQ and our business;
    EverQ may subject us to multiple, conflicting and changing laws,
    regulations and tax schemes;
    EverQ may be unable to obtain, maintain or enforce adequate
    intellectual property rights and protection due to limited or
    unfavorable intellectual property protection and may be subject
    to claims or suits alleging infringement of third party
    intellectual property rights;
    under certain circumstances, if we exit EverQ, EverQ will
    continue to have certain rights to our proprietary technologies
    that we are licensing to it and thereby compete with us;
    limitations on dividends or restrictions against repatriation of
    earnings may limit our ability to capitalize on earnings from
    EverQ;
    the operation of the manufacturing facility may experience
    seasonal reductions in productivity common in certain foreign
    countries, such as the summer months in Europe;
    EverQ may be subject to increases in tariffs, duties, price
    controls or other restrictions on foreign currencies or trade
    barriers imposed by foreign countries;
    EverQ may be unable to successfully hire and retain the
    additional personnel necessary to operate the facility, or
    future facilities;
    we will be exposed to fluctuations in currency exchange
    rates; and
    we may experience difficulties in staffing and managing
    international operations, including the difficulty in managing a
    geographically dispersed workforce in compliance with diverse
    local laws and customs.    Our
    future success substantially depends on our ability to
    significantly increase our manufacturing capacity through the
    development of additional manufacturing facilities. We may be
    unable to achieve our capacity expansion goals, which would
    limit our growth potential, impair our operating results and
    financial condition and cause our stock price to
    decline.
   17




---



##### Table of Contents




    we may need to continue to raise significant additional capital
    through the issuance of equity or convertible or debt securities
    in order to finance the costs of development of any additional
    facility, which we may be unable to do so on reasonable terms or
    at all, and which could be dilutive to our existing stockholders;
    the build-out of any additional facility will be subject to the
    risks inherent in the development of a new manufacturing
    facility, including risks of delays and cost overruns as a
    result of a number of factors, many of which may be out of our
    control, such as delays in government approvals or problems with
    supplier relationships;
    we may be required to depend on third parties or strategic
    partnerships that we establish in the development and operation
    of a facility, which may subject us to risks that such third
    parties do not fulfill their obligations to us under our
    arrangements with them; and
    if a new facility is established internationally, we may
    encounter legal restrictions and liability, encounter commercial
    restrictions and incur taxes and other expenses to do so and
    otherwise be subject to the risks inherent in conducting
    business in a foreign jurisdiction as described elsewhere in
    this section.    Because
    we depend on a limited number of suppliers for a number of
    specialized materials, including silicon and string, necessary
    to manufacture our solar power products, we are susceptible to
    supplier and industry-wide supply shortages and price
    volatility, which could adversely affect our ability to meet
    existing and future customer demand for our products and cause
    us to make fewer shipments, generate lower than anticipated
    revenues and manufacture our products at higher than expected
    costs.
    Our
    dependence on a limited number of third party suppliers for raw
    materials, key components for our solar power products and
    custom-built equipment for our operations could prevent us from
    delivering our products to our customers within required
    timeframes, which could result in order cancellations and loss
    of market share.
   18




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##### Table of Contents



We may
    fail to successfully bring to market our new solar power
    products under development, which may prevent us from achieving
    increased sales and market share.
    Our
    solar power products may not gain market acceptance, which would
    prevent us from achieving increased sales and market
    share.
    
    our failure to produce solar power products that compete
    favorably against other solar power products on the basis of
    cost, quality and performance;
    our failure to produce solar power products that compete
    favorably against conventional energy sources and alternative
    distributed generation technologies, such as wind and biomass,
    on the basis of cost, quality and performance;
    whether or not customers will accept our new module designs
    under development and the techniques we are developing to mount
    them; and
    our failure to develop and maintain successful relationships
    with distributors, systems integrators and other resellers, as
    well as strategic partners.    Technological
    changes in the solar power industry could render our solar power
    products uncompetitive or obsolete, which could reduce our
    market share and cause our sales to decline.
   19




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##### Table of Contents



Our
    ability to increase market share and sales depends on our
    ability to successfully maintain our existing distribution
    relationships and expand our distribution
    channels.
    We
    face risks associated with the marketing, distribution and sale
    of our solar power products internationally, and if we are
    unable to effectively manage these risks, it could impair our
    ability to expand our business abroad.
    
    difficult and expensive compliance with the commercial and legal
    requirements of international markets, with which we have only
    limited experience;
    inability to obtain, maintain or enforce intellectual property
    rights;
    encountering trade barriers such as export requirements,
    tariffs, taxes and other restrictions and expenses, which could
    affect the competitive pricing of our solar power products and
    reduce our market share in some countries;
    fluctuations in currency exchange rates relative to the
    U.S. dollar;
    difficulty in recruiting and retaining individuals skilled in
    international business operations;
    increased costs associated with maintaining international
    marketing efforts;
    difficulty of enforcing revenue collection
    internationally; and
    inability to develop, manufacture, market and sell our products
    and services in German and other international markets due to,
    for example, third-party intellectual property rights.   20




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##### Table of Contents



Our
    dependence on a small number of resellers may cause significant
    fluctuations or declines in our product revenues.
    
    reduction, delay or cancellation of orders from one or more of
    our significant resellers;
    selection by one or more of our significant resellers of
    products competitive with ours;
    loss of one or more of our significant resellers and our failure
    to recruit additional or replacement resellers; and
    failure of any of our significant resellers to make timely
    payment of our invoices.  Problems
    with product quality or product performance may cause us to
    incur warranty expenses and may damage our market reputation and
    prevent us from achieving increased sales and market
    share.
  25-year
  Our
    success in the future may depend on our ability to establish and
    maintain strategic alliances, and any failure on our part to
    establish and maintain such relationships could adversely affect
    our market penetration and revenue growth.
     21




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The
    success of our business depends on the continuing contributions
    of our key personnel and our ability to attract and retain new
    qualified employees in a competitive labor market.
      We may
    be affected by skilled labor shortages and labor
    disputes.
    Extended
    business interruption at our manufacturing facilities could
    result in reduced sales.
    The
    reduction or elimination of government subsidies and economic
    incentives for on-grid applications could cause our revenues to
    decline.
  and/or
  If
    solar power technology is not suitable for widespread adoption
    or sufficient demand for solar power products does not develop
    or takes longer to develop than we anticipate, our sales would
    not significantly increase and we would be unable to achieve or
    sustain profitability.
   22




---



##### Table of Contents




    cost-effectiveness of solar power technologies as compared with
    conventional and non-solar alternative energy technologies;
    performance and reliability of solar power products as compared
    with conventional and non-solar alternative energy products;
    success of alternative distributed generation technologies such
    as fuel cells, wind power and micro turbines;
    fluctuations in economic and market conditions that impact the
    viability of conventional and non-solar alternative energy
    sources, such as increases or decreases in the prices of oil and
    other fossil fuels;
    capital expenditures by customers that tend to decrease when the
    United States or global economy slows;
    continued deregulation of the electric power industry and
    broader energy industry; and
    availability of government subsidies and incentives.  We
    face intense competition from other companies producing solar
    power and other energy generation products. If we fail to
    compete effectively, we may be unable to increase our market
    share and sales.
    If we
    are unable to protect our intellectual property adequately, we
    could lose our competitive advantage in the solar power
    market.
    
    we cannot be certain that our pending United States and foreign
    patent applications will result in issued patents or that the
    claims allowed are or will be sufficiently broad to protect our
    technology or processes; 23




---



##### Table of Contents




    given the costs of obtaining patent protection, we may choose
    not to protect certain innovations that later turn out to be
    important;
    third parties may design around our patented technologies or
    seek to challenge or invalidate our intellectual property rights
    and there is no assurance that our intellectual property rights
    will deter infringement or misappropriation of our intellectual
    property;
    we may incur significant costs and diversion of management
    resources in prosecuting or defending intellectual property
    infringement suits;
    we may not be successful in prosecuting or defending
    intellectual property infringement suits and, as a result, may
    need to seek to obtain a license of the third partys
    intellectual property rights, which may not be available to us,
    whether on reasonable terms or at all;
    the contractual provisions we rely on to protect our trade
    secrets and proprietary information, such as our confidentiality
    and non-disclosure agreements with our employees, consultants
    and other third parties, may be breached and our trade secrets
    and proprietary information may be disclosed to competitors,
    strategic partners and the public; and  If we
    are subject to litigation and infringement claims, they could be
    costly and disrupt our business.
      
    assert claims of infringement or misappropriation of or
    otherwise enforce our intellectual property rights;
    protect our trade secrets or know-how; or
    determine the enforceability, scope and validity of our
    intellectual property rights or those of others.     24




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##### Table of Contents



We may
    be unable to adequately protect or enforce our proprietary
    information, which may result in its unauthorized use or reduced
    sales or otherwise reduce our ability to compete.
        
    independently develop substantially equivalent proprietary
    information, products and techniques;
    otherwise gain access to our proprietary information; or
    design around our patents or other intellectual property.    Existing
    regulations and changes to such regulations may present
    technical, regulatory and economic barriers to the purchase and
    use of solar power products, which may significantly reduce
    demand for our products.
  back-up
    Compliance
    with environmental regulations can be expensive, and
    noncompliance with these regulations may result in adverse
    publicity and potentially significant monetary damages and
    fines.
   25




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##### Table of Contents



Product
    liability claims against us could result in adverse publicity
    and potentially significant monetary damages.
    Risks
    Related to Our Common Stock
  Substantial
    leverage and debt service obligations may adversely affect our
    cash flows.
    
    make it difficult for us to make payments on the notes;
    make it difficult for us to obtain financing for working
    capital, acquisitions or other purposes on favorable terms, if
    at all, including financing to fund the development or expansion
    of EverQs manufacturing operations;
    make us more vulnerable to industry downturns and competitive
    pressures; and
    limit our flexibility in planning for, or reacting to changes
    in, our business.    The
    price of our common stock has been volatile.
  52-week
 26




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##### Table of Contents




    the size and timing of customer orders for or shipments of our
    products;
    the rate and cost at which we are able to expand our
    manufacturing capacity to meet product demand, including the
    rate and cost at which we are able to implement advances in our
    String-Ribbon technology;
    our ability to establish and expand key customer and distributor
    relationships;
    our ability and the terms upon which we are able to raise
    capital sufficient to finance the expansion of our manufacturing
    capacity and our sales and marketing efforts;
    our ability to expand EverQ within budget and within the time
    frame that we expect;
    our ability to establish strategic relationships with third
    parties to accelerate our growth plans;
    the amount and timing of expenses associated with our research
    and development programs and our ability to develop enhancements
    to our manufacturing processes and our products;
    delays associated with the supply of specialized materials
    necessary for the manufacture of our solar power products;
    our ability to execute our cost reduction programs;
    one time charges resulting from replacing existing equipment or
    technology with new or improved equipment or technology as part
    of our strategy to expand our manufacturing capacity and to
    decrease our per unit manufacturing cost;
    developments in the competitive environment, including the
    introduction of new products or technological advancements by
    our competitors; and
    the timing of adding the personnel necessary to execute our
    growth plan.  quarter-to-quarter
  Because
    we do not intend to pay dividends, stockholders will benefit
    from an investment in our common stock only if it appreciates in
    value.
   27




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##### Table of Contents



We are
    subject to anti-takeover provisions in our charter and by-laws
    and under Delaware law that could delay or prevent an
    acquisition of our company, even if the acquisition would be
    beneficial to our stockholders.
    We can
    issue shares of preferred stock that may adversely affect the
    rights of a stockholder of our common stock.
  time-to-time
  
    adversely affect the voting power of the stockholders of our
    common stock;
    discourage bids for our common stock at a premium;
    limit or eliminate any payments that the stockholders of our
    common stock could expect to receive upon our
    liquidation; or
    otherwise adversely affect the market price of our common stock.     ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.     ITEM 2.
    PROPERTIES.     ITEM 3.
    LEGAL
    PROCEEDINGS.     ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS.   28




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES:  Market
    for Our Common Stock
    High


LowYear ended December 31,
    2005First Quarter

$
8.05


$
4.00Second Quarter

$
8.23


$
4.68Third Quarter

$
9.54


$
5.73Fourth Quarter

$
12.84


$
7.74Year ended December 31,
    2006First Quarter

$
17.50


$
11.85Second Quarter

$
16.25


$
10.00Third Quarter

$
13.50


$
7.90Fourth Quarter

$
9.80


$
7.27     Holders
    Dividends
    Form 10-K Form 10-K.
 29




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##### Table of Contents



STOCK
    PERFORMANCE GRAPH
    COMPARISON
    OF CUMULATIVE TOTAL RETURN AMONG
    EVERGREEN SOLAR, INC., SIC CODE INDEX
    AND NASDAQ MARKET INDEX
  
  ASSUMES
    $100 INVESTED ON DEC. 31, 2001
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING DEC. 31, 2006
  12/31/01


12/31/02


12/31/03


12/31/04


12/31/05


12/31/06Evergreen Solar, Inc.


$
100.00



$
37.94



$
49.41



$
128.53



$
313.24



$
222.65SIC Code Index


$
100.00



$
63.20



$
99.20



$
97.50



$
96.28



$
104.81NASDAQ Market Index


$
100.00



$
69.75



$
104.88



$
113.70



$
116.19



$
128.12   (1)
    The preceding Stock Performance Graph is not deemed filed with
    the Securities and Exchange Commission and shall not to be
    incorporated by reference in any of our filings under the
    Securities Act of 1933 or the Securities Exchange Act of 1934,
    whether made before or after the date hereof and irrespective of
    any general incorporation language in any such filing.(2)
    Information used on the graph was obtained from Hemscott, Inc.,
    a source believed to be reliable, but we are not responsible for
    any errors or omissions in such information. 30




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA:    Year Ended December 31,2002


2003


2004


2005


2006STATEMENT OF OPERATIONS
    DATA:Revenues:Product

$
5,296


$
7,746


$
22,240


$
43,627


$
102,252Research


1,448



1,565



1,296



405


$
894Total revenues


6,744



9,311



23,536



44,032



103,146Cost of revenue:Product revenue costs


12,405



15,379



29,717



39,954


$
90,310Research revenue costs


1,448



1,565



1,296



405



894Total cost of revenue


13,853



16,944



31,013



40,359



91,204Gross profit


(7,109
)


(7,633
)


(7,477
)


3,673



11,942Operating Expenses:Research and development


2,244



2,226



3,635



11,056



19,064Selling, general and administrative


4,520



5,337



7,797



12,274



21,216Loss on disposal of fixed assets


















1,526Total operating expenses


6,764



7,563



11,432



23,330



41,806Operating loss


(13,873
)


(15,196
)


(18,909
)


(19,657
)


(29,864
)Other income (loss), net


674



222



(454
)


1,146



1,851Loss from operations before
    minority interest


(13,199
)


(14,974
)


(19,363
)


(18,511
)


(28,013
)Minority interest in EverQ














1,195



849Equity income from interest in
    EverQ


















495Net loss before accretion


(13,199
)


(14,974
)


(19,363
)


(17,316
)


(26,669
)Accretion, dividends and
    conversion premiums on Series A convertible preferred stock






(13,498
)


(2,904
)






Net loss attributable to common
    stockholders

$
(13,199
)

$
(28,472
)

$
(22,267
)

$
(17,316
)

$
(26,669
)Net loss per share (basic and
    diluted)

$
(1.16
)

$
(2.39
)

$
(0.67
)

$
(0.29
)

$
(0.41
)Weighted average shares used in
    computing basic and diluted net loss per share


11,405



11,899



33,204



59,631



65,662   31




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##### Table of Contents



December 31,2002


2003


2004


2005


2006BALANCE SHEET DATA:Cash, cash equivalents and
    marketable securities

$
8,483


$
20,340


$
11,942


$
116,207


$
49,421Investment in and advances to EverQ


















70,460Working capital


12,544



22,039



14,281



124,404



57,590Total assets


31,963



45,976



49,721



228,959



207,251Subordinated convertible notes














90,000



90,000Convertible preferred stock






27,032











Total stockholders equity


29,913



16,944



41,520



87,450



92,847   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  EXECUTIVE
    OVERVIEW
  tm
         32




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##### Table of Contents



Accounting
    for EverQ
   33




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
    Revenue
    Recognition and Allowance for Doubtful Accounts
       34




---



##### Table of Contents



Warranty
    Stock-based
    Compensation
    2004

2005

2006Expected options term

7

7

6.25Risk-free interest rate

4.0%

4.0%

4.9%-5.1%Expected dividend yield

None

None

NoneVolatility

90%

90%

130%     Inventory
   35




---



##### Table of Contents



Long-lived
    Assets
    Income
    Taxes
    Results
    of Operations
  Description
    of Our Revenues, Costs and Expenses
  Revenues.
   36




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##### Table of Contents



% of Total Revenue

2004


2005


2006By geography:United States


25
%


28
%


37
%Germany


69
%


63
%


48
%Spain



%



%


13
%All other


6
%


9
%


2
%100
%


100
%


100
%By customer:Krannich Solartechnik


44
%


20
%


3
%Donauer Solartechnik


19
%


19
%


13
%PowerLight Corporation


0
%



%


10
%All other


37
%


61
%


74
%100
%


100
%


100
%   Cost of product revenues.
  Research and development expenses, including cost of research
    revenues.
  Selling, general and administrative
    expenses.
  Other income (loss).
  Equity income in EverQ.
  Minority interest.
  Accretion, dividends and conversion premiums on Series A
    convertible preferred stock.
 37




---



##### Table of Contents



Net loss attributable to common
    stockholders.
  COMPARISON
    OF YEARS ENDED DECEMBER 31, 2006 AND 2005
  Revenues.
      Cost of product revenues and gross margin. year-over-year
  Research and development expenses.
 38




---



##### Table of Contents



Loss on disposal of fixed assets.
  Selling, general and administrative
    expenses.
  Other income.
  Net loss. scale-up
  COMPARISON
    OF YEARS ENDED DECEMBER 31, 2005 AND 2004
  Revenues.
  Cost of product revenues.
  Research and development expenses.
  Selling, general and administrative
    expenses.
 39




---



##### Table of Contents



Other income (loss).
  Net loss. scale-up
  LIQUIDITY
    AND CAPITAL RESOURCES
         40




---



##### Table of Contents



Redemption Period

Price (%)Beginning on July 1, 2010 and
    ending on June 30, 2011


101.250Beginning on July 1, 2011 and
    ending on June 30, 2012


101.625On July 1, 2012


100.000      41




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##### Table of Contents



EverQ
    Debt Guarantee
    Evergreen
    Solar Loans to EverQ
    Date of Loan

Principal


Principal (USD)


Interest Rate


Date DueNovember 23, 2005


4,000,000


$
5,278,800



5.40
%

June 30, 2010February 2, 2006


4,000,000


$
5,278,800



5.40
%

June 30, 2010April 18, 2006


850,000


$
1,121,745



5.86
%

January 31, 2007April 27, 2006

$
4,343,500


$
4,343,500



8.02
%

January 31, 2007June 8, 2006


3,825,000


$
5,047,853



5.72
%

January 31, 2007June 30, 2006


1,700,000


$
2,243,490



5.81
%

January 31, 2007August 28, 2006

$
9,800,000


$
9,800,000



8.00
%

January 31, 2007November 21, 2006

$
6,350,000


$
6,350,000



5.75
%

January 31, 2007$
39,464,188     Off-Balance
    Sheet Arrangements
   42




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##### Table of Contents



Contractual
    Obligations
    Total


Less ThanYears


1 Year


1-3 Years


4-5 Years


After 5 YearsNon-cancelable operating lease

$
4,539


$
991


$
2,858


$
676


$
14Maturity of Convertible Debt


90,000















90,000Interest expense associated with
    Convertible Debt


25,595



3,938



11,813



7,875



1,969Capital expenditure obligations


6,269



6,269











Raw materials purchase commitments


4,116



4,116











Total contractual cash
    obligations

$
130,519


$
15,314


$
14,671


$
8,551


$
91,983   INCOME
    TAXES
      RECENT
    ACCOUNTING PRONOUNCEMENTS
     43




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##### Table of Contents



No. 06-3, 06-3). 06-03 06-3 06-3 06-03
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.  INTEREST
    RATE RISK
    FOREIGN
    CURRENCY EXCHANGE RATE RISK
   44




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  page F-1 Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A.
    CONTROLS
    AND PROCEDURES.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Internal
    Control Over Financial Reporting
  Rule 13a-15(f)
  Managements
    Report on Internal Control Over Financial Reporting.
  Rule 13a-15(f).
  Internal Control 
    Integrated Framework Internal
    Control  Integrated Framework
   45




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##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION.   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE
    MATTERS.          ITEM 11.
    EXECUTIVE
    COMPENSATION.    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.    ITEM 13.
    CERTAIN
    RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE.   46




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##### Table of Contents



ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES.   PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES.  Form 10-K:
  page F-1 Form 10-K.
  page F-1 Form 10-K.
  Form 10-K
    ExhibitNumber

Description1
.1(1)

Underwriting Agreement dated as of
    February 3, 2005, by and among the Company, SG
    Cowen & Co., LLC and First Albany Capital Inc.
    (Exhibit 1.1)3
.1(2)

Third Amended and Restated
    Certificate of Incorporation. (Exhibit 3.2)3
.2(2)

Second Amended and Restated
    By-laws. (Exhibit 3.4)3
.3(3)

Certificate of Amendment of Third
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of the State of Delaware on May 15,
    2003. (Exhibit 4.3)3
.4(3)

Certificate of the Powers,
    Designations, Preferences and Rights of the Series A
    Convertible Preferred Stock of the Company. (Exhibit 4.4)3
.5(4)

Certificate of Amendment of Third
    Amended and Restated Certificate of Incorporation filed with the
    Secretary of State of the State of Delaware on August 20,
    2004. (Exhibit 4.5)3
.6(14)

Certificate of Amendment of Third
    Amendment and Restated Certificate of Incorporation filed with
    the Secretary of State of Delaware on January 8, 2007.
    (Exhibit 3.1)4
.1(10)

Indenture, dated as of
    June 29, 2005, between the Registrant and U.S. Bank
    National Association, as Trustee. (Exhibit 4.4)4
.2(10)

Form of 4.375% Convertible
    Subordinated Notes due 2012. (Exhibit 4.4)10
.1(2)*

1994 Stock Option Plan.
    (Exhibit 10.1)10
.2(2)*

2000 Stock Option and Incentive
    Plan. (Exhibit 10.2)10
.3(13)*

Amended and Restated 2000 Stock
    Option and Incentive Plan. (Exhibit 99.1)10
.4(13)*

Amended and Restated 2000 Employee
    Stock Purchase Plan. (Exhibit 99.2)10
.5(2)

Lease Agreement between Registrant
    and W9/TIB Real Estate Limited Partnership dated as of
    January 31, 2000, as amended. (Exhibit 10.5)10
.6(2)

Form of Indemnification Agreement
    between Registrant and each of its directors and executive
    officers. (Exhibit 10.9)10
.7(6)

Stock and Warrant Purchase
    Agreement dated as of March 21, 2003. (Exhibit 10.1)10
.8(6)

Form of Registration Rights
    Agreement. (Exhibit 10.3)10
.9(5)

Voting Agreement dated as of
    March 21, 2003. (Exhibit 10.2)10
.10(8)

Stock and Warrant Purchase
    Agreement dated June 16, 2004. (Exhibit 10.1)10
.11(8)

Warrant Agreement dated
    June 21, 2004. (Exhibit 10.2)10
.12(8)

Form of Warrants.
    (Exhibit 10.3) 47




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##### Table of Contents



ExhibitNumber

Description10
.13(8)

Registration Rights Agreement
    dated June 21, 2004. (Exhibit 10.4)10
.14(8)

Conversion, Consent, Voting and
    Lock-Up Agreement dated June 21, 2004. (Exhibit 10.5)10
.15(9)

Master Joint Venture Agreement
    entered into as of November 24, 2005 by and among Evergreen
    Solar, Inc., Q-Cells AG, Renewable Energy Corporation and EverQ
    GmbH. (Exhibit 10.17)10
.16(9)

License and Technology Transfer
    Agreement by and between Evergreen Solar, Inc. and EverQ GmbH,
    dated November 24, 2005. (Exhibit 10.18)10
.17(9)

Technology Co-Operation Agreement
    by and between Renewable Energy Corporation and Evergreen Solar,
    Inc. dated November 24, 2005. (Exhibit 10.19)10
.18(7)*

Evergreen Solar, Inc. Management
    Incentive Policy. (Exhibit 10.20)10
.19(12)

Purchase Agreement, dated
    June 23, 2005 between the Registrant and SG
    Cowen & Co., LLC, as representatives of the Initial
    Purchasers. (Exhibit 10.24)10
.20(10)

Registration Rights Agreement,
    dated June 29, 2005, between the Registrant and SG
    Cowen & Co., LLC, as representative of the Initial
    Purchasers. (Exhibit 10.21)10
.21(11)

Memorandum of Understanding, dated
    June 5, 2006, by and among Evergreen Solar, Inc.,
    Q-Cells AG,
    EverQ GmbH and Renewable Energy Corporation AS.
    (Exhibit 10.1)10
.22(13)

Amendment to the Master Joint
    Venture Agreement entered into as of September 29, 2006, by and
    among Q-Cells AG, the Company, Renewable Energy Corporation, REC
    Solar Grade Silicon LLC and EverQ GmbH. (Exhibit 10.26)10
.23(13)

Sales Representative Agreement by
    and between the Company and EverQ GmbH dated September 29, 2006.
    (Exhibit 10.27)10
.24(13)

Amended and Restated License and
    Technology Transfer Agreement by and between the Company and
    EverQ GmbH, dated September 29, 2006. (Exhibit 10.18)14
.1(15)

Code of Business Conduct and
    Ethics of Evergreen Solar, Inc. (Exhibit 14.1)23
.1

Consent of PricewaterhouseCoopers
    LLP, an Independent Registered Public Accounting Firm.23
.2

Consent of Leipzig, Germany
    PricewaterhouseCoopers AG24
.1

Power of Attorney. (included on
    Page II-1)31
.1

CEO Certification pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

CFO Certification pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1

CEO Certification pursuant to
    Rule 13a-14(b)
    and
    Rule 15d-14(b)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

CFO Certification pursuant to
    Rule 13a-14(b)
    and
    Rule 15d-14(b)
    of the Securities Exchange Act of 1934, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.99
.1

EverQ GmbH balance sheet for the
    period ended December 31, 2006.99
.2

EverQ GmbH income statement for
    the period December 20 to December 31, 2006.99
.3

EverQ GmbH cash flow for the
    period December 20 to December 31, 2006.99
.4

EverQ GmbH notes to the financial
    statements for the period December 20 to December 31,
    2006.     
    
    Confidential treatment granted as to certain portions.*
    
    Indicates a management contract or compensatory plan, contract
    or arrangement.(1)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated February 7, 2005. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(2)
    
    Incorporated herein by reference to the exhibits to the
    Companys Registration Statement on
    Form S-1,
    filed on August 4, 2000. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form S-1. 48




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##### Table of Contents



(3)
    
    Incorporated herein by reference to the exhibits to the
    Companys Registration Statement on
    Form S-8
    dated June 9, 2003. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form S-8.(4)
    
    Incorporated herein by reference to the exhibits to the
    Companys Registration Statement on
    Form S-3
    filed on October 21, 2004. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form S-3.(5)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    filed on March 24, 2003. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(6)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated March 24, 2003. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(7)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Quarterly Report on
    Form 10-Q
    for the period ended April 2, 2005 filed on May 2,
    2005. The number given in parenthesis indicates the
    corresponding exhibit number in such
    Form 10-Q.(8)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated June 22, 2004. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(9)
    
    Incorporated herein by reference to the exhibits to the
    Companys Annual Report on
    Form 10-K
    for the period ended December 31, 2005 filed on
    March 16, 2006. The number given in parenthesis indicates
    the corresponding exhibit number in such
    Form 10-K.(10)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated June 29, 2005. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(11)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated June 9, 2006. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(12)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Quarterly Report on
    Form 10-Q
    for the period ending July 2, 2005 filed on August 11,
    2005. The number given in parenthesis indicates the
    corresponding exhibit number in such
    Form 10-Q.(13)
    
    Incorporated herein by reference to the exhibits to the
    Companys Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2006 filed on
    November 7, 2006. The number given in parenthesis indicates
    the corresponding exhibit number in such
    Form 10-Q.(14)
    
    Incorporated herein by reference to the exhibits to the
    Companys Current Report on
    Form 8-K
    dated January 8, 2007. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 8-K.(15)
    
    Incorporated herein by reference to the exhibits to the
    Companys Annual Report on
    Form 10-K/A
    dated April 29, 2004. The number given in parenthesis
    indicates the corresponding exhibit number in such
    Form 10-K/A.  Form 10-K 60611-2511. 1-800-SEC-0330.
   49




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##### Table of Contents



LIST OF
    FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
  Report of
    Independent Registered Public Accounting Firm


F-2Consolidated
    Balance Sheets as of December 31, 2005 and 2006


F-4Consolidated
    Statements of Operations for the years ended December 31,
    2004, 2005 and 2006


F-5Consolidated
    Statements of Stockholders Equity for the years ended
    December 31, 2004, 2005 and 2006


F-6Consolidated
    Statements of Cash Flows for the years ended December 31,
    2004, 2005 and 2006


F-7Notes to
    Consolidated Financial Statements


F-8Schedule I 
    Condensed Financial Information of the Registrant


F-34  F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm       Consolidated
    financial statements and financial statement schedule
      Internal
    control over financial reporting
  Internal Control  Integrated
    Framework Internal Control  Integrated
    Framework
   F-2




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##### Table of Contents



F-3




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  CONSOLIDATED
    BALANCE SHEETS AS OF DECEMBER 31, 2005 AND
    2006
  December 31,


December 31,2005


2006(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
30,742


$
6,828Marketable securities


85,465



42,593Accounts receivable, net of
    allowance for doubtful accounts and sales discounts of $65 and
    $150 at December 31, 2005 and December 31, 2006,
    respectively


4,124



25,278Grants Receivable


16,295



Inventory


3,634



4,767Interest receivable


541



675Other current assets


4,052



1,853Total current assets


144,853



81,994Investment in and advances to EverQ






70,460Deposits


8,217



1,433Restricted cash


1,582



414Deferred financing costs


2,877



2,434Fixed assets, net


71,430



50,516Total assets

$
228,959


$
207,251LIABILITIES, MINORITY INTEREST
    AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
12,210


$
18,465EverQ short term borrowings


4,131



Other accrued expenses


1,625



2,443Accrued employee compensation


1,778



2,791Accrued warranty


705



705Total current liabilities


20,449



24,404Subordinated convertible notes


90,000



90,000EverQ deferred grants


16,284



Other long-term debt 
    EverQ


3,553



Total liabilities


130,286



114,404Commitments and contingencies
    (Note 11)Minority interest in EverQ


11,223



Stockholders equity:Common stock, $0.01 par
    value, 100,000,000 shares authorized, 61,965,231 and
    68,066,204 issued and outstanding at December 31, 2005 and
    December 31, 2006, respectively


620



681Additional paid-in capital


182,345



211,053Accumulated deficit


(93,009
)


(119,678
)Deferred compensation


(1,036
)


Accumulated other comprehensive
    income (loss)


(1,470
)


791Total stockholders equity


87,450



92,847Total liabilities, minority
    interest and stockholders equity

$
228,959


$
207,251    F-4




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##### Table of Contents



EVERGREEN
    SOLAR, INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  For the Years Ended December 31,2004


2005


2006(In thousands, except per share data)Revenues:Product revenues

$
22,240


$
43,627


$
102,252Research revenues


1,296



405



894Total revenues


23,536



44,032



103,146Cost of revenue:Product revenue costs


29,717



39,954



90,310Research revenue costs


1,296



405



894Total cost of revenue


31,013



40,359



91,204Gross profit (loss)


(7,477
)


3,673



11,942Operating expenses:Research and development


3,635



11,056



19,064Selling, general and administrative


7,797



12,274



21,216Loss on disposal of fixed assets










1,526Total operating expenses


11,432



23,330



41,806Operating loss


(18,909
)


(19,657
)


(29,864
)Other income:Foreign exchange gains (losses),
    net


(618
)


5



3,322Gain on investment in EverQ






527



Interest income


238



3,140



4,613Interest expense


(74
)


(2,526
)


(6,084
)Other income (loss), net


(454
)


1,146



1,851Loss from operations before
    minority interest


(19,363
)


(18,511
)


(28,013
)Minority interest in EverQ






1,195



849Equity income from interest in
    EverQ










495Net loss


(19,363
)


(17,316
)


(26,669
)Accretion, dividends and
    conversion premiums on Series A convertible preferred stock


(2,904
)






Net loss attributable to common
    stockholders

$
(22,267
)

$
(17,316
)

$
(26,669
)Net loss per share attributable to
    common stockholders (basic and diluted)

$
(0.67
)

$
(0.29
)

$
(0.41
)Weighted average shares used in
    computing basic and diluted net loss per share attributable to
    common stockholders


33,204



59,631



65,662    F-5




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##### Table of Contents



EVERGREEN
    SOLAR, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  AccumulatedAdditional








Other


TotalCommon Stock


Paid-In


Deferred


Accumulated


Comprehensive


Stockholders


ComprehensiveShares


Amount


Capital


Compensation


Deficit


Income (Loss)


Equity


Loss(In thousands)Balance at January 1,
    2004


15,126


$
151


$
73,239


$
(89
)

$
(56,330
)

$
(27
)

$
16,944Issuance of common stock pursuant
    to exercise of options


18







22















22Shares of common stock issued under
    ESPP


2







11















11Conversion of Series A
    convertible preferred stock to common stock


24,733



247



27,457















27,704Compensation expense associated
    with stock options










58



89











147Issuance of common stock in
    connection with private equity financing, net of offering costs


7,663



77



18,694















18,771Dividend on Series A
    convertible preferred stock










(2,904
)














(2,904
)Issuance of common stock warrant to
    Silicon Valley Bank










187















187Comprehensive loss:Net loss


















(19,363
)






(19,363
)

$
(19,363
)Unrealized gains on marketable
    securities






















1



1



1Comprehensive loss





























$
(19,362
)Balance at December 31,
    2004


47,542



475



116,764







(75,693
)


(26
)


41,520Issuance of common stock pursuant
    to exercise of options


750



8



1,709















1,717Issuance of common stock pursuant
    to exercise of warrants


224



2



606















608Shares of common stock issued under
    ESPP


3







23















23Restricted Stock grant


100



1



1,042



(1,043
)










Compensation expense associated
    with restricted stock














7











7Issuance of common stock in
    connection with private equity financing, net of offering costs


13,346



134



62,201















62,335Comprehensive loss:Net loss


















(17,316
)






(17,316
)

$
(17,316
)Unrealized losses on marketable
    securities






















(43
)


(43
)


(43
)Foreign currency translation
    adjustment






















(1,401
)


(1,401
)


(1,401
)Comprehensive loss





























$
(18,760
)Balance at December 31,
    2005


61,965



620



182,345



(1,036
)


(93,009
)


(1,470
)


87,450Issuance of common stock pursuant
    to exercise of options


988



10



2,480















2,490Issuance of common stock pursuant
    to exercise of warrants


4,007



40



13,406















13,446Shares of common stock issued under
    ESPP


45







341















341Reclassification on adoption of
    SFAS No. 123R










(1,036
)


1,036











Gain on investment in EverQ by REC
    and Q-Cells










8,466















8,466Compensation expense associated
    with equity compensation plans, including restricted share grants


1,061



11



5,051















5,062Comprehensive loss:


























Net loss


















(26,669
)






(26,669
)

$
(26,669
)Unrealized gains on marketable
    securities






















71



71


$
71Foreign currency translation
    adjustment






















2,190



2,190



2,190Comprehensive loss





























$
(24,408
)Balance at December 31,
    2006


68,066


$
681


$
211,053


$



$
(119,678
)

$
791


$
92,847    F-6




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##### Table of Contents



EVERGREEN
    SOLAR, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2004


2005


2006(In thousands)Cash flows from operating
    activities:Net loss

$
(19,363
)

$
(17,316
)

$
(26,669
)Adjustments to reconcile net loss
    to net cash used in operating activities:Depreciation expense


3,455



4,134



9,311Amortization of deferred grant
    credits










(2,004
)Loss on disposal of fixed assets


2,093



56



2,383Minority interest in EverQ






(1,195
)


(849
)Gain on investment in EverQ






(527
)


Equity income from EverQ










(495
)Bad debt expense and provision for
    early payment discounts


28



(19
)


85Amortization of deferred debt
    financing costs






224



443Amortization (accretion) of bond
    premiums


357



(595
)


(955
)Compensation expense associated
    with employee equity awards


147



7



5,062Changes in operating assets and
    liabilities:Accounts receivable


(5,211
)


2,062



(17,444
)Grants










18,962Inventory


(887
)


(729
)


(10,958
)Interest receivable


97



(484
)


(134
)Other current assets


(681
)


(2,685
)


(1,623
)Accounts payable


2,169



9,317



(728
)Accrued expenses


2,092



927



15,285Deferred revenue


440



(440
)


Net cash used in operating
    activities


(15,264
)


(7,263
)


(10,328
)Cash flows from investing
    activities:Purchases of fixed assets and
    deposits on assets under construction


(10,851
)


(57,729
)


(107,667
)Decrease in cash related to
    conversion of EverQ consolidated entity to equity method
    affiliate










(22,274
)Decrease (increase) in restricted
    cash






(1,194
)


891Decrease in EverQ loan










(389
)Purchases of marketable securities


(2,418
)


(119,300
)


(63,290
)Proceeds from sale and maturity of
    marketable securities


11,218



40,950



107,186Net cash used in investing
    activities


(2,051
)


(137,273
)


(85,543
)Cash flows from financing
    activities:Proceeds from issuance of common
    stock, net of offering costs


18,771



62,335



Proceeds from convertible debt
    financing, net of offering costs






86,899



Increase in EverQ debt






7,687



58,708Capital contributions to EverQ from
    minority interest holder






9,331



Proceeds from the sale of EverQ
    interest to REC






4,060



Dividend and conversion premium
    paid on Series A convertible preferred stock


(2,230
)






Increase (decrease) in short-term
    borrowings


1,500



(1,500
)


Proceeds from exercise of warrants










13,446Proceeds from exercise of stock
    options and shares purchased under Employee Stock Purchase Plan


33



2,348



2,831Net cash provided by financing
    activities


18,074



171,160



74,985Effect of exchange rate changes on
    cash and cash equivalents






(1,261
)


(3,028
)Net increase (decrease) in cash and
    cash equivalents


759



25,363



(23,914
)Cash and cash equivalents at
    beginning of year


4,620



5,379



30,742Cash and cash equivalents at end of
    year

$
5,379


$
30,742


$
6,828Supplemental cash flow information:Interest paid


27



2,526



5,201Non-cash Series A convertible
    preferred stock dividends earned


674







Non-cash conversion of
    Series A convertible preferred stock to common stock


27,704







Issuance of common stock warrant to
    Silicon Valley Bank


187







Gain on investment in EverQ by
    Q-Cells and REC










8,466    F-7




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##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    NATURE OF
    BUSINESS    (Q-Cells).
    and/or
   F-8




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##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    BASIS
    OF PRESENTATION
    CASH
    AND MARKETABLE SECURITIES
    available-for-sale.
    2005


2006Cash

$
8,601


$
3,316Money market funds


7,540



3,512Certificates of deposits


16,235



5,498Commercial paper


42,550



3,981Corporate bonds


22,524



33,114U.S. Agency notes


18,757



Total cash, cash equivalents and
    marketable securities

$
116,207


$
49,421   CONCENTRATION
    OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
   F-9




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2004


2005


2006% of accounts
    receivableDonauer Solartechnik






15
%


14
%NVT, LLC










33
%PowerLight Corporation










15
%AEE Solar










11
%Sun Farms






23
%


Krannich Solartechnik


50
%


8
%


Top 5 customers


75
%


64
%


81
%   INVENTORY
  first-in,
  GUARANTOR
    ARRANGEMENTS
    Product
    Warranty
  25-year
 F-10




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Balance at January 1, 2004

$
426,000Accruals for warranties issued
    during 2004


279,000Balance at December 31, 2004,
    2005 and 2006


705,000   Indemnification
    Agreements
    EverQ
    Debt Guarantee
  Q-Cells,
  Letters
    of Credit
   F-11




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   FIXED
    ASSETS
    IMPAIRMENT
    OF LONG-LIVED ASSETS
    REVENUE
    RECOGNITION
         F-12




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    RESEARCH
    AND DEVELOPMENT
    INCOME
    TAXES
    COMPREHENSIVE
    INCOME
  available-for-sale
  STOCK-BASED
    COMPENSATION
    NET
    LOSS PER COMMON SHARE
   F-13




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SEGMENT
    REPORTING
      USE OF
    ESTIMATES
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS
   F-14




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   RECENT
    ACCOUNTING PRONOUNCEMENTS
        No. 06-3, 06-3). 06-03 06-3 06-3 06-03
   F-15




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    3.
    INVENTORY    2005


2006Raw materials

$
2,929


$
3,714Work-in-process


519



804Finished goods


186



249$
3,634


$
4,767     4.
    FIXED
    ASSETS    Useful

December 31,


December 31,Life

2005


2006Laboratory and manufacturing
    equipment

3-7 years

$
29,046


$
36,544Computer and office equipment

3-7 years


1,235



910Leasehold improvements

Lesser of 15 to 20 years
    or lease term


8,360



8,360Assets under construction




43,199



18,00281,840



63,816Less: Accumulated depreciation




(10,410
)


(13,300
)$
71,430


$
50,516      F-16




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   5.
    INCOME
    TAXES    2004


2005


2006Income tax expense (benefit) at US
    federal statutory tax rate

$
(6,630,000
)

$
(5,904,000
)

$
(9,068,000
)State income taxes, net of federal
    tax effect


(1,498,000
)


(1,363,000
)


(1,844,000
)Permanent items


39,000



64,000



1,409,000Other


(136,000
)


(347,000
)


(724,000
)Change in deferred tax asset
    valuation allowance


8,225,000



7,550,000



10,227,000$



$



$
        F-17




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2005


2006Gross deferred tax assetsNet operating loss carryforwards

$
18,736


$
34,676Research and development credit
    carryforwards


976



1,748Capitalized R&D expenses


8,071



10,660Accrued expenses and deferred
    compensation


1,146



1,849Other, net


431



0Total gross deferred tax assets


29,360



48,933Less: gross deferred tax
    liabilitiesDepreciation


(414
)


(2,679
)Basis difference in EverQ
    investment


0



(3,224
)Other, net


0



(236
)Deferred tax valuation allowance


(28,946
)


(42,794
)Net deferred tax asset

$



$
     6.
    CAPITAL
    STOCK       F-18




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Dividend
    Rights of Series A Convertible Preferred Stock
      7.
    STOCK
    BASED COMPENSATION    Year EndedDecember 31,2006Product revenue cost

$
420Research and development expenses


1,593Selling, general and
    administrative expenses


3,049    F-19




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2004


2005Net Loss


Net Loss


Net Loss


Net LossAttributable


Per


Attributable


Perto Common


Common


to Common


CommonStockholders


Share


Stockholders


ShareNet loss attributable to common
    stockholders, as reported

$
(22,267
)

$
(0.67
)

$
(17,316
)

$
(0.29
)Add: Stock-based employee
    compensation expense included in reported results


89







7



Deduct: Total stock-based employee
    compensation expense determined under the fair value-based
    method for all awards


(2,556
)


(0.08
)


(3,625
)


(0.06
)Pro forma net loss attributable to
    common stockholders

$
(24,734
)

$
(0.75
)

$
(20,934
)

$
(0.35
)   Stock
    Incentive Plans
   F-20




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Weighted-AverageShares


Exercise Price(in thousands)Outstanding at January 1,
    2004


5,264


$
2.42Granted


823



2.83Exercised


(17
)


1.19Forfeited


(320
)


3.72Outstanding at
    December 31, 2004


5,750


$
2.41Granted


1,312



6.16Exercised


(750
)


2.30Forfeited


(262
)


4.11Outstanding at
    December 31, 2005


6,050


$
3.15Granted


643



14.42Exercised


(988
)


2.51Forfeited


(396
)


12.05Outstanding at
    December 31, 2006


5,309


$
4.20     Options OutstandingWeighted





Options ExercisableAverage


Weighted





WeightedRemaining


Average





AverageNumber


Contractual


Exercise


Number


ExerciseRange of Exercise Prices

Outstanding


Life (Years)


Price


Exercisable


Price(in thousands)








(in thousands)$ 0.65  $ 1.60


315



5.33


$
1.35



235


$
1.291.61     1.61


1,638



6.94



1.61



1,138



1.611.68     1.95


7



6.59



1.75



8



1.752.00     2.00


1,020



6.88



2.00



731



2.002.08     2.99


555



5.98



2.48



353



2.433.00     6.50


555



7.34



4.82



237



4.716.51     8.45


541



8.05



7.35



187



7.288.63   14.00


327



7.07



11.64



242



11.8915.09   15.09


335



9.15



15.09







19.00   19.00


16



3.84



19.00



16



19.005,309



7.02


$
4.20



3,147


$
3.22    F-21




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2004

2005

2006Expected options term (years)

7

7

6.25Risk-free interest rate

4.0%

4.0%

4.9%-5.1%Expected dividend yield

None

None

NoneVolatility

90%

90%

130%         Weighted-AverageGrant DateShares


Fair Value(in thousands)Outstanding at January 1,
    2005

$



$
Granted


100



10.42Outstanding at
    December 31, 2005


100


$
10.42Granted


1,116



14.45Vested


(32
)


8.75Forfeited


(55
)


14.45Outstanding at
    December 31, 2006


1,129


$
14.25    F-22




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      8.
    EMPLOYEE
    STOCK PURCHASE PLAN  25-share
    9.
    WARRANTS     F-23




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    10.
    EMPLOYEES
    SAVINGS PLAN    11.
    COMMITMENTS  LEASES
            2007

$
9912008


1,0352009


1,0592010


7632011


334Thereafter


357Total

$
4,539  F-24




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    OTHER
    COMMITMENTS
    12.
    SEGMENT
    INFORMATION      Segment
    Revenue and Gross Profit
    Evergreen


EverQSolar, Inc.


GmbH


Eliminations


TotalRevenue

$
101,303



54,535



(52,692
)

$
103,146Gross profit


2,681



9,261







11,942Operating loss


(29,443
)


(422
)






(29,865
)Net loss


(25,160
)


(2,358
)


849



(26,669
)Other supplemental
    informationInterest Income


5,659



291



(1,337
)


4,613Interest expense


4,032



3,389



(1,337
)


6,084Depreciation expense


5,136



4,175







9,311Amortization of deferred grant
    credits






2,004







2,004  F-25




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Geographic
    Concentration of Revenue Information
    2004


2005


2006% of revenueBy geography:United States


25
%


28
%


37
%Germany


69
%


63
%


48
%Spain










13
%All other


6
%


9
%


2
%100
%


100
%


100
%By customer:Krannich Solartechnik


44
%


20
%


3
%Donauer Solartechnik


19
%


19
%


13
%PowerLight Corporation


0
%


0
%


10
%All other


37
%


61
%


74
%100
%


100
%


100
%   13.
    INVESTMENT
    IN EVERQ    For the Year Ended December 31,2004


2005


2006Revenue

$



$



$
59,295Cost of goods sold










51,160Other expenses






4,458



9,006Net loss






(4,458
)


(871
)   As of December 31,2005


2006Current assets

$
19,669


$
125,232Non-current assets


51,294



144,279Current liabilities


16,397



100,471Non  current liabilities


23,390



80,763   14.
    LONG TERM
    DEBT   F-26




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Redemption Period

Price (%)Beginning on July 1, 2010 and
    ending on June 30, 2011


101.250Beginning on July 1, 2011 and
    ending on June 30, 2012


101.625On July 1, 2012


100.000       year-to-date
  Conversion
    Option
    Put
    Option
    Call
    Options
   F-27




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   EverQ
    Debt Guarantee
    Evergreen
    Solar Loans to EverQ
    Principal


InterestDate of Loan

Principal


(USD)


Rate


Date DueNovember 23, 2005


4,000,000


$
5,278,800



5.40
%


June 30, 2010February 2, 2006


4,000,000


$
5,278,800



5.40
%


June 30, 2010April 18, 2006


850,000


$
1,121,745



5.86
%


January 31, 2007April 27, 2006

$
4,343,500


$
4,343,500



8.02
%


January 31, 2007June 8, 2006


3,825,000


$
5,047,853



5.72
%


January 31, 2007June 30, 2006


1,700,000


$
2,243,490



5.81
%


January 31, 2007August 28, 2006

$
9,800,000


$
9,800,000



8.00
%


January 31, 2007November 21, 2006

$
6,350,000


$
6,350,000



5.75
%


January 31, 2007$
39,464,188   15.
    RELATED
    PARTY TRANSACTIONS   F-28




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    SUBSEQUENT
    EVENTS        Time-Based


Performance-BasedName

Restricted Stock(1)


Restricted Stock(2)Richard M. Feldt


50,000



300,000Michael El-Hillow


200,000
(3)


100,000Dr. Brown F. Williams


25,000



100,000Richard G. Chleboski


20,000



100,000Dr. Terry Bailey


20,000



100,000Gary T. Pollard


20,000



100,000     (1)
    The time based restricted stock is subject to a four year
    vesting schedule.(2)
    The vesting of the performance-based restricted stock will only
    occur upon the achievement of all of the following
    accomplishments within a calendar year:
    (a) $400 million in revenue, (b) certain
    specified gross margin objectives and (c) certain specified
    net income objectives. All performance based restricted stock
    awards will expire after five years if they have not vested.(3)
    These shares were granted pursuant to the terms of
    Mr. El-Hillows offer letter with the Company. F-29




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  17.
    UNAUDITED
    QUARTERLY RESULTS    QUARTERLY
    STATEMENT OF OPERATIONS
  Apr 2,


Jul 2,


Oct 1,


Dec 31,


Apr 1,


Jul 1,


Sept 30,


Dec 31,2005


2005


2005


2005


2006


2006


2006


2006(In thousands, except per share data)UnauditedRevenues:Product revenues

$
10,287


$
10,679


$
11,092


$
11,569


$
11,566


$
22,048


$
36,231


$
32,407Research revenues


235







94



76



325



354



215



Total revenues


10,522



10,679



11,186



11,645



11,891



22,402



36,446



32,407Cost of revenue:Product revenue costs


9,936



10,018



9,934



10,066



13,016



21,121



30,525



25,656Research revenue costs


235







94



76



325



354



215



Total cost of revenue


10,171



10,018



10,028



10,142



13,341



21,475



30,740



25,656Gross profit


351



661



1,158



1,503



(1,450
)


927



5,706



6,751Operating expenses:Research and development


2,090



2,647



2,971



3,348



4,193



3,958



4,661



6,252Selling, general and administrative


1,960



2,992



3,115



4,207



4,399



6,396



5,122



5,298Loss on disposal of fixed assets






























1,526Total operating expenses


4,050



5,639



6,086



7,555



8,592



10,354



9,783



13,076Operating loss


(3,699
)


(4,978
)


(4,928
)


(6,052
)


(10,042
)


(9,427
)


(4,077
)


(6,325
)Other income (loss), netForeign exchange gains (losses), net


280



(194
)


48



(129
)


540



1,419



148



1,215Gain on sale of EverQ interest in
    REC














527















Interest income (expense), net


158



397



7



52



(122
)


(386
)


(846
)


(117
)Loss from operations before
    minority interest


(3,261
)


(4,775
)


(4,873
)


(5,602
)


(9,624
)


(8,394
)


(4,775
)


(5,227
)Minority interest in EverQ


41



282



310



562



1,484



929



(828
)


(734
)Equity income from interest in EverQ






























495Net loss


(3,220
)


(4,493
)


(4,563
)


(5,040
)


(8,140
)


(7,465
)


(5,603
)


(5,466
)Net loss per share (basic and
    diluted)

$
(0.06
)

$
(0.07
)

$
(0.07
)

$
(0.08
)

$
(0.13
)

$
(0.11
)

$
(0.08
)

$
(0.08
)Weighted average shares used in
    computing net loss per share (basic and diluted)


54,914



60,973



61,178



61,510



63,771



65,789



66,127



66,880  F-30




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  18.
    VALUATION
    AND QUALIFYING ACCOUNTS    Balance atBeginning


Charged to





Balance atDescription

of Period


Operations


Deductions


End of PeriodYear ended December 31,
    2004Reserves and allowances deducted
    from assets accounts:Valuation allowance for deferred
    tax assets


22,908



8,225



(8,596
)


22,537Allowance for doubtful
    accounts & sales discounts


227



28



(171
)


84Year ended December 31,
    2005Reserves and allowances deducted
    from assets accounts:Valuation allowance for deferred
    tax assets


22,537



7,550



(1,141
)


28,946Allowance for doubtful
    accounts & sales discounts


84



(19
)






65Year ended December 31,
    2006Reserves and allowances deducted
    from assets accounts:Valuation allowance for deferred
    tax assets


28,946



10,227



(3,621
)


42,794Allowance for doubtful
    accounts & sales discounts


65



85







150  F-31




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Schedule 1  Condensed
    Financial Information of the Registrant
    Condensed Balance sheets
  December 31,


December 31,2005


2006ASSETSTotal current assets

$
126,999


$
81,994Restricted cash


414



414Investment in and advances to EverQ


24,617



70,460Loans to EverQ


4,765



Deferred financing costs


2,877



2,434Deposits on fixed assets


599



1,433Fixed assets, net


28,923



50,516Total assets


189,194



207,251LIABILITIES, CONVERTIBLE
    PREFERRED STOCK AND STOCKHOLDERS EQUITYTotal current liabilities


7,079



24,404Subordinated convertible notes


90,000



90,000Stockholders equityCommon stock, $0.01 par
    value, 100,000,000 shares authorized 61,965,231 and
    68,066,204 issued and outstanding at December 31, 2005 and
    December 31, 2006, respectively


620



681Additional paid-in capital


182,345



211,053Deferred compensation


(1,036
)


Accumulated deficit


(89,745
)


(119,678
)Accumulated other comprehensive
    loss


(69
)


791Total stockholders equity


92,115



92,847Total liabilities, convertible
    preferred stock and stockholders equity

$
189,194



207,251  F-32




---



##### Table of Contents



EVERGREEN
    SOLAR, INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Schedule 1  Condensed
    Financial Information of the Registrant
    Condensed Statements of Operations
  For the Years Ended December 31,2004


2005


2006Revenues:Product revenues

$
22,240


$
43,627


$
44,866Research revenues


1,296



405



894Total revenues


23,536



44,032



45,760Cost of revenue:Product revenue costs


29,717



39,954



42,184Research revenue costs


1,296



405



894Total cost of revenue


31,013



40,359



43,078Gross profit (loss)


(7,477
)


3,673



2,682Operating expenses:Research and development


3,635



9,348



17,109Selling, general and administrative


7,797



9,678



16,339Loss on disposal of fixed assets










1,526Total operating expenses


11,432



19,026



34,974Operating loss


(18,909
)


(15,353
)


(32,292
)Other income (loss), net


(454
)


1,298



3,787Equity income from interest in
    EverQ










495Accretion, dividends and
    conversion premiums on Series A convertible preferred stock


(2,904
)






Net loss attributable to common
    stockholders

$
(22,267
)

$
(14,055
)

$
(28,010
)Net loss per share attributable to
    common stockholders (basic and diluted)

$
(0.67
)

$
(0.24
)

$
(0.43
)Weighted average shares used in
    computing basic and diluted net loss per share attributable to
    common stockholders


33,204



59,631



65,662  F-33




---



##### Table of Contents



Schedule 1  Condensed
    Financial Information of the Registrant
    Condensed Statements of Cash Flows  For the Years Ended December 31,2004


2005


2006Net cash used in operating
    activities

$
(15,264
)

$
(11,477
)

$
(17,431
)Net cash used in investing
    activities


(2,051
)


(118,126
)


(21,936
)Net cash flow provided by
    financing activities


18,074



154,142



16,277Net increase (decrease)  in cash
    and cash equivalents


759



24,539


$
(23,090
)Cash and cash equivalents at
    beginning of year


4,620



5,379



29,918Cash and cash equivalents at end
    of year

$
5,379


$
29,918


$
6,828  F-34




---



##### Table of Contents



SIGNATURES      By:
    /s/  Richard
    M. Feldt      POWER OF
    ATTORNEY
  attorneys-in-fact, Form 10-K attorneys-in-fact attorneys-in-fact
    Name

Title

Date/s/  Richard
    M. FeldtRichard
    M. Feldt

Chief Executive Officer, 
    President and Chairman of the Board(Principal Executive Officer)

February 27, 2007/s/  Michael
    El-HillowMichael
    El-Hillow

Chief Financial Officer and
    Secretary (Principal Financial and Accounting Officer)

February 27, 2007/s/  Allan
    H. CohenAllan
    H. Cohen

Director

February 27, 2007/s/  Edward
    C. GradyEdward
    C. Grady

Director

February 27, 2007/s/  Dr.
    Gerald L.
    WilsonDr.
    Gerald L. Wilson

Director

February 27, 2007/s/  Dr.
    Peter W.
    CowdenDr.
    Peter W. Cowden

Director

February 27, 2007  II-1