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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-K

_X_      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

___      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________.

                        COMMISSION FILE NUMBER 000-31687

                              EVERGREEN SOLAR, INC.
             (Exact name of registrant as specified in its charter)


                    DELAWARE                                04-3242254
         (State or other jurisdiction of                 (I.R.S. Employer
         incorporation or organization)                Identification No.)

                211 SECOND AVENUE                             02451
             WALTHAM, MASSACHUSETTS                         (Zip Code)
    (Address of principal executive offices)


Registrant's telephone number, including area code: 781-890-7117

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:
                                          COMMON STOCK, PAR VALUE $.01 PER SHARE

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         As of March 9, 2001, there were 11,170,327 shares of the registrant's
Common Stock, $.01 par value per share, outstanding. The aggregate market value
of the registrant's voting stock held by nonaffiliates as of March 9, 2001 was
approximately $48 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive proxy statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended December 31,
2000. Portions of such proxy statement are incorporated by reference into Part
III of this Annual Report on Form 10-K.


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                                     PART I

ITEM 1. BUSINESS:

OVERVIEW

     We develop, manufacture and market solar power products that are capable of
providing reliable and environmentally clean electric power throughout the
world. Our solar power products are targeted at the estimated $1.5 billion
global solar power market. We believe our proprietary and patented solar power
technologies, including our String Ribbon technology, will offer significant
design, cost and manufacturing advantages over competing solar power
technologies. We intend to become a leading producer of high-quality solar power
products by expanding our manufacturing capacity, reducing our manufacturing
costs, developing innovative solar power products and pursuing strategic
relationships, such as our distribution and marketing relationship with Kawasaki
Heavy Industries, Ltd. of Japan.

     We have spent three years on research and development and four years
refining our solar power products and manufacturing processes in our pilot
manufacturing facility. Since 1997, we have shipped small quantities of
commercial products. We are currently preparing to begin manufacturing of our
solar power products in our new manufacturing facility. We are continuing to
refine, develop and commercialize a number of laboratory-demonstrated
advancements in our solar power technologies, including wider and thinner
crystalline silicon wafers, more efficient solar cells and improved solar panel
designs. Through December 31, 2000, we shipped over 4,000 solar panels for
residential, commercial and industrial applications in the United States and
internationally. We are expanding our manufacturing capacity by relocating our
operations to a 56,250 square foot facility in Marlboro, Massachusetts. We
currently expect that we will relocate to our Marlboro facility beginning in
April 2001 and will begin large scale manufacturing there by the middle of 2001.
As we begin to increase production volumes, we intend to actively expand
existing and seek new distribution and marketing arrangements.

HISTORICAL MILESTONES

     We were incorporated in August 1994 and to date we have achieved the
following major milestones along our product development and commercialization
schedule:

Date                 Historical Milestone

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.
April 1998        First order placed by Kawasaki.
June 1999         Total sales of solar panels of 2,500 units and 100 kilowatts
                  achieved.
December 1999     Kawasaki investment of $5 million and execution of a strategic
                  distribution and marketing agreement.
March 2000        Leased 56,250 square foot manufacturing facility and
                  headquarters located in Marlboro, Massachusetts.
August 2000       Renovation of our Marlboro manufacturing facility and
                  headquarters begun.

INDUSTRY BACKGROUND

     The electric power industry is one of the world's largest industries.
Furthermore, electricity accounts for a growing share of overall energy use. A
principal driver of this growth is increasing reliance on electricity-dependent
advanced technologies, such as in the Internet and telecommunications
industries. We believe that deregulation and technological innovations are
creating significant opportunities for new entrants and technologies within the
electric power industry, just as these changes have created similar
opportunities in other regulated industries such as telecommunications, banking
and transportation.

     We believe that distributed generation is one of the most promising areas
for growth in the global electric power industry. Distributed generation is
defined as point-of-use electricity generation that either supplements or
bypasses the electric utility grid, and employs technologies such as solar
power, microturbines and fuel cells. Distributed generation is expected to
provide greater portability, reliability, power quality and user control. We
believe capacity constraints, increased demand for power reliability and
quality, and new environmental initiatives will drive the demand for distributed
generation.
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SOLAR POWER APPLICATIONS AND BENEFITS

         Unlike many other distributed generation technologies that have been
under development but not in widespread commercial use, solar power technology
has had a growing worldwide market for approximately 20 years in the following
applications:

         -        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, largely driven by the
                  worldwide trend toward deregulation and privatization of the
                  electric power industry as well as 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 and building facades, for
                  both new construction and existing structures.

         -        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 low cost,
                  reliable alternative for powering highway call boxes,
                  microwave stations, portable highway road signs, remote street
                  or billboard lights, vacation homes, rural homes in developed
                  and developing countries, water pumps and battery chargers for
                  sailboats and recreational vehicles.

         Solar power has emerged as one of the primary distributed generation
technologies seeking to capitalize on the opportunities resulting from trends
affecting the electric power industry. Relative to other distributed generation
technologies, solar power benefits include:

         -        Modular and scaleable. From tiny solar cells powering a
                  hand-held calculator to an array of roof panels powering an
                  entire home to acres of panels 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.

         -        Reliable. With no moving parts and no fuel supply required,
                  solar power systems reliably power some of the world's most
                  sensitive applications, from space satellites to microwave
                  stations in the mountains and other remote, harsh
                  environments. Solar panels typically carry warranties of 20
                  years or more.

         -        Dual use. Solar panels are expected to increasingly serve as
                  both a power generator and the skin of the building. Like
                  architectural glass, solar panels can be installed on the
                  roofs or facades of residential and commercial buildings.

         -        Environmentally cleaner. Solar power systems produce no air or
                  water emissions.

THE SOLAR POWER CHALLENGE

         Although solar power can provide a low cost alternative for off-grid
applications, we believe the principal challenge to widespread adoption of solar
power is reducing manufacturing costs without impairing product performance or
reliability. We believe the following advancements in solar power technology are
necessary to meet this challenge:

         -        Efficient material use. Reduce raw materials waste,
                  particularly the waste associated with slicing silicon by
                  conventional crystalline silicon technology.

         -        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 and smaller plant
                  capacity.

         -        Improved product design and performance. Increase product
                  conversion efficiency, longevity and

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                  ease of use. Conversion efficiency refers to the fraction of
                  the sun's energy converted to electricity.

         We further believe the two principal solar power technologies,
crystalline silicon and thin films, have not adequately addressed this
challenge:

         Crystalline Silicon. Crystalline silicon technology was the earliest
practiced solar power technology and remains the foundation for most solar power
applications. Conventional crystalline silicon technology involves slicing 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 slicing, complicated processing procedures and high
capital costs have limited the ability of conventional crystalline silicon
manufacturers to reduce manufacturing costs.

         Thin Films. While most major solar power manufacturers currently rely
on crystalline silicon technology for their solar cell production, they 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 material more efficiently than conventional
crystalline silicon, we believe higher capital costs, lower manufacturing
yields, lower conversion efficiency and reduced product performance and
reliability have resulted in and will continue to result in limited commercial
acceptance.

OUR TECHNOLOGY SOLUTION

         We believe our technologies and processes are unique among our
competitors and have been designed to reduce manufacturing costs while improving
product performance without impairing product reliability. Our innovative
technologies include:

         String Ribbon Wafer Manufacturing. In the String Ribbon technique,
strings are pulled vertically through a shallow pool of molten silicon, and the
silicon solidifies between the strings to form a continuous ribbon of
crystalline silicon. Once the ribbon has reached the desired length, it is cut
and prepared for cell fabrication. The use of strings to aid in the growth of a
silicon ribbon is what distinguishes our proprietary and patented String Ribbon
technology from other advanced crystalline silicon wafer technologies that do
not involve slicing. Our String Ribbon technology for the growth of solar wafers
has the following significant advantages:

         -        Efficient materials use. Unlike conventional crystalline
                  silicon wafer technology, in which solid blocks of silicon are
                  sliced 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
                  slicing solid blocks, we currently use about half as much
                  silicon as conventional crystalline silicon techniques and we
                  believe we can reduce this amount to about one-fifth in the
                  future.

         -        Continuous processing. Our technology permits the continuous
                  growth of crystalline silicon ribbon, which leads to high
                  automation, efficient equipment use and improved productivity.

         Innovative Solar Cell Fabrication. We believe our innovative solar cell
fabrication techniques will enable us to reduce our manufacturing costs, improve
product appearance and increase design flexibility. Our solar cell fabrication
techniques include:

         -        "Wrap-around" solar cells. We have patented and are currently
                  developing a process for manufacturing "wrap-around" solar
                  cells in which the front metal conductors literally
                  "wrap-around" to the back of the solar cell. As a result,
                  instead of the conventional practice of electrically wiring
                  the front of the solar cell to the back of the adjacent cell,
                  our wrap-around solar cell will allow all of the electrical
                  wiring to be accomplished on the back of the solar cell. We
                  believe our wrap-around solar cell will enable us to reduce
                  manufacturing costs, increase manufacturing output and produce
                  more attractive solar panels in a wider range of sizes.

         -        Simplified processing. We have developed an innovative
                  approach of using fewer, simpler steps combined with
                  simplified and continuous processing in much of our solar cell
                  fabrication line. We believe this approach will lower
                  manufacturing costs relative to conventional crystalline
                  silicon processing which involves clean rooms and requires
                  processing wafers in batches.

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     Advanced Solar Panel Designs. We are currently developing innovative solar
panels using improved designs and production processes. We believe our new
technology will ultimately reduce costs, both in the factory and during shipping
and installation, and improve solar panel appearance, performance, ease of use
and longevity. In particular, we are developing a simplified and less expensive
method for interconnecting solar cells, which we call monolithic integration, as
well as better lamination materials and methods.

     -    Monolithic integration. Monolithic solar panel integration is a
          simplified and less expensive method of electrically wiring solar
          cells using our "wrap-around" technology. This method allows solar
          cells to be electrically wired in a nearly continuous process without
          front-to-back electrical wiring. This is a novel approach in
          crystalline silicon manufacturing, where expensive front-to-back
          electrical wiring is standard practice.

     -    Improved lamination materials and methods. We expect our lamination
          improvements to include the following:

          -    Replacement of the two-inch-thick, expensive, aluminum-framed
               solar panels with quarter-inch-thick, polymer-based frameless
               solar panels that we expect will permit as much as ten-times
               greater packing density during shipping and use of less-expensive
               mounting approaches.


          -    Replacement of the junction box, which is the conventional box on
               the back of a solar panel through which electrical wiring
               connections are made, with a thin wire on the edge of one panel
               to simplify field wiring.

          -    Creation of an improved encapsulant, used to seal the solar
               panel, which we expect will extend solar panel life.

          -    Replacement of the conventional lamination process, which
               requires processing in batches in a vacuum, with a continuous
               process which permits lamination in air.

OUR STRATEGY

     Our principal objective is to become a leading producer of high-quality
solar power products for a wide variety of on-grid and off-grid solar power
applications in industrially advanced and developing countries. We plan to
achieve this objective by aggressively pursuing the following strategies:

     Expand Manufacturing Capacity. By the middle of 2001, we expect to begin
manufacturing at our new 56,250 square foot facility, which will include
approximately 35,000 square feet of manufacturing space and will enable us to
support approximately seven megawatts of annual production capacity using our
advanced manufacturing process technologies. Subsequently, we intend to further
expand our manufacturing capacity by establishing manufacturing operations in
both United States and international markets.

     Reduce Manufacturing Costs. We believe that the advantages of our
proprietary and patented technologies in the areas of String Ribbon wafer
manufacturing, innovative solar cell fabrication and advanced solar panel
designs will enable us to reduce our manufacturing costs while producing solar
power products with high reliability, high conversion efficiency, improved
product longevity and greater flexibility of use.

     Develop Innovative Solar Power Products. We intend to build upon our
technological advantages in solar power product design and performance to
continue improving and developing our solar power products. The solar power
products we are currently developing are being designed to be thinner, longer
lasting, more attractive and easier to deliver and install. We intend to
primarily target these products for on-grid applications, such as
building-integrated roof tiles, and off-grid applications such as rural
electrification.

     Pursue Strategic Relationships. We intend to continue to pursue strategic
relationships to capitalize on the marketing, manufacturing and distribution
capabilities of larger companies and to explore opportunities for additional
solar power product development. In December 1999, we entered into a
distribution and marketing agreement with Kawasaki under which Kawasaki has
exclusive distribution rights for our solar power products in Japan and is
required to promote our solar power products. We believe that strategic
relationships such as our relationship with Kawasaki will enable us to more
easily and cost-effectively enter new geographic markets, attract

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new customers and develop innovative solar power products.

         Penetrate International Markets Through Local Manufacturing. We believe
our manufacturing advantages will enable us to more easily and cost-effectively
penetrate international markets by building local manufacturing facilities.
While local manufacturing of solar power products is typically limited by
factors such as high capital costs and reduced economies of scale, our String
Ribbon technology offers greater modularity and achieves economies of scale at
smaller capacities than conventional solar power technologies. Since these
facilities can manufacture our full line of solar power products and can be
appropriately scaled to grow as market opportunities dictate, we believe local
manufacturing will also enable us to more readily capitalize on market
opportunities. Further, we believe local manufacturing would assist us in
enhancing brand recognition in local markets, avoiding import tariffs and
accessing local private or public sector financing.

OUR PRODUCTS

         Solar power products in general are built-up through four stages of
production:

         -        Wafers. A crystalline silicon wafer is a flat piece of
                  crystalline silicon, approximately palm-sized, that can be
                  processed into a solar cell.

         -        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. A typical solar cell produces from
                  one to three watts of power and is approximately palm-sized.

         -        Panels. A solar panel is an assembly of solar cells that have
                  been electrically interconnected and laminated in a physically
                  durable and weather-tight package. A typical solar panel can
                  produce from 20 to 120 watts of power and range in size from
                  two to 12 square feet. A 120 watt solar panel can power a
                  standard 120 watt light bulb, or approximately 3% of the power
                  requirements of a typical home in the United States. Our
                  current solar panels range from 25 to 64 watts in power.

         -        Systems. A solar system is an assembly of one or more solar
                  panels that have been physically mounted and electrically
                  interconnected, often with batteries and/or power electronics,
                  to produce electricity.

         We sell primarily solar panels. We expect our solar panel technology to
provide us with a number of competitive advantages and, ultimately, lower
manufacturing costs. We believe that the frameless solar panel we are developing
will provide a distinctive advantage in on-grid, building-integrated solar
systems and off-grid rural electrification solar systems, as well as for other
applications where international shipping, remote installation and/or thin solar
panels are required. We expect our frameless solar panel will be thinner,
lighter, easier to ship, easier to install, longer lasting and more attractive
than those of our competitors. We are developing solar roofing tiles and other
building-integrated solar power products that we believe will accelerate the
acceptance and penetration of solar power products in the building industry.

         We further believe that our solar panels will be enhanced by our
wrap-around solar cells. We expect our wrap-around cells, currently under
development, to provide simplified interconnection procedures allowing greater
range in solar panel design and a distinctive, attractive appearance for on-grid
solar systems.

         Our current solar panels range from 25 to 64 watts, and we expect to
introduce larger solar panels of approximately 100 watts in 2001. Our solar
panels are certified to international standards for safety and quality. If our
current development programs are successful, we expect to continue to increase
the conversion efficiency and wattage of our solar panels as we expand
manufacturing capacity and shift from 5.6 centimeter wide String Ribbon wafers
to 8 centimeter wide String Ribbon wafers in 2001.

SALES AND MARKETING

  Market Focus

         We intend to primarily target the on-grid markets and the off-grid
rural electrification market, where we

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believe growth prospects are the largest and where we expect our solar power
technology will provide us the greatest competitive advantage. These markets are
characterized as follows:

         -        On-grid. The on-grid market is currently the fastest growing
                  solar power market. Within the on-grid market, Japan has been
                  the largest market for several years, but the German market is
                  growing rapidly with the recent passage of an additional
                  government subsidy program. We also expect the Netherlands,
                  Spain and the United States to become large markets.

         -        Off-grid rural electrification. Within the off-grid market,
                  rural electrification has the largest potential but is the
                  least penetrated market as evidenced by the two billion people
                  in the world without conventional electricity. Marketing,
                  financing, local infrastructure and support remain the
                  principal challenges to greater expansion of this market.

Competitive Advantage

         We expect to gain a competitive advantage in our target markets through
product differentiation, strong marketing, distribution and manufacturing
partners in local markets, and ultimately low manufacturing costs.

         In the on-grid market, our distinctive solar power products are
expected to include building-integrated roofing tiles, both framed and
frameless, and other building-integrated solar power products, such as facade
tiles.

         We expect our building-integrated solar power products will include
solar panels with wrap-around solar cells that will offer a distinctive,
attractive appearance, which we believe is particularly important to architects
and homebuilders.

         In the off-grid rural electrification market, we expect our frameless
panels to have a competitive advantage because we believe that they will be:

         -        easier and less expensive to ship due to their thinness and
                  improved packing density;

         -        lighter and easier to physically mount and electrically wire;
                  and

         -        able to be mounted using local mounting materials.

Distribution, Marketing and Other Strategic Relationships

         We bring our solar power products to market using distributors, system
integrators and other value-added resellers. Our resellers often add value
through system design by incorporating our panels with batteries, associated
electronics, structures and wiring systems. Most of our resellers have a
geographic or applications focus.

         We expect to collaborate closely with a relatively small number of
resellers. We entered into our first of these collaborations with Kawasaki in
December 1999. Under the terms of our strategic distribution and marketing
agreement, we have agreed to sell our solar power products in Japan exclusively
through Kawasaki, and Kawasaki has agreed that we will be Kawasaki's exclusive
supplier for the Japanese market of the types of solar power products we produce
that do not require customization for Kawasaki's applications. For any of
Kawasaki's applications that do require customization, we have one year to
customize our products before Kawasaki may obtain products from another
supplier. Our distribution arrangement with Kawasaki will automatically continue
through December 2004. The exclusivity term will continue through December 2001,
and may be extended beyond December 2001 upon the mutual agreement of the
parties. In addition, as part of our sales and marketing collaboration, Kawasaki
will dedicate personnel and funding to sales and marketing and development of
our solar power products. We are also collaborating on technical training, and
have agreed to explore the future possibility of joint manufacturing in Japan.

         We intend to selectively pursue additional strategic relationships with
other companies worldwide for the joint marketing, distribution and
manufacturing of our products. These resellers will range from large,
multinational corporations to small, development-stage companies, each chosen
for their particular market expertise. We believe that these relationships will
enable us to leverage the marketing, manufacturing and distribution capabilities
of larger companies, explore opportunities for additional product development,
and more easily and cost-effectively enter new geographic markets, attract new
customers and develop advanced solar power applications. We expect to target
such

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relationships particularly in the European on-grid and international off-grid
rural electrification markets.

     Since initiating our small pilot production line in 1997, our solar power
product sales have been limited by capacity constraints. As a result, we have
focused on smaller resellers whose needs have not vastly exceeded our production
levels. Sales to our ten largest resellers have accounted for more than 95% of
our total product revenues since inception. No one reseller has accounted for
more than 50% of total revenues over that period. As we seek to expand
manufacturing capacity and sales volumes, we anticipate developing relationships
with additional resellers. Through December 31, 2000, approximately 56% of our
sales were made to resellers in North America.

     In addition, we market our products through trade shows, on-going customer
communications, promotional material, direct mail and advertising. Our staff
provides limited customer service and applications engineering support to
customers while also gathering information on current product performance and
future product requirements. All solar power product sales are currently handled
by a small internal sales force. We anticipate that we will increase the size of
our sales force as necessary in connection with manufacturing capacity
increases.

MANUFACTURING

     Our principal manufacturing objective is to provide for large-scale
manufacturing of our solar power products at low costs that will enable us to
penetrate price-sensitive solar power markets. We currently manufacture our
solar power products at our headquarters in Waltham, Massachusetts. Our current
manufacturing facility includes a complete line of equipment to manufacture
String Ribbon wafers, fabricate and test solar cells, laminate and test panels,
and assemble and test systems.

     In March 2000, we signed a lease agreement for a 56,250 square foot
facility in Marlboro, Massachusetts, which will include approximately
35,000square feet of manufacturing space. We expect to relocate substantially
all our operations and begin manufacturing there by the middle of 2001. We have
designed our new facility to support approximately seven megawatts of capacity,
and believe it is ultimately capable of supporting up to 11 megawatts of
capacity provided we make equipment upgrades and technological improvements.

     In addition to our current investment in our new Marlboro, Massachusetts
facility for large-scale manufacturing in the United States, we intend to
selectively pursue opportunities to establish local manufacturing arrangements
on a worldwide basis. Because the market opportunity for solar power encompasses
numerous applications in both developed and developing nations worldwide, we
expect a significant portion of our sales to be made outside of the United
States. Despite these opportunities, manufacturing of solar power products has
remained largely concentrated in the United States, northern Europe and Japan
due to factors such as high capital costs, reduced economies of scale and
technical process complexities of establishing local manufacturing facilities.

     In spite of these barriers, we believe there are several advantages to
local manufacturing, including enhanced brand recognition in local markets,
avoidance of import tariffs and access to local private or public sector
financing. We believe that our String Ribbon technology and our innovative
manufacturing techniques offer greater modularity and lower per unit capital
costs than other competing technologies, which we believe will enable us to
establish fully integrated factories at a smaller scale that can better grow in
concert with market demands. Consequently, we expect to pursue local
manufacturing of our products in selected target markets. We also expect that
our technologies will allow us to efficiently scale our production to take
advantage of market opportunities as they arise.

RESEARCH AND DEVELOPMENT

     Because we believe continuously improving our technology is an important
part of our overall strategy, we have maintained and intend to maintain a strong
research and development effort. To this end, our Marlboro, Massachusetts
facility will have approximately 6,000 square feet dedicated to research and
development. The research and development portion of this facility will contain
equipment to support the development, fabrication and evaluation of new solar
power products and technologies.

     We have and will continue to selectively pursue contract research programs
funded by various United States and other governmental agencies to help support
the development of new proprietary technologies. We have four research contracts
that expire on various dates through October 31, 2003. The estimated research
revenues from these contracts from December 31, 2000 through their expiration in
2003, is approximately $2.2 million. These research contracts generally provide
for development of advanced materials and methods for wafer, cell and panel

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manufacturing, product development and market development. In all cases, we
retain all rights to any intellectual property and technological developments
resulting from the government funding, with the exception of government
"march-in" rights to practice the technology on its own behalf if we do not
commercialize the technology and certain rights universities retain for work
they perform under subcontract to us. These contracts usually require the
submission of technical progress reports, most of which can become publicly
available. These contracts are generally cost shared between us and the funding
agency with our share of the total contract cost ranging from approximately 30%
to 70%. The contracts normally expire between six months and three years from
their initiation. We had research revenues of, $1.4 million in 1998, $2.1
million in 1999 and $1.8 million in 2000, from several government-sponsored
research contracts. We recorded research and development expenditures, including
the cost of research revenue, of $2.4 million in 1998, $3.1 million in 1999 and
$3.3 million in 2000. For each of the years ended December 31, 1998, 1999 and
2000, revenues received from each of the Commonwealth of Massachusetts, National
Institute of Standards and Technology and the National Renewable Energy
Laboratory accounted for over 10% of our total revenues.

INTELLECTUAL PROPERTY RIGHTS

  Patents

         We believe that our commercial success will significantly depend on our
ability to protect our intellectual property rights underlying our proprietary
technologies. We seek United States and international patent protection for
major components of our technology platform, including our crystalline silicon
wafers, solar cells and solar panels. We own or have licensed 13 issued United
States patents and one issued Israeli patent in the solar power field, which
expire beginning in 2003 and ending in 2019. In addition, we have eight United
States patent applications pending. We decide whether and in what foreign
countries to file counterparts of our United States patent applications. We
devote substantial resources to building a strong patent position, and we intend
to continue to file additional United States and foreign patent applications to
seek protection for technology we deem important to our commercial success.

         Crystalline Silicon Wafers. Our core String Ribbon technology was
developed by Dr. Emanuel Sachs, a tenured Professor of Mechanical Engineering at
the Massachusetts Institute of Technology. Dr. Sachs has been awarded three
issued United States patents for the String Ribbon technology. An additional
issued 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 begin to expire in 2003. This agreement permits us to sublicense any
of our license and other rights under the agreement. The license is exclusive
worldwide, subject only to nonexclusive, nontransferable rights held by the
United States Department of Energy to practice the String Ribbon technology on
its own behalf. Our rights to the String Ribbon technology depend upon the
survival of our license from Dr. Sachs. Although our license is by its terms
irrevocable and terminates only upon expiration of the underlying patents, it is
possible that Dr. Sachs could seek to terminate the license if we materially
breach or default on our obligations to Dr. Sachs under the license, in
particular our obligation to pay royalties to Dr. Sachs. The termination of our
license from Dr. Sachs to the String Ribbon technology and our loss of the right
to practice under the String Ribbon patents would substantially impair our
business and prospects.

         We have been awarded two issued United States patents and have filed
two patent applications on our own, internally-developed inventions related to
String Ribbon, which are method inventions relating to automated, high-yield
production techniques.

         Solar Cell Fabrication. We have been awarded two issued United States
patents and have filed three additional United States patent applications
relating to our solar cell processing technology. The issued United States
patents relate to the method for forming wrap-around contacts on solar cells and
a method for processing solar cells. The three pending patent applications
relate to methods for processing solar cells.

         Solar Panels. We have been awarded five issued United States patents
and have filed three additional United States patent applications relating to
advanced solar panel designs. The five issued United States patents relate to
solar cell modules with an improved backskin, solar cell modules with an
interface mounting system, two for an encapsulant material for solar cell
modules and a solar cell roof tile system. The three pending patent

                                       8
<PAGE>   10
applications relate to new materials for encasing the panel which we believe
will lower cost, extend panel life and enhance panel performance.

         Patent positions of companies like ours are generally uncertain and
involve complex legal and factual questions. Furthermore, even if patents are
licensed or issued to us, others may design around the patented technologies. In
addition, we could incur substantial costs in litigation if we are required to
initiate patent litigation to enforce our patent rights, and the outcome of any
patent litigation is uncertain. Our patent positions may be impaired by the
following:

         -        our pending patent applications may not result in issued
                  patents;

         -        the claims of patents which are issued may not provide
                  meaningful protection;

         -        we may not develop additional proprietary technologies that
                  are patentable;

         -        patents licensed or issued to us may not provide a basis for
                  commercially viable products or may not provide us with
                  competitive advantages and may be challenged by third parties;
                  or

         -        patents of others may have an adverse effect on our ability to
                  do business.

         Although we do not believe that our technologies infringe the rights of
third parties, third parties could in the future assert infringement claims
against us which may result in costly litigation or require us to obtain a
license to third-party intellectual property rights. We may be unable to obtain
required licenses or obtain these licenses on terms which are acceptable to us,
either of which would substantially impair our business.

  Trade Secrets and Other Rights

         With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our interests. We believe
that several elements of our solar power products and manufacturing processes
involve proprietary know-how, technology or data which are not covered by
patents or patent applications. We have taken security measures to protect
proprietary know-how and technologies and confidential data, and continue to
explore further methods of protection. While we require all employees, key
consultants and other third parties to enter into confidentiality agreements
with us, we cannot assure you that proprietary information will not be disclosed
inappropriately, that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets, or that we can meaningfully protect our trade secrets. Any
material leak of confidential information into the public domain or to third
parties could result in the loss of a competitive advantage in the solar power
market.

COMPETITION

         The market for solar power products is intensely competitive. There are
over 20 companies in the world that produce solar power products, including BP
Solar, Kyocera Corporation, Siemens Solar Group, Sharp Corporation, AstroPower,
Inc. and Photowatt International S.A. All six of these solar power product
producers, as well as several others, derive all or a majority of their sales
from conventional manufacturing technology that involves using wafers made from
slicing solid blocks of crystalline silicon. In addition, most of these
companies are developing advanced crystalline silicon or thin film technologies,
including technologies such as advanced crystalline sheet and ribbon
technologies and thin films of amorphous silicon, cadmium telluride and copper
indium diselenide, and project future cost savings similar to or greater than
ours. We believe several of our competitors are developing and are currently
producing products based on crystalline silicon wafer technologies that, like
String Ribbon, do not involve slicing silicon blocks.

         We believe our current solar power products have features similar to
other crystalline silicon products, including those made using other crystalline
silicon ribbon technologies. However, because our solar power products are made
from crystalline silicon, we believe they may be more reliable than those made
from thin film technologies which often use materials, such as amorphous
silicon, which we believe may be less stable. In addition, we believe the
polymer-framed solar panels we are developing will be thinner, lighter and
easier to install than our competitors' panels, including those produced using
other crystalline silicon ribbon technologies. However, because these panels
will require different mounting techniques than our customers typically use, our
customers will need to

                                       9
<PAGE>   11
adopt these new mounting techniques and therefore may be reluctant to use our
polymer-framed panels.

         Solar power has certain advantages and disadvantages when compared to
other alternative energy sources. The advantages include the ability to deploy
products in many sizes and configurations, to install products almost anywhere
in the world, to provide reliable power for many applications, to serve as both
a power generator and the skin of a building and to eliminate air, water and
noise emissions. However, unlike most alternative energy generators which can
produce power on demand, solar power cannot generate power when sunlight is not
available. In addition, based on current technology, the upfront cost, including
installation, of alternative energy generators is often lower than that of solar
power products. However, we believe that the relative cost of power produced
over the lifetime of solar products as compared with alternative energy
generators often depends on the application. For example, solar power products
may be more cost-effective over the long-term for remote applications that are
not connected to the utility grid and that have smaller power requirements,
while alternative power sources may be more cost effective for larger,
grid-connected applications.

         Many of our competitors have substantially greater financial resources,
research and development staff, manufacturing facilities, sales and marketing
experience, distribution channels and human resources than we do. In order to
compete effectively against these companies, we will need to demonstrate to
potential customers and partners that our solar power products perform better,
are more reliable or are less expensive than those of our competitors.

         In addition, we believe that the market for solar power specifically,
and electric power in general, will be subject to rapid technological
development. This rapid development may result in some of our solar power
products becoming obsolete before we can recover development expenses. We also
expect that future competition will come not only from existing competitors, but
also from new entrants to the market with new technological solutions. We may be
unable to compete successfully against present and future competitors and our
failure to successfully compete could significantly reduce our market share, our
revenues and our prospects for profitability.

ENVIRONMENTAL REGULATIONS

         We use, generate and discharge toxic, volatile or otherwise hazardous
chemicals and wastes in our research and development and manufacturing
activities. We are subject to a variety of federal, state and local governmental
regulations related to the storage, use and disposal of hazardous materials. If
we fail to comply with present or future environmental regulations, we could be
subject to fines, suspension of production or a cessation of operations.

         We believe that we have all environmental permits necessary to conduct
our business and expect to obtain all necessary environmental permits for our
new facility. We believe that we have properly handled our hazardous materials
and wastes and have not contributed to any contamination at any of our premises.
We are not aware of any environmental investigation, proceeding or action by
federal or state agencies involving our current facilities or our newly leased
facilities where we will be relocating our operations. Any failure by us to
control the use of, or to restrict adequately the discharge of, hazardous
substances could subject us to substantial financial liabilities, operational
interruptions and adverse publicity, any of which could materially and adversely
affect our business, results of operations and financial condition. In addition,
under some federal and state statutes and regulations, a governmental agency may
seek recovery and response costs from operators of property where releases of
hazardous substances have occurred or are ongoing, even if the operator was not
responsible for the release or otherwise was not at fault.

EMPLOYEES

         As of December 31, 2000, we had 74 full-time employees, including 16
engaged in research and development and 54 engaged in manufacturing. Twelve of
our employees have advanced degrees, including three Ph.D.s. None of our
employees are represented by any labor union nor are they organized under a
collective bargaining agreement. We have never experienced a work stoppage and
believe that our relations with our employees are good.

ITEM 2. PROPERTIES:

         Our headquarters is currently located in a leased space in Waltham,
Massachusetts, where we currently occupy approximately 9,400 square feet of
administrative, laboratory and manufacturing space. Our lease expires on June
30, 2001.

                                       10
<PAGE>   12
         In March 2000, we entered into a 10-year lease for approximately 56,250
square feet of office, laboratory and manufacturing space in Marlboro,
Massachusetts. We plan to relocate all of our operations to the Marlboro
facility by the middle of 2001, after the space has been built out to our
manufacturing and other specifications.

ITEM 3. LEGAL PROCEEDINGS:

We are not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

No matters were submitted to a vote of security holders during the quarter ended
December 31, 2000.

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:

Market for Our Common Stock

Our common stock is traded on The Nasdaq National Market under the symbol
"ESLR". The following table sets forth for the calendar periods indicated, the
high and low sales price of our common stock on The Nasdaq National Market .

<TABLE>
<CAPTION>
                                                                     HIGH        LOW
                                                                     ----        ---
<S>                                                                 <C>         <C>
2000:
    Fourth Quarter (commencing November 2, 2000)............        $20.750     $6.000

2001:
    First Quarter (through March 9, 2001)...................        $13.625     $6.375
</TABLE>


On March 9, 2001 there were approximately 65 stockholders of record of our
common stock. The last reported sale price of the common stock on March 9, 2001
was $9.21 per share. We have never declared or paid cash dividends. We currently
intend to retain any earnings for use in our business and do not anticipate
paying any cash dividends on our capital stock in the foreseeable future.

Use of Proceeds

On October 31, 2000, the Securities and Exchange Commission declared effective
our registration statement on Form S-1 (file number 333-43140), relating to the
initial public offering of 3,000,000 shares of our common stock, $.01 par value
per share, at a price to the public of $14.00 per share. The offering commenced
on November 2, 2000 and closed on November 7, 2000. The aggregate offering price
to the public of the initial public offering was $42,000,000. The proceeds to
us, net of underwriting discounts and commissions of $2,940,000 and offering
expenses of $1,300,000, was approximately $37.7 million. Through December 31,
2000, we had not spent any of the net offering proceeds. We have invested all of
such proceeds in investment grade, interest-bearing securities. None of the net
proceeds from the offering were used to pay, directly or indirectly, directors,
officers, persons owning ten percent or more of our equity securities, or
affiliates of us.

Recent Sales of Unregistered Securities

During the fiscal year ended December 31, 2000, we granted stock options to
purchase an aggregate of 26,000 shares of common stock at a weighted average
exercise price of $6.43 per share, to employees and directors pursuant to our
2000 Stock Option and Incentive Plan and 401,153 shares of common stock at a
weighted average exercise price of $7.60 per share to employees, consultants and
directors under our 1994 Stock Option Plan. In addition, we issued 13,382 shares
of common stock during the three months ended December 31, 2000 in connection
with the exercise of outstanding options under our 1994 Stock Option Plan, by
nine of our employees and consultants, at a weighted average exercise price of
$1.43 per share. These option exercises resulted in aggregate proceeds to us of
approximately $19,112. No underwriters were involved in the foregoing stock or
option issuances. The foregoing stock and option issuances were exempt from
registration under the Securities Act of 1933, as amended, either pursuant to
Rule 701 under the Act, as transactions pursuant to a compensatory benefit plan,
or pursuant to Section

                                       11
<PAGE>   13
4(2) under the Act, as a transaction by an issuer not involving a public
offering.

In January 2000, we issued and sold 2,100,000 shares of our Series D redeemable
convertible preferred stock at a price per share of $2.50 to two accredited
investors and three non-U.S. persons, resulting in proceeds to us of
approximately $5,250,000. No underwriters were involved in the foregoing stock
issuances and the issuances were exempt from registration under the Securities
Act of 1933, as amended, pursuant to Rule 506 of Regulation D promulgated under
the Act, Regulation S promulgated under the Act or Section 4(2) under the Act,
as a transaction by an issuer not involving a public offering.

In November 2000, we issued 7,248,240 shares of our common stock in connection
with the conversion of 2,124,968 shares of our Series A redeemable convertible
preferred stock, 2,781,666 shares of our Series B redeemable convertible
preferred stock, 3,442,547 shares of our Series C redeemable convertible
preferred stock and 7,343,323 shares of our Series D redeemable convertible
preferred stock.

ITEM 6. SELECTED FINANCIAL DATA:

         You should read the data set forth below in conjunction with our
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this
filing. The statement of operations data presented below for the fiscal years
ended December 31, 1998, 1999 and 2000, and the balance sheet data at December
31, 1999 and 2000, have been derived from our financial statements which have
been audited by PricewaterhouseCoopers LLP, independent accountants, and which
appear elsewhere in this filing. The statement of operations data presented
below for the years ended December 31, 1996 and 1997, and the balance sheet data
at December 31, 1996, 1997 and 1998 have been derived from our financial
statements that have been audited by PricewaterhouseCoopers LLP and are not
included in this filing.


                                       12
<PAGE>   14

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                            ===============================================================
                                                              1996          1997          1998          1999          2000
                                                              ----          ----          ----          ----          ----
                                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                         <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Product revenues .....................................      $    --       $   153       $   163       $   189       $   419
Research revenues ....................................          587           556         1,395         2,113         1,753
                                                            -------       -------       -------       -------       -------
   Total revenues ....................................          587           709         1,558         2,302         2,172

Operating Expenses:
  Cost of product revenues ...........................           --         1,007           955           991         2,757
  Research and development expenses, including cost ..        1,346         2,051         2,373         3,085         3,266
  of research revenues
   Selling, general and administrative expenses ......          555           809           917         1,303         2,365
  Stock-based compensation expense ...................           --            --            --            18           294
                                                            -------       -------       -------       -------       -------
   Total operating expenses ..........................        1,901         3,867         4,245         5,397         8,682
                                                            -------       -------       -------       -------       -------
Operating income (loss) ..............................       (1,314)       (3,158)       (2,687)       (3,095)       (6,510)
Net interest income ..................................          120           102           165           163         1,305
                                                            -------       -------       -------       -------       -------
Net income (loss) ....................................       (1,194)       (3,056)       (2,522)       (2,932)       (5,205)
Accretion of redeemable convertible preferred stock ..         (415)         (537)         (953)       (1,231)       (2,283)
                                                            -------       -------       -------       -------       -------
Net income (loss) attributable to common stockholders       $(1,609)      $(3,593)      $(3,475)      $(4,163)      $(7,488)
                                                            =======       =======       =======       =======       =======
Net income (loss) per common share (basic and diluted)      $ (2.01)      $ (4.47)      $ (4.33)      $ (5.18)      $ (2.96)
Weighted average shares used in computing basic and
diluted net income (loss) per common share ...........          801           803           803           803         2,530
</TABLE>

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,
                                                       -------------------------------------------------------------------
                                                           1996         1997           1998          1999          2000
                                                           ----         ----           ----          ----          ----
                                                                                 (IN THOUSANDS)
<S>                                                     <C>           <C>             <C>          <C>            <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments       $ 3,887       $ 2,623          4,805       $ 14,455       $45,994
Working capital .................................         3,885           426          4,985         14,982        46,056
Total assets ....................................         4,441         3,755          5,893         16,318        55,783
Total redeemable convertible preferred stock ....         6,712         7,250         15,014         29,293            --
Total stockholders' equity (deficit) ............        (2,361)       (5,955)        (9,357)       (13,502)       54,143
</TABLE>


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

           We caution readers that statements in this Annual Report on Form 10-K
that are not strictly historical statements constitute forward-looking
statements which 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, including,
among other things, those risks and uncertainties described below in this Annual
Report under the caption "Certain Factors Which May Affect Future Results" and
in our other filings with the Securities and Exchange Commission. 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.

OVERVIEW

         We develop, manufacture and market solar power products for the global
marketplace. Solar cells are semiconductor devices that convert sunlight into
electricity and form the building block for all solar power products. To date,
our product sales have been primarily solar panels, which have been used to
generate electricity for on-grid and off-grid applications. Off-grid
applications have included the electrification of rural homes, lighting for
small,

                                       13
<PAGE>   15
rural schools and power supplies for water pumping. More recently, an increasing
percentage of our products have been used by on-grid customers as a clean,
renewable source of alternative or supplemental electricity.

         Product revenues. Product revenues consist of revenues from the sale of
solar cells, panels and systems. These revenues have been limited by our current
production capacity, and we are in the process of relocating our operations to a
new large-scale facility to permit greater manufacturing capacity. We recognize
product revenues upon shipment. Product revenues represented 19.0% of total
revenues for the year ended December 31, 2000 and 8.2% of total revenues for the
year ended December 31, 1999. For the year ended December 31, 2000, sales to
Kawasaki Heavy Industries, Ltd. accounted for approximately $372,000 of our
total $419,000 of product revenues. We anticipate that international sales,
including sales to Kawasaki, will continue to account for a significant portion
of our product revenues for the foreseeable future. Currently, all product
revenues are denominated in United States dollars and foreign exchange rate
fluctuations have not had a direct impact on the results of our operations.

         Research revenues. Research revenues consist of revenues from various
state and federal government agencies to fund our ongoing research, development,
testing and enhancement of our products and manufacturing technology. We have
not in the past, nor is it our intention in the future, to pursue contracts that
are not part of our ongoing research activities. We recognize research revenues
using the percentage of completion method.

         Cost of product revenues. Cost of product revenues consists primarily
of salaries and related personnel costs, materials expenses, depreciation
expenses, maintenance, royalties on licensed technology and other support
expenses associated with the manufacture of our solar power products. We expect
to continue to experience costs in excess of revenues until we achieve greater
efficiencies and higher production levels.

         Research and development expenses, including cost of research revenues.
Research and development expenses, including cost of research revenues, consist
primarily of salaries and related personnel costs, consulting expenses, and
prototype costs related to the design, development, testing and enhancement of
our products and manufacturing technology. We expense our research and
development expenses as incurred. We believe that research and development is
critical to our strategic objectives of enhancing our technology, reducing
manufacturing costs and meeting the changing requirements of our customers. As a
result, we expect that our total research and development expenses will increase
in the future.

         Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of salaries and related personnel
costs, professional fees, rent, insurance and other sales expenses. We expect
that selling expenses will increase substantially in absolute dollars as we
increase our sales efforts, hire additional sales personnel and initiate
additional marketing programs. We expect that selling, general and
administrative expenses will increase as we add personnel and incur additional
costs related to the growth of our business and our operations as a public
company.

         Stock-based compensation expense. During the years ended December 31,
1999 and 2000, we recorded total cumulative deferred compensation of
approximately $1.3 million representing the difference between fair market value
of the common stock on the option grant date and the exercise price. These
amounts were presented as a reduction of stockholders' equity and are being
amortized ratably over the vesting period of the options, which is generally
four years. The amortization resulted in charges to operations of $18,000 for
the year ended December 31, 1999 and $294,000 for the year ended December 31,
2000. We expect to recognize stock-based compensation expense for past grants of
approximately $295,000 for each of the years ended December 31, 2001 and 2002,
$292,000 for the year ended December 31, 2003 and $76,000 for the year ended
December 31, 2004.

         Net interest income. Net interest income consists primarily of interest
earned on the holding of short-term, high quality commercial paper, corporate
bonds and United States government-backed securities, less any interest paid on
our convertible debentures. We expect net interest income will increase during
the first half of 2001 as compared to the income earned in 2000 as we invest the
proceeds from our initial public offering of stock in high quality commercial
paper, corporate bonds and United States government-backed securities.

                                       14
<PAGE>   16
COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 1999

         Revenues. Our product revenues for the year ended December 31, 2000
were $419,000, an increase of $230,000, or 122%, from $189,000 for the same
period in 1999. Our increase in product revenues was due to capacity expansions
at our pilot manufacturing facility in Waltham, Massachusetts and the increase
of commercial sales to Kawasaki as a result of our distribution and marketing
arrangement with them. Research revenues for the year ended December 31, 2000
were $1.8 million, a decrease of $360,000, or 17%, from $2.1 million for the
same period in 1999. The decline in research revenues reflects reduced
expenditures on our research contracts, as one of our multi-year contracts was
completed and another neared completion in 2000.

         Cost of product revenues. Our cost of product revenues for the year
ended December 31, 2000 was $2.8 million, an increase of $1.8 million, or 178%,
from $991,000 for the same period in 1999. The increase in cost of product
revenues was primarily associated with our expanded pilot operations and our
preparation for the expansion and relocation of our manufacturing operations to
our new facility. Approximately one-third of the increase was due to increases
in materials expense, one-third was caused by increases in salary expense, and
one-quarter was caused by increases in consulting fees, with the remainder
caused by increases in storage, depreciation and royalty expense.

         Research and development expenses, including cost of research revenues.
Our research and development expenses, including cost of research revenues, for
the year ended December 31, 2000 were $3.3 million, an increase of $181,000, or
5.9%, from $3.1 million for the same period in 1999. The increase was due
primarily to an increase in consulting fees associated with designing and
developing new processes and equipment for our manufacturing expansion,
partially offset by a reduction in salary expense.

         Selling, general and administrative expenses. Our selling, general and
administrative expenses for the year ended December 31, 2000 were $2.4 million,
an increase of $1.1 million, or 82%, from $1.3 million in 1999. The increase is
nearly evenly divided among increases in rent expense, salary expense, and
professional fees. The increase in rent primarily reflects the start of rental
payments at our new facility and to a lesser extent an increase in our payments
for our Waltham facility. The increase in salary expense represents both
additional personnel, salary increases and bonuses. The increase in professional
fees was principally due to increased legal and auditing fees associated with
our increased requirements in these areas as a newly public company.

         Stock-based compensation expense. Our stock-based compensation expense
for the year ended December 31, 2000 was $294,000, an increase of $276,000, or
1,533%, from $18,000 for the same period in 1999. The increase in stock-based
compensation expense for the year ended December 31, 2000 was due to
amortization arising from options granted in 2000.

         Net interest income. Our net interest income for the year ended
December 31, 2000 was $1.3 million, an increase of $1.1 million, or 701%, from
$163,000 for the same period in 1999. The increase in net interest income was
due to higher average cash balances that resulted from the closing of a private
financing in December 1999 and January 2000, and the completion of our initial
public offering in November 2000.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

         Revenues. Our product revenues for the year ended December 31, 1999
were $189,000, an increase of $26,000, or 16%, from $163,000 for the year ended
December 31, 1998. The increase in product revenues was due to capacity
expansion at our pilot manufacturing facility. Research revenues for the year
ended December 31, 1999 were $2.1 million, an increase of $718,000, or 51%, from
$1.4 million for the year ended December 31, 1998. The increase in research
revenues was primarily attributable to the increased revenues from a three-year
$4.1 million cost shared contract that began in the middle of 1998.

         Cost of product revenues. Our cost of product revenues for the year
ended December 31, 1999 was $991,000, an increase of $36,000, or 3.8%, from
$955,000 for the year ended December 31, 1998. The increase was due primarily to
increased salary expense for the additional personnel associated with our
increased pilot manufacturing operations, including the addition of our Vice
President, Manufacturing in June 1999.

         Research and development expenses, including cost of research revenues.
Our research and development expenses, including cost of research revenues, for
the year ended December 31, 1999 were $3.1 million, an increase of $712,000, or
30%, from $2.4 million for the year ended December 31, 1998. The increase was
primarily due to increased salary expense, consulting fees and materials
expense.


                                       15
<PAGE>   17
         Selling, general and administrative expenses. Our selling, general and
administrative expenses for the year ended December 31, 1999 were $1.3 million,
an increase of $386,000, or 42%, from $917,000 for the year ended December 31,
1998. The increase was primarily due to increased salary expense, professional
fees and rent expense. Salary expense increased because of higher salaries and
the addition of new personnel, consulting fees increased because of growth in
general administrative requirements and legal fees associated with marketing
contract negotiations, and the increase in rent expense was due to a higher
rental rate associated with a lease extension for our Waltham, Massachusetts
facility.

         Stock-based compensation expense. Our stock-based compensation expense
for the year ended December 31, 1999 was $18,000. We recorded no stock-based
compensation expense for the year ended December 31, 1998. The expense in 1999
was due to amortization arising from options granted in 1999.

         Net interest income. Our net interest income for the year ended
December 31, 1999 was $163,000, a decrease of $2,000, or 1.2%, from $165,000 for
the year ended December 31, 1998. The slight decline in interest income was
attributable to a decline in average cash balances in 1999, which was almost
entirely offset by the elimination of interest expense resulting from the
conversion of $2.2 million of convertible debentures into preferred stock in
April 1998.

LIQUIDITY AND CAPITAL RESOURCES

         We have historically financed our operations and met our capital
expenditures requirements primarily through sales of our capital stock and to a
lesser extent from funds from operations, including primarily research revenues.
At December 31, 2000, we had cash, cash equivalents and short-term investments
of $46.0 million.

         Net cash used in operating activities was $2.4 million for the year
ended December 31, 1998, $2.6 million for the year ended December 31, 1999, and
$5.2 million for the year ended December 31, 2000. The increase in net cash used
in operating activities for the year ended December 31, 2000 was primarily due
to increases in our net loss and working capital associated with our capacity
expansion. The net cash used in operating activities represents primarily net
loss plus depreciation and changes in working capital. We expect net cash used
in operating activities to increase substantially in 2001 as we begin production
at our new manufacturing facility.

         Net cash used in investing activities was $4.1 million for the year
ended December 31, 1998, $8.7 million for the year ended December 31, 1999 and
$26.2 million for the year ended December 31, 2000. This cash represents
purchases, sales and maturities of high quality corporate paper, corporate bonds
and United States government-backed obligations with contractual maturities
typically less than one year and capital expenditures. Capital expenditures were
$123,000 for the year ended December 31, 1998, $383,000 for the year ended
December 31, 1999, and $7.1 million for the year ended December 31, 2000. The
increase in capital expenditures for the year ended December 31, 2000 was for
equipment needed for our new manufacturing facility. As of December 31, 2000,
our outstanding commitments for capital expenditures were $5.0 million. Nearly
all of our commitments for capital expenditures are associated with
infrastructure improvements and equipment purchases for our new manufacturing
facility. We expect to fund our capital commitments using proceeds from our
initial public offering which closed in November 2000. In addition to the $7.1
million of capital expenditures in 2000, we expect to spend an additional $10 to
$13 million on capital expenditures related to our new manufacturing facility
during the first half of 2001. We expect further capital expenditures will be
required after the first half of 2001 to achieve increases in capacity at our
new facility.

         Net cash provided by financing activities was $4.6 million for the year
ended December 31, 1998, $12.6 million for the year ended December 31, 1999, and
$43.0 million for the year ended December 31, 2000. The cash provided by
financing activities in the years ended December 31, 1998 and 1999 represents
private placements of our redeemable convertible preferred stock and for the
year ended December 31, 2000 represents private placements of redeemable
convertible preferred stock and the sale of common stock in our initial public
offering. In December 1997, we issued $2.2 million in convertible debentures
bearing interest at 8% per annum and maturing in December 1998. The debentures
converted into 1,142,547 shares of redeemable convertible preferred stock in
April 1998.

         We believe our current cash, cash equivalents and short-term
investments will be sufficient to satisfy our projected operating and capital
expenditures needs for at least the next 12 months. We anticipate that we will
need additional financing to execute our business model after that time or
sooner if we need to respond to business contingencies. These contingencies may
include the need to enhance our operating infrastructure, respond to

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<PAGE>   18
competitive pressures and acquire complementary businesses or necessary
technologies. We do not know whether we will be able to raise additional
financing or financing on terms favorable to us. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
operations, develop our manufacturing operations and distribution network, or
otherwise respond to competitive pressures would be significantly limited.

INCOME TAXES

         As of December 31, 2000, we had federal net operating loss and tax
credit carryforwards totaling approximately $14.8 million and $602,500 available
to reduce future taxable income and tax liabilities and which expire at various
dates between 2009 and 2015. In addition, as of December 31, 2000 we had state
net operating loss and tax credit carryforwards totaling approximately $14.6
million and $368,000 available to reduce future taxable income and tax
liabilities and which expire at various dates between 2001 and 2005. Under
provisions of the Internal Revenue Code, substantial changes in our ownership
may limit the amount of net operating loss carryforwards and tax credit
carryforwards, which can be used in any future year. As required by Financial
Accounting Statement No. 109, we have evaluated the positive and negative
evidence bearing on the realizability of these assets and we have fully reserved
the deferred tax asset.

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition Financial Statements", which
provides guidance related to revenue recognition based on interpretations and
practices promulgated by the Commission. We have retroactively adopted the
guidance of SAB 101 for all periods presented in our financial statements and
this adoption did not have a material impact on our financial position or
results of operations.

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The standard established accounting and
reporting standards requiring the recognition of all derivative instruments as
either assets or liabilities in the statement of financial position and the
measure of those instruments at fair value. In June 1999, the FASB issued SFAS
No. 137, which defers the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. Because we do not currently hold any derivative
instruments and do not currently engage in hedging activities, we expect the
adoption of FAS No. 133 will not have a material impact on our financial
position or operating results.

         In March 2000, FASB issued FASB Interpretation 44, "Accounting for
Certain Transactions Involving Stock Compensation -- an Interpretation of
Accounting Principles Board Opinion 25". FASB Interpretation 44 clarifies the
application of Accounting Principles Board Opinion 25 and among other issues
clarifies the definition of an employee for compensatory plan purposes, the
accounting consequence of various modifications to the terms of previously fixed
stock options or awards, and the accounting for an exchange of stock
compensation awards in a business combination. FASB Interpretation 44 was
effective July 1, 2000, but certain conclusions in FASB Interpretation 44 cover
specific events that occurred after either December 15, 1998 or January 12,
2000. The application of FASB Interpretation 44 has not had a material impact on
our financial position or results of operations to date.

CERTAIN FACTORS WHICH MAY AFFECT FUTURE RESULTS

         We caution readers that statements in this Annual Report on Form 10-K
that are not strictly historical statements, including, but not limited to,
statements reflecting management's expectations regarding the timing, cost, and
success of the Company's relocation to its new facility in Marlboro,
Massachusetts and future manufacturing scale-up and production; future financial
performance; the Company's technology and product development, cost and
performance; the Company's current and future strategic relationships and future
market opportunities; and the Company's other business and technology strategies
and objectives, constitute forward-looking statements which 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, those risks and uncertainties described below and in our other
filings with the Securities and Exchange Commission, 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

                                       17
<PAGE>   19
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.

RISKS RELATING TO OUR FINANCIAL RESULTS

YOU MAY HAVE DIFFICULTY EVALUATING OUR BUSINESS AND PROSPECTS DUE TO OUR LIMITED
OPERATING HISTORY.

    We are at an early stage of development and there is limited historical
information available upon which you can base your evaluation of our business
and prospects. We were formed in 1994 to research and develop crystalline
silicon technology for use in manufacturing solar power products. Although we
began shipping product from our pilot manufacturing facility in 1997, the
primary objective of our pilot production line was the technical development and
further refinement of our String Ribbon technology and related manufacturing
processes. We have shipped only approximately 4,000 solar power panels as of
December 31, 2000 and have recognized limited revenues since our inception.

    In addition, our earlier stage of development means that we have less
insight into how market and technology trends may affect our business. The
revenue and income potential of our business is unproven and the market we are
addressing is rapidly evolving. You should consider our business and prospects
in light of the risks, expenses and challenges that we will face as an
early-stage company seeking to develop and manufacture new products in an
emerging and rapidly evolving market.

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.

    Since our inception, we have incurred significant net losses, including net
losses of $5.2 million for the year ended December 31, 2000. As a result of
ongoing operating losses, we had a cumulative net loss of $15.7 million as of
December 31, 2000. We expect to incur substantial losses for the foreseeable
future, and may never become profitable. Even if we do achieve profitability, we
may be unable to sustain or increase our profitability in the future, which
could materially decrease the market value of our common stock. We expect to
continue to incur significant capital expenditures and anticipate that our
expenses will increase substantially in the foreseeable future as we seek to:

    -   expand our manufacturing operations;

    -   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 do not know whether our revenues will grow at all or grow rapidly enough to
absorb these expenses, and our limited operating history makes it difficult to
assess the extent of these expenses or their impact on our operating results.

OUR STOCK PRICE COULD FALL SUBSTANTIALLY IF OUR QUARTERLY REVENUE OR OPERATING
RESULTS FLUCTUATE OR ARE DISAPPOINTING.

    Our quarterly revenue and operating results have fluctuated significantly in
the past and may fluctuate significantly from quarter to quarter in the future
due to a variety of factors, many of which are discussed elsewhere in this
section.

    We anticipate that our operating expenses will continue to increase
significantly. If sales in any quarter do not increase correspondingly, our net
losses for that period will increase. For these reasons, quarter-to-quarter
comparisons of our results of operations are not necessarily meaningful and you
should not rely on results of operations in any particular quarter as an
indication of future performance. If our quarterly revenue or results of
operations fall below the expectations of investors or public market analysts in
any quarter, the market value of our common stock would likely decrease, and may
decrease rapidly and substantially.

                                       18
<PAGE>   20
RISKS RELATING TO OUR INDUSTRY, PRODUCTS AND OPERATIONS

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.

    The market for solar power products is emerging and rapidly evolving, and
its future success is uncertain. If solar power technology proves unsuitable for
widespread commercial deployment or if demand for solar power products fails to
develop sufficiently, we would be unable to generate enough revenues to achieve
and sustain profitability. In addition, demand for solar power products in the
markets and geographic regions we target may not develop or may develop more
slowly than we anticipate. Many factors will influence the widespread adoption
of solar power technology and demand for solar power products, including:

    -   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 microturbines;

    -   fluctuations in economic and market conditions which 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;

    -   continued deregulation of the broader energy industry; and

    -   availability of government subsidies and incentives.

WE MAY FAIL TO SUCCESSFULLY DEVELOP OUR NEW SOLAR POWER PRODUCTS UNDER
DEVELOPMENT, WHICH WOULD PREVENT US FROM ACHIEVING INCREASED SALES AND MARKET
SHARE.

    Although we have been selling our solar power products since 1997, we expect
to derive a substantial portion of our revenues from sales of our new solar
power products which are under development and not yet commercially available.
Many of these new products are derived from our innovative cell fabrication and
advanced panel design technologies, which are under development. If we fail to
successfully develop our new solar power products or technologies, we will
likely be unable to recover the losses we will have incurred to develop these
products and technologies and may be unable to increase our sales and market
share and to become profitable. Much of our new product and manufacturing
technologies are novel and represent a departure from conventional solar power
technologies, and it is difficult to predict whether we will be successful in
completing their development. Our manufacturing technologies have been tested
only in our pilot manufacturing facility and, in most cases, only limited
pre-production prototypes of our new products have been field tested.

OUR SOLAR POWER PRODUCTS MAY NOT GAIN MARKET ACCEPTANCE, WHICH WOULD PREVENT US
FROM ACHIEVING INCREASED SALES AND MARKET SHARE.

    The development of a successful market for our solar power products may be
adversely affected by a number of factors, many of which are beyond our control,
including:

    -   our failure to produce solar power products which compete favorably
        against other solar power products on the basis of cost, quality and
        performance;

    -   our failure to produce solar power products which compete favorably
        against conventional energy sources and alternative distributed
        generation technologies, such as fuel cells, on the basis of cost,
        quality and performance;

    -   whether customers accept the thin polymer-frame design of our solar
        panels and the new techniques we are developing to mount them; and

                                       19
<PAGE>   21
    -   our failure to develop and maintain successful relationships with
        distributors, systems integrators and other resellers, as well as
        strategic partners such as Kawasaki.

If our solar power products fail to gain market acceptance, we would be unable
to increase our sales and market share and to achieve and sustain profitability.

TECHNOLOGICAL CHANGES IN THE SOLAR POWER INDUSTRY COULD RENDER OUR SOLAR POWER
PRODUCTS OBSOLETE, WHICH COULD REDUCE OUR MARKET SHARE AND CAUSE OUR SALES TO
DECLINE.

    Our failure to further refine our technology and develop and introduce new
solar power products could cause our products to become obsolete, which could
reduce our market share and cause our sales to decline. The solar power industry
is rapidly evolving and competitive. We will need to invest significant
financial resources in research and development to keep pace with technological
advances in the solar power industry and to effectively compete in the future.
We believe that there are a variety of competing solar power technologies under
development by other companies that could result in lower manufacturing costs
than those expected for our solar power products. Our development efforts may be
rendered obsolete by the technological advances of others, and other
technologies may prove more advantageous for the commercialization of solar
power products.

THE COMPLETION OF OUR NEW MANUFACTURING FACILITY MAY BE DELAYED AND WE MAY INCUR
GREATER COSTS THAN WE EXPECT.

    If we fail to successfully complete our new manufacturing facility and begin
large-scale manufacturing there on time and at budgeted costs, our business and
results of operations will likely be materially impaired. Our pilot
manufacturing facility in Waltham, Massachusetts is not adequate to accommodate
significant increases in production. As a result, we entered into a lease in
March 2000 for a 56,250 square foot facility in Marlboro, Massachusetts, which
includes approximately 35,000 square feet of manufacturing space. The design,
renovation and start-up of this facility will require a significant investment
of capital and substantial engineering expenditures, and is subject to
significant risks, including risks of cost overruns, delays, equipment problems
and other start-up and operating difficulties. Our manufacturing processes use
custom-built equipment which may not be delivered and installed in our new
facility in a timely manner. In addition, this equipment may take longer to
debug than planned and may never operate as designed. If we experience any of
these or similar difficulties, our manufacturing capacity could be substantially
constrained and our revenues and earnings would likely be materially impaired.

WE MAY NOT BE ABLE TO MANUFACTURE OUR SOLAR POWER PRODUCTS IN SUFFICIENT
QUANTITIES OR AT ACCEPTABLE COSTS TO MEET CUSTOMER DEMAND.

    To date, we have focused primarily on research and development of our solar
power products and have limited experience manufacturing large volumes of our
solar power products on a commercial basis. Furthermore, we may not be able to
achieve our manufacturing cost targets. If we cannot achieve our targeted
production volumes or capacity or if we experience capacity constraints, quality
control problems or other disruptions, we may not be able to manufacture our
products in large volumes or at acceptable costs and may be unable to satisfy
the demand of our customers, which would reduce our market share and revenues
and may harm our reputation. The expansion of our manufacturing operations to
achieve targeted production volumes will require the successful deployment of
advanced equipment and technology utilizing manufacturing processes and
components which we are currently developing.

THE SUCCESS OF OUR BUSINESS AND OUR FUTURE PROSPECTS DEPEND SIGNIFICANTLY UPON
OUR STRATEGIC DISTRIBUTION AND MARKETING RELATIONSHIP WITH KAWASAKI.

    In December 1999, we entered into a five-year distribution and marketing
agreement with Kawasaki, under which we appointed Kawasaki our exclusive
distributor in Japan. During the fiscal year ended December 31, 2000, sales to
Kawasaki accounted for over 85% of our product revenues. We expect that a
substantial portion of our product revenues for the foreseeable future will
continue to be derived from sales of our products to Kawasaki. If our
relationship with Kawasaki is not successful, our sales may not increase or may
decrease and our reputation may be harmed. Any change in our relationship with
Kawasaki, including any decision by Kawasaki to reduce its commitment to our
solar power technologies or to focus on a different energy technology, could
harm our business by reducing our potential revenues and diminishing our market
share.

OUR ABILITY TO INCREASE MARKET SHARE AND SALES DEPENDS ON OUR ABILITY TO
SUCCESSFULLY MAINTAIN OUR EXISTING

                                       20
<PAGE>   22
DISTRIBUTION RELATIONSHIPS AND EXPAND OUR DISTRIBUTION CHANNELS.

    We currently sell our solar power products primarily to distributors, system
integrators and other value-added resellers within and outside of North America,
which typically resell our products to end users on a global basis. Through
December 31, 2000, we sold our solar power products to more than 10
distributors, system integrators and other value-added resellers. If we are
unable to successfully maintain our existing distribution relationships and
expand our distribution channels, our revenues and future prospects will be
materially harmed. As we seek to grow our sales by entering new markets in which
we have little experience selling our solar power products, our ability to
increase market share and sales will depend substantially on our ability to
expand our distribution channels by identifying, developing and maintaining
relationships with resellers both within and outside of North America. We may be
unable to enter into relationships with resellers in the markets we target or on
terms and conditions favorable to us, which could prevent us from entering these
markets or entering these markets in accordance with our plans. Our ability to
enter into and maintain relationships with resellers will be influenced by the
relationships between these resellers and our competitors, market acceptance of
our solar power products and our low brand recognition as a new entrant.

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 GROW OUR BUSINESS ABROAD.

    From our inception through December 31, 2000, approximately 44% of our
product sales have been made to resellers outside North America. We expect that
our sales both to resellers and distributors outside of North America and
through our resellers and distributors to end users outside of North America
will increase in the future, including sales made in Japan to Kawasaki. We will
require significant management attention and financial resources to successfully
develop our international sales channels. In addition, the marketing,
distribution and sale of our solar power products internationally exposes us to
a number of risks that we have not yet encountered due to the limited number of
products we have sold internationally. If we are unable to effectively manage
these risks, it could impair our ability to grow our business abroad. These
risks include:

    -   difficult and expensive compliance with the commercial and legal
        requirements of international markets, with which we have only limited
        experience;

    -   inability to obtain intellectual property protection;

    -   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; and

    -   difficulty of enforcing revenue collection internationally.

    We expect that our international sales will be generally denominated in
United States dollars. As a result, increases in the value of the United States
dollar relative to foreign currencies would cause our products to become less
competitive in international markets and could result in limited, if any, sales
and profitability. To the extent that we denominate sales in foreign currencies,
we will be exposed to increased risks of currency fluctuations.

    Our strategy includes establishing local manufacturing facilities in
international markets, although we have not yet done so. As we implement our
strategy, we may encounter legal and commercial restrictions and incur taxes and
other expenses to establish our manufacturing facilities in certain countries.
In addition, we may potentially forfeit, voluntarily or involuntarily, foreign
assets due to economic or political instability in the countries where our local
manufacturing facilities are located.

OUR DEPENDENCE ON A SMALL NUMBER OF RESELLERS MAY CAUSE SIGNIFICANT FLUCTUATIONS
OR DECLINES IN OUR PRODUCT REVENUES.

    From our inception through December 31, 2000, our three largest resellers
accounted for approximately 64% of our product sales and our 10 largest
resellers accounted for approximately 95% of our product sales. We anticipate
that sales of our solar power products to a limited number of key resellers,
including Kawasaki, will continue to account for a significant portion of our
total product revenues for the foreseeable future. Consequently, any one of the
following events may cause significant fluctuations or declines in our product
revenues:

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<PAGE>   23
    -   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.

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 AND WE MAY EXPERIENCE ORDER CANCELLATION AND LOSS OF MARKET
SHARE.

    We manufacture all of our solar power products using materials and
components procured from a limited number of third-party suppliers. If we fail
to develop or maintain our relationships with these or our other suppliers, we
may be unable to manufacture our products or our products may be available only
at a higher cost or after a long delay, which could prevent us from delivering
our products to our customers within required timeframes and we may experience
order cancellation and loss of market share. We currently do not have contracts
with most of our suppliers and may not be able to procure sufficient quantities
of the materials and components necessary to manufacture our products on
acceptable commercial terms or at all. To the extent the processes that our
suppliers use to manufacture materials and components are proprietary, we may be
unable to obtain comparable materials and components from alternative suppliers.
The failure of a supplier to supply materials and components in a timely manner,
or to supply materials and components that meet our quality, quantity and cost
requirements could impair our ability to manufacture our products and/or
increase their costs, particularly if we are unable to obtain substitute sources
of these materials and components on a timely basis or on terms acceptable to
us. In addition, our manufacturing processes utilize custom-built equipment that
is currently produced by a limited number of suppliers. A supplier's failure to
supply this equipment in a timely manner, with adequate quality and on terms
acceptable to us could delay our capacity expansion to our new manufacturing
facility and otherwise, disrupt our production schedule or increase our costs of
production.

OUR USE OF FORECASTS TO MANAGE OUR INVENTORY COULD RESULT IN INSUFFICIENT
QUANTITIES TO MEET RESELLER DEMAND OR EXCESS INVENTORY.

    We generally do not obtain purchase orders prior to the production of our
solar power products. Instead, we rely on forecasts to determine the timing of
our production schedules and the volume of product to be manufactured. The level
and timing of orders placed by our resellers may vary for many reasons. As a
result, at any particular time, we may not have enough inventory to meet demand
or we may have excess inventory, each of which could negatively impact our
operating results. In addition, as we manufacture more solar power products
without related purchase orders, we increase our risk of loss of revenues due to
the obsolescence of products held in inventory for which we have already
incurred production costs.

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 have attracted a highly skilled management team and specialized
workforce, including scientists, engineers, researchers, and manufacturing and
marketing professionals. If we were to lose the services of Mark A. Farber, our
Chief Executive Officer, President and a director, or Dr. Jack I. Hanoka, our
Chief Technical Officer, or any of our other executive officers and key
employees, our business could be materially and adversely impacted. We had 74
employees as of December 31, 2000, and anticipate that we will need to hire a
significant number of new highly-skilled technical, manufacturing, sales and
marketing, and administrative personnel if we are to successfully develop and
market our products, develop our distribution network, and operate our expanded
manufacturing facility. In addition, the growing demands of our business have
created the need for additions to our management team. As a result, we recently
hired a new Vice President of Marketing and Sales and, last year, began a search
for a new Chief Financial Officer. We recently decided to suspend our search for
a new Chief Financial Officer, but may renew this search at some point in the
future. Competition for personnel is intense, and qualified technical personnel
are likely to remain a limited resource for the foreseeable future. Locating
candidates with the appropriate qualifications, particularly in the desired
geographic location, can be costly and difficult. We may not be able to hire the
necessary personnel to implement our business strategy, or we may need to
provide higher compensation or training to our personnel than we currently
anticipate. Moreover, any officer or employee can terminate his or her
relationship with us at any time.

                                       22
<PAGE>   24
OUR MANAGEMENT TEAM MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS
STRATEGIES BECAUSE IT HAS LIMITED EXPERIENCE MANAGING A RAPIDLY GROWING COMPANY
AND KEY MANAGEMENT POSITIONS HAVE NOT BEEN FILLED.

    The existing members of our management team have had only limited experience
managing a rapidly growing company on either a public or private basis. We are
undergoing rapid growth in the size of our physical plant, the scope of our
operations and the number of our employees, which is likely to place a
significant strain on our senior management team and other resources. In
addition, we may encounter difficulties in effectively managing the budgeting,
forecasting and other process control issues presented by our rapid growth. If
our management team is unable to manage the rapid growth of our business
operations, then our product development, the expansion of our manufacturing
operations and distribution network, and our sales and marketing activities
would be materially and adversely affected.

WE ARE LIKELY TO REQUIRE ADDITIONAL FINANCING AND MAY NOT BE ABLE TO RAISE
ADDITIONAL FINANCING OR FINANCING ON FAVORABLE TERMS.

    We currently anticipate that our current cash, cash equivalents and
short-term investments, will be sufficient to meet our anticipated needs for
expanding and developing our manufacturing and distribution capabilities,
funding ongoing research and development, expanding our sales and marketing
activities, and funding our operations and general corporate purposes through at
least the next 12 months. We anticipate that we are likely to need additional
financing to execute our business model after that time or sooner if we need to
respond to business contingencies. These contingencies may include the need to:

    -   enhance our manufacturing and operating infrastructure;

    -   respond to competitive pressures; and

    -   acquire complementary businesses or necessary technologies.

    We do not know whether we will be able to raise additional financing or
financing on terms favorable to us. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our operations, develop
our manufacturing operations and distribution network, or otherwise respond to
competitive pressures would be significantly limited. In addition, if we raise
additional funds through the issuance of equity or convertible debt securities,
the percentage ownership of our existing stockholders will be reduced. These
newly issued securities may have rights, preferences and privileges senior to
those of existing stockholders.

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.

    The solar power market is intensely competitive and rapidly evolving. If our
competitors establish a market position more prominent than ours and we fail to
attract and retain customers and establish a successful distribution network for
our solar power products, we may be unable to increase our sales and market
share. A number of the largest companies in the world, including BP Solar, which
is a division of BP Amoco, Siemens Solar Group, Kyocera Corporation and Sharp
Corporation, as well as a number of other large and small companies, including
AstroPower, Inc., have developed or are developing solar power products that
compete with ours. Other existing and potential competitors in the solar power
market include universities and research institutions. We also expect that
future competition will include new entrants to the solar power market offering
new technological solutions. Further, many of our competitors are developing and
are currently producing products based on new solar power technologies,
including other crystalline silicon ribbon and sheet technologies, that they
believe will ultimately have costs similar to or lower than our projected costs.

    Most of our competitors are substantially larger than we are, have longer
operating histories and have substantially greater financial, technical,
manufacturing and other resources than we do. Many also have greater name
recognition, a more established distribution network and a larger installed base
of customers. In addition, many of our competitors have well-established
relationships with our current and potential customers and have extensive
knowledge of our target markets. As a result, our competitors may be able to
devote greater resources to the research, development, promotion and sale of
their products and respond more quickly to evolving industry standards and
changing customer requirements than we can.

                                       23
<PAGE>   25
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY, WE COULD LOSE
OUR COMPETITIVE ADVANTAGE IN THE SOLAR POWER MARKET.

    Our ability to compete effectively against competing solar power
technologies will depend, in part, on our ability to protect our current and
future proprietary technology, product designs and manufacturing processes
through a combination of patent, copyright, trademark, trade secret and unfair
competition laws. We may not be able to adequately protect our intellectual
property and may need to defend our intellectual property against infringement
claims, either of which could result in the loss of our competitive advantage in
the solar power market and materially harm our business and profitability. We
face the following risks in protecting our intellectual property:

    -   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;

    -   our license, but not our right, to practice the String Ribbon technology
        terminates upon expiration of the underlying patents which begin to
        expire in 2003 and our historical operating experience with String
        Ribbon and our related patented and proprietary manufacturing processes
        may not adequately protect our competitive advantage after these patents
        have expired;

    -   third parties may design around our patented technologies or seek to
        challenge or invalidate our patented technologies;

    -   we may incur significant costs and diversion of management resources in
        prosecuting or defending patent infringement suits;

    -   we may not be successful in prosecuting or defending patent infringement
        suits and, as a result, may need to seek to obtain a license of the
        third party's intellectual property rights; however, a license may not
        be available to us or may not be available to us on commercially
        reasonable terms; and

    -   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 disclosed
        to the public.

EXISTING REGULATIONS AND CHANGES RESULTING FROM ELECTRIC UTILITY DEREGULATION
MAY PRESENT TECHNICAL, REGULATORY AND ECONOMIC BARRIERS TO THE PURCHASE AND USE
OF SOLAR POWER PRODUCTS, WHICH MAY SIGNIFICANTLY REDUCE DEMAND FOR OUR PRODUCTS.

    The market for electricity generation products is heavily influenced by
federal, state and local government regulations and policies concerning the
electric utility industry, as well as internal policies and regulations
promulgated by electric utilities. These regulations and policies often relate
to electricity pricing and technical interconnection of customer-owned
electricity generation. In the United States and in a number of other countries,
these regulations and policies are being modified and may continue to be
modified. Customer purchases of, or further investment in the research and
development of, alternative energy sources, including solar power technology,
could be deterred by these regulations and policies which could result in a
significant reduction in the potential demand for our solar power products.

    We anticipate that our solar power products and their installation will be
subject to oversight and regulation in accordance with national and local
ordinances relating to building codes, safety, environmental protection, utility
interconnection and metering and related matters. Any new government regulations
or utility policies pertaining to our solar power products may result in
significant additional expenses to us, our resellers and their customers and, as
a result, could cause a significant reduction in demand for our solar power
products.

THE REDUCTION OR ELIMINATION OF GOVERNMENT SUBSIDIES AND ECONOMIC INCENTIVES FOR
ON-GRID APPLICATIONS COULD CAUSE OUR SALES TO DECLINE.

    We believe that the growth of some of our target markets, including the
market for on-grid applications, depends in part on the availability and size of
government subsidies and economic incentives. Accordingly, the reduction or
elimination of government subsidies and economic incentives may adversely affect
the growth of these markets, which could cause our sales to decline. Today, the
cost of solar power substantially exceeds the cost of power furnished by the
electric utility grid. As a result, federal, state and local governmental bodies
in many countries,

                                       24
<PAGE>   26
most notably the United States, Japan and Germany, have provided subsidies in
the form of cost reductions, tax write-offs and other incentives to end users,
distributors, systems integrators and manufacturers of solar power products to
promote the use of solar energy in on-grid applications and to reduce dependency
on other forms of energy. These government subsidies and economic incentives
could be reduced or eliminated altogether.

THE LACK OR INACCESSIBILITY OF FINANCING FOR OFF-GRID SOLAR POWER APPLICATIONS
COULD CAUSE OUR SALES TO DECLINE.

    One of our key markets is off-grid solar power applications to developing
countries. In some developing countries, government agencies and the private
sector have provided from time to time subsidies or financing on preferred terms
for rural electrification programs. We believe that the availability of
financing could have a significant effect on the level of sales of off-grid
solar power applications, particularly in developing countries where users may
not have sufficient resources or credit to otherwise acquire solar power
systems. If existing financing programs for off-grid solar power applications
are eliminated or if financing is inaccessible, the growth of the market for
off-grid applications may be adversely affected, which could cause our sales to
decline.

OUR RELIANCE ON GOVERNMENT CONTRACTS TO PARTIALLY FUND OUR RESEARCH AND
DEVELOPMENT PROGRAMS COULD IMPAIR OUR ABILITY TO COMMERCIALIZE OUR SOLAR POWER
TECHNOLOGIES AND WOULD INCREASE OUR RESEARCH AND DEVELOPMENT EXPENSES.

    We intend to continue our policy of selectively pursuing contract research,
product development, and market development programs funded by various agencies
of the United States, state and international governments to complement and
enhance our own resources. The percentage of our total revenues derived from
government-related contracts was approximately 81% for the fiscal year ended
December 31, 2000. We currently have four active research contracts with total
estimated revenues of approximately $6.5 million, $5.1 million of which has been
authorized by the sponsoring agency and $4.3 million of which has been recorded
as revenue as of December 31, 2000. The remaining $2.2 million of revenue will
be recognized over the remaining life of these contracts which expire at various
dates between March 31, 2001 and October 31, 2003. These government agencies may
not continue their commitment to programs to which our development projects are
applicable. Moreover, we may not be able to compete successfully to obtain
funding through these or other programs. A reduction or discontinuance of these
programs or of our participation in these programs would increase our research
and development expenses, which could impair our ability to develop our solar
power technologies.

    In addition, contracts involving government agencies may be terminated at
the convenience of the agency. Other risks include potential disclosure of our
confidential information to third parties and the exercise of "march-in" rights
by the government. Our government-sponsored research contracts require that we
provide regular written technical updates on a monthly, quarterly or annual
basis, and, at the conclusion of the research contract, a final report on the
results of our technical research. Because these reports are generally available
to the public, some aspects of our sensitive confidential information may be
obtained by third parties. March-in rights refer to the right of the United
States government or government agency to require us to grant a license to the
technology to a responsible applicant or, if we refuse, the government may grant
the license itself. The government can exercise its march-in rights if it
determines that action is necessary because we fail to achieve practical
application of the technology, or because action is necessary to alleviate
health or safety needs, or to meet requirements of federal regulations, or to
give United States industry preference. Funding from government contracts also
may limit when and how we can deploy our technology developed under those
contracts.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS CAN BE EXPENSIVE AND INADVERTENT
NONCOMPLIANCE MAY RESULT IN ADVERSE PUBLICITY AND POTENTIALLY SIGNIFICANT
MONETARY DAMAGES AND FINES.

    We are required to comply with all federal, state and local regulations
regarding protection of the environment. If more stringent regulations are
adopted in the future, the costs of compliance with these new regulations could
be substantial. We believe that we have all necessary permits to conduct our
business as it is presently conducted. If we fail to comply with present or
future environmental regulations, however, we may be required to pay substantial
fines, suspend production or cease operations. We use, generate and discharge
toxic, volatile and otherwise hazardous chemicals and wastes in our research and
development and manufacturing activities. Any failure by us to control the use
of, or to restrict adequately the discharge of, hazardous substances could
subject us to potentially significant monetary damages and fines. In addition,
under some federal and state statutes and regulations, a governmental agency may
seek recovery and response costs from operators of property where releases of
hazardous substances have occurred or are ongoing, even if the operator was not
responsible for such release or otherwise at fault.

                                       25
<PAGE>   27
PRODUCT WARRANTY CLAIMS COULD REDUCE OUR PROFITABILITY.

    As is consistent with standard practice in our industry, the duration of our
product warranties is lengthy relative to expected product life and has recently
been increasing. Our current standard product warranty includes a one-year
warranty period for defects in material and workmanship and a 20-year warranty
period for declines in power performance. We believe our warranty periods are
consistent with industry practice. Due to the long warranty period, we bear the
risk of extensive warranty claims long after we have shipped product and
recognized revenues.

PRODUCT LIABILITY CLAIMS AGAINST US COULD RESULT IN ADVERSE PUBLICITY AND
POTENTIALLY SIGNIFICANT MONETARY DAMAGES.

    Like other retailers, distributors and manufacturers of products that are
used by consumers, we face an inherent risk of exposure to product liability
claims in the event that the use of the solar power products we sell results in
injury. Since our products are electricity producing devices, it is possible
that consumers could be injured or killed by our products, whether by product
malfunctions, defects, improper installation or other causes. In addition, since
sales of our existing products have been modest and the products we are
developing incorporate new technologies and use new installation methods, we
cannot predict whether product liability claims will be brought against us in
the future or the effect of any resulting adverse publicity on our business.
Moreover, we may not have adequate resources in the event of a successful claim
against us. We have evaluated the potential risks we face and believe that we
have appropriate levels of insurance for product liability claims. We rely on
our general liability insurance to cover product liability claims and have not
obtained separate product liability insurance. If our insurance protection is
inadequate, the successful assertion of product liability claims against us
could result in potentially significant monetary damages.

RISKS ASSOCIATED WITH THE MARKET FOR OUR COMMON STOCK

OUR OFFICERS AND DIRECTORS CONTROL 44% OF OUR COMMON STOCK AND MAY BE ABLE TO
SIGNIFICANTLY INFLUENCE CORPORATE ACTIONS.

    As of March 9, 2001, our executive officers, directors and entities
affiliated with them controlled approximately 44% of our common stock. As a
result, these stockholders, acting together, may be able to significantly
influence all matters requiring approval by our stockholders, including the
election of directors, the approval of charter and by-law amendments, and the
approval of mergers or other business combinations.

THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

    The stock market has, from time to time, experienced extreme price and
trading volume fluctuations, and the market prices of technology companies such
as ours have been extremely volatile. Our operating performance will
significantly affect the market price of our common stock. To the extent we are
unable to compete effectively and gain market share or the other factors
described in this section affect us, our stock price will likely decline. The
market price of our common stock also may be adversely impacted by broad market
and industry fluctuations regardless of our operating performance, including
general economic and technology trends. In addition, companies that have
experienced volatility in the market price of their stock have been the subject
of securities class action litigation. We may be involved in securities class
action litigation in the future. This litigation often results in substantial
costs and a diversion of management's attention and resources.

THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE COULD CAUSE OUR STOCK PRICE
TO DECLINE.

    The market price of our common stock could decline a result of sales by our
existing stockholders of a large number of shares of our common stock in the
market or the perception that these sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate. Approximately 8,170,327 shares of our
outstanding common stock and 636,027 shares of our common stock subject to
currently exercisable options and warrants are subject to contractual
restrictions on resale between each of the stockholders and Banc of America
Securities LLC, the lead manager of our initial public offering which closed in
November 2000. On or about April 29, 2001 these shares will be available for
sale in the public market, subject in some cases to compliance with Rule 144 of
the Securities Act of 1933, as amended.

WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS AND UNDER
DELAWARE LAW THAT COULD

                                       26
<PAGE>   28
DELAY OR PREVENT AN ACQUISITION OF OUR COMPANY, EVEN IF THE ACQUISITION WOULD BE
BENEFICIAL TO OUR STOCKHOLDERS.

    Provisions of our certificate of incorporation, our by-laws and Delaware law
could make it more difficult and expensive for a third party to pursue a tender
offer, change in control transaction or takeover attempt which is opposed by our
board of directors. Stockholders who wish to participate in these transactions
may not have the opportunity to do so. We also have a staggered board of
directors which makes it difficult for stockholders to change the composition of
our board of directors in any one year. If a tender offer, change in control
transaction, takeover attempt or change in our board of directors is prevented
or delayed, the market price of our common stock could decline.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

INTEREST RATE RISK

We do not use derivative financial instruments. We generally place our
marketable security investments in high credit quality instruments. We do not
expect any material loss from our marketable security investments and therefore
believe that our potential interest rate exposure is not material.

FOREIGN CURRENCY EXCHANGE RATE RISK

All of our sales are denominated in United States dollars. Accordingly, we have
not been materially exposed to fluctuations in currency exchange rates. As we
expand our manufacturing operations and distribution network internationally,
our exposure to fluctuations in currency exchange rates may increase, but we do
not believe this increase will be material.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

The Company's Financial Statements and related Notes and Report of Independent
Accountants are included beginning on page F-1 of this Annual Report on Form
10-K.

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

Not applicable.


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:

The information required under this item may be found under the sections
captioned "Election of Directors", "Occupations of Directors and Executive
Officers", and "Section 16(a) Beneficial Ownership Reporting Compliance" in our
Proxy Statement (the "2000 Proxy Statement"), which will be filed with the
Securities and Exchange Commission not later than 120 days after the close of
our fiscal year ended December 31, 2000, and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION:

The information required under this item may be found under the section
captioned "Compensation and Other Information Concerning Directors and Officers"
in the 2000 Proxy Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:

The information required under this item may be found under the section
captioned "Securities Ownership of Certain Beneficial Owners and Management" in
the 2000 Proxy Statement, and is incorporated herein by reference.

                                       27
<PAGE>   29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

The information required under this item may be found under the caption "Certain
Relationships and Related Transactions" in the 2000 Proxy Statement, and is
incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K:

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

                  1. Consolidated Financial Statements. The financial statements
included in Item 8 of Part II which appear beginning on page F-1 of this Annual
Report on Form 10-K.

                  2. Financial Statement Schedules. Schedule II - Valuation and
Qualifying Accounts appears on page F-17 of this Annual Report on Form 10-K.

                  3. Exhibits. The following exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
------                                            -----------
<S>           <C>
 3.1 (1)      Third Amended and Restated Certificate of Incorporation of the Registrant.  (Exhibit 3.2)
 3.2 (1)      Second Amended and Restated By-laws of the Registrant.  (Exhibit 3.4)
10.1 (1)*     1994 Stock Option Plan.  (Exhibit 10.1)
10.2 (1)*     2000 Stock Option and Incentive Plan.  (Exhibit 10.2)
10.3 (1)*     2000 Employee Stock Purchase Plan.  (Exhibit 10.3)
10.4 (1)      Lease between Registrant and 211 Second Avenue Realty L.P.  dated as of September 15, 1995, as
              amended.  (Exhibit 10.4)
10.5 (1)      Lease Agreement between Registrant W9/TIB Real Estate Limited Partnership dated as of January 31,
              2000, as amended (Exhibit 10.5)
10.6 (1)+     Distribution and Marketing Agreement between Registrant and Kawasaki Heavy Industries, Ltd.
              dated as of December 24, 1999.  (Exhibit 10.6)
10.7 (1)+     Agreement between Registrant and Emanuel M.  Sachs dated as of September 30, 1994, as amended.
              (Exhibit 10.7)
10.8 (1)      Series D Preferred Stock Purchase Agreement dated as of December 28, 1999.  (Exhibit 10.8)
10.9 (1)      Form of Indemnification Agreement between Registrant and each of its directors and executive
              officers. (Exhibit 10.9)
21.1          Subsidiaries of the Registrant (filed herewith)
23.1          Consent of PricewaterhouseCoopers LLP, independent accountants.  (filed herewith)
24.1          Power of Attorney. (included on Page II-2)
</TABLE>


+ 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
    Registration Statement on Form S-1, as amended (file No. 333-43140). The
    number given in parenthesis indicates the corresponding exhibit number in
    such Form S-1.


         (b)  Reports on Form 8-K:

              No reports on Form 8-K were filed during the fiscal quarter ended
December 31, 2000.

         (c)  Exhibits:

              The Company hereby files as part of this Annual Report on Form
10-K the exhibits listed in Item 14(a)(3) set forth above. Exhibits which are
incorporated herein by reference may be inspected and copied at the

                                       28
<PAGE>   30
public reference facilities maintained by the SEC at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
regional offices located at Seven World Trade Center, Suite 1300, New York, New
York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611-2511. Copies of such material may be obtained by mail
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The public may obtain
information on the operation of the Public Reference Room by calling
1-800-SEC-0330. The SEC also maintains a Website that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC at the address "http://www.sec.gov".


                                       29
<PAGE>   31
                          INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                        PAGE
<S>                                                                                                     <C>
Report of Independent Accountants                                                                        F-2

Consolidated Balance Sheets as of December 31, 1999 and 2000                                             F-3

Consolidated Statements of Operations for the years ended December 31, 1998, 1999 and 2000               F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1998,
  1999 and 2000                                                                                          F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1999 and 2000               F-6

Notes to Financial Statements                                                                            F-7

Schedule II - Valuation and Qualifying Accounts                                                          F-17
</TABLE>


                                      F-1
<PAGE>   32
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Evergreen Solar, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity (deficit), and of
cash flows present fairly, in all material respects, the financial position of
Evergreen Solar, Inc. and its subsidiary at December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the index appearing under Item 14(a)
on page 28 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 15, 2001


                                      F-2
<PAGE>   33
EVERGREEN SOLAR, INC.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
================================================================================

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                             1999           2000
<S>                                                                                        <C>            <C>
         ASSETS

Current assets:

  Cash and cash equivalents                                                                $  1,466       $ 13,171
  Investments                                                                                12,989         32,823
  Accounts receivable, net of allowance for doubtful accounts of $10 and $13 at
    December 31, 1999 and 2000                                                                  299            850
  Unbilled grant receivable                                                                      96             99
  Subscription receivable for Series D preferred stock                                          400             --
  Inventory                                                                                     134            408
  Other current assets                                                                          125            345
                                                                                           --------       --------
           Total current assets                                                              15,509         47,696

Restricted cash                                                                                  --            464
Fixed assets, net                                                                               809          7,623
                                                                                           --------       --------
           Total assets                                                                    $ 16,318       $ 55,783


      LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
           STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable                                                                         $    253       $    661
  Accrued employee compensation                                                                 123            462
  Accrued initial public offering financing costs                                                --            225
  Accrued legal fees                                                                             90             75
  Other accrued expenses                                                                         39            169
  Accrued warranty                                                                               22             48
                                                                                           --------       --------
           Total current liabilities                                                            527          1,640

Commitments

Redeemable convertible preferred stock (Note 6)                                              29,293             --
                                                                                           --------       --------

Stockholders' equity (deficit):
  Preferred stock; $.01 par value, no shares authorized, issued or outstanding,
   1,000,000 shares authorized, no shares issued and outstanding at December 31, 1999
    and 2000, respectively                                                                       --             --
  Common stock, $0.01 par value, 28,000,000 and 30,000,000 shares authorized, 802,537
   and 11,170,327 shares issued and outstanding at December 31, 1999 and 2000,
    respectively                                                                                  8            111
  Additional paid-in capital                                                                    400         70,671
  Accumulated deficit:
     Cumulative net income (loss) since inception                                           (10,475)       (15,680)
     Deferred compensation                                                                     (300)          (959)
     Accretion of redeemable convertible preferred stock                                     (3,135)            --
                                                                                           --------       --------
           Total stockholders' equity (deficit)                                             (13,502)        54,143
                                                                                           --------       --------
           Total liabilities, redeemable convertible preferred stock and
             stockholders' equity  (deficit)                                               $ 16,318       $ 55,783
                                                                                           ========       ========
</TABLE>


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


                                      F-3
<PAGE>   34
EVERGREEN SOLAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
================================================================================

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                              1998          1999          2000
<S>                                                                         <C>            <C>          <C>
Revenues:
  Product revenues                                                          $   163       $   189       $   419
  Research revenues                                                           1,395         2,113         1,753
                                                                            -------       -------       -------
           Total revenues                                                     1,558         2,302         2,172

Operating expenses:
  Cost of product revenues (excluding stock-based compensation
    of $0 for the year ended December 31, 1999, and $38 for
      the year ended

    December 31, 2000, respectively)                                            955           991         2,757
  Research and development expenses, including costs of research
     revenues (excluding stock-based compensation of $33 for the
      year ended December 31, 1999 and $116 for the year
        ended December 31, 2000, respectively)                                2,373         3,085         3,266
  Selling, general and administrative expenses (excluding stock-based
    compensation of $15 for the year ended December 31, 1999 and $140
    for the year ended December 31, 2000, respectively)                         917         1,303         2,365
  Stock-based compensation expense                                               --            18           294
                                                                            -------       -------       -------
           Total operating expenses                                           4,245         5,397         8,682
                                                                            -------       -------       -------
           Operating income (loss)                                           (2,687)       (3,095)       (6,510)

Net interest income                                                             165           163         1,305
                                                                            -------       -------       -------
Net income (loss)                                                            (2,522)       (2,932)       (5,205)

Accretion of redeemable convertible preferred stock                            (953)       (1,231)       (2,283)
                                                                            -------       -------       -------
Net income (loss) attributable to common stockholders                       $(3,475)      $(4,163)      $(7,488)
                                                                            =======       =======       =======
Net income (loss) per common share (basic and diluted)                      $ (4.33)      $ (5.18)      $ (2.96)

Weighted average shares used in computing basic and diluted net income
  (loss) per common share                                                       803           803         2,530
</TABLE>


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


                                      F-4
<PAGE>   35
EVERGREEN SOLAR, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED DEFICIT
                                                                                       --------------------------
                                                                                                     ACCRETION OF
                                                                                       CUMULATIVE     REDEEMABLE
                                                            ADDITIONAL                  NET LOSS     CONVERTIBLE        TOTAL
                                          COMMON STOCK       PAID-IN     DEFERRED        SINCE        PREFERRED       SHAREHOLDERS'
                                       SHARES     AMOUNT     CAPITAL   COMPENSATION    INCEPTION        STOCK       EQUITY (DEFICIT)
<S>                                    <C>        <C>        <C>       <C>             <C>           <C>           <C>
Balance at December 31, 1997             803       $  8      $     9      $     -       $ (5,021)      $  (951)         $ (5,955)

Issuance of warrants                                              73                                                          73

Accretion of redeemable
convertible
preferred stock                                                                                           (953)             (953)

Net loss                                                                                  (2,522)                         (2,522)
                                      ------       ----      -------      ------        --------       -------         ---------

Balance at December 31, 1998             803          8           82                      (7,543)       (1,904)          (9,357)

Deferred compensation                                            318        (318)                                              -

Compensation expense associated
  with stock options                                                          18                                              18

Accretion of redeemable
 convertible
 preferred stock                                                                                        (1,231)           (1,231)


Net loss                                                                                  (2,932)                         (2,932)
                                      -------      ----      -------      ------        --------       -------         ---------

Balance at December 31, 1999             803          8          400        (300)        (10,475)       (3,135)          (13,502)

Issuance of common stock
 pursuant
  to IPO                               3,000         30       37,737                                                      37,767

Issuance of common stock
 pursuant to
 exercise of options                     119          1          102                                                         103

Issuance and revaluation
 of stock
  options to consultants                                         176                                                         176

Deferred compensation                                            953        (953)                                              -

Compensation expense
 associated with
  stock options                                                              294                                             294

Accretion of redeemable
 convertible
 preferred stock                                                                                        (2,283)          (2,283)

Conversion of preferred
to common                              7,248         72       31,303                                     5,418            36,793

Net loss                                                                                  (5,205)                         (5,205)
                                      ------       ----      -------      ------        --------       -------         ---------

Balance at December 31, 2000          11,170       $111      $70,671      $ (959)       $(15,680)      $     -         $  54,143
                                      ======       ====      =======      ======        ========       =======         =========
</TABLE>



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


                                      F-5
<PAGE>   36
EVERGREEN SOLAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
================================================================================

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                          1998           1999          2000
<S>                                                                    <C>            <C>            <C>
Cash flows for operating activities:

  Net income (loss)                                                    $ (2,522)      $ (2,932)      $ (5,205)
   Adjustments to reconcile net income (loss) to net cash used in
     operating activities:
     Depreciation                                                           320            246            286
     Non-cash investment income                                             (36)           (16)          (984)
     Issuance and revaluation of stock options to consultants                --             --            176
     Compensation expense associated with employee stock options             --             18            294
     Changes in operating assets and liabilities:
       Inventory and other current                                           (6)          (212)          (294)
       Accounts receivable                                                 (149)           (26)          (554)
       Accounts payable and accrued expenses                                  3            291          1,113
                                                                       --------       --------       --------
           Net cash used in operating activities                         (2,390)        (2,631)        (5,168)

Cash flow for investing activities:

  Purchases of fixed assets                                                (123)          (383)        (7,100)
  Purchases of investments                                               (7,842)       (16,809)       (38,423)
  Proceeds from sale and maturity of investments                          3,881          8,479         19,373
                                                                       --------       --------       --------

           Net cash used in investing activities                         (4,084)        (8,713)       (26,150)

Cash flow from financing activities:

  Restricted cash                                                            --             --           (464)
  Proceeds from issuance of Redeemable Convertible Preferred
    Stock                                                                 4,600         12,648          5,617
  Proceeds from the issuance of common stock for IPO                         --             --         37,767
  Proceeds from the exercise of stock options                                --             --            103
                                                                       --------       --------       --------

Net cash flow provided by financing activities                            4,600         12,648         43,023

Net (decrease) increase in cash and cash equivalents                     (1,874)         1,304         11,705

Cash and cash equivalents at beginning of period                          2,036            162          1,466
                                                                       --------       --------       --------

Cash and cash equivalents at end of period                             $    162       $  1,466       $ 13,171
                                                                       ========       ========       ========

Supplemental cash flow information:

  Interest paid                                                        $     --       $     --       $     --
   Taxes paid                                                          $     --       $     --       $     --
Noncash transactions:
  Deferred compensation                                                $     --       $    318       $    953
</TABLE>


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

                                      F-6
<PAGE>   37
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================


1.       NATURE OF BUSINESS

         Evergreen Solar, Inc. (the "Company"), incorporated in August 1994,
         develops, manufactures and markets solar power products, including
         solar cells, panels and systems. In April 1997 the Company commenced
         product sales. The Company has incurred losses since inception and has
         an accumulated deficit which has been funded by issuing debt and equity
         securities. In November 2000, the Company completed an initial public
         offering of 3,000,000 common shares at $14.00 per share. After
         deducting underwriting commissions and other offering expenses totaling
         $4.3 million, the Company received $37.7 million from this offering. In
         the opinion of management, the Company may need to raise additional
         financing to permit the required investment in equipment, materials and
         resources necessary to further develop and commercialize the Company's
         products. However, no assurances can be provided that such financing
         will be available when needed or on terms acceptable to the Company, if
         at all.

         The Company is subject to risks common to companies in the high
         technology and energy industries including, but not limited to,
         development by the Company or its competitors of new technological
         innovations, dependence on key personnel, protection of proprietary
         technology and compliance with government regulations. In addition, the
         Company currently expects to relocate into new headquarters and
         manufacturing space in April 2001. Any delay in this move may result in
         increased costs and could impair business operations.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A summary of the major accounting policies followed by the Company in
         the preparation of the accompanying financial statements is set forth
         below. Certain previously reported amounts may have been reclassified
         to conform to the current method of presentation.

         BASIS OF PRESENTATION
         The consolidated financial statements include the accounts of the
         Company's wholly-owned subsidiary, Evergreen Securities, Inc. All
         material intercompany accounts and transactions have been eliminated.

         REVERSE STOCK SPLIT
         In September 2000, the Company's board of directors declared a reverse
         stock split of 1 share for every 2.165 shares of common stock then
         outstanding. The reverse stock split became effective at the date the
         Company's registration statement for its initial public offering was
         declared effective. Accordingly, the accompanying financial statements
         and footnotes have been restated to reflect the stock split.

         USE OF ESTIMATES
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         dates of the financial statements and the reported amounts of revenues
         and expenses during the reporting periods. Actual results could differ
         from those estimates.

         CASH AND INVESTMENTS
         Cash and cash equivalents consist of cash and highly liquid investments
         with maturities of three months or less from the date of purchase and
         whose carrying amount approximates fair value.

         The Company's investments are classified as available-for-sale. At
         December 31, 1999 the Company held US government agency bonds and
         treasury notes. At December 31, 2000 the Company held US government
         agency bonds, treasury notes, municipal bonds, corporate bonds and
         commercial paper. The investments generally mature within one year from
         the date of purchase and are carried at amortized cost, on a specific
         identification basis, which approximates fair value. There were no
         realized or unrealized gains or losses recognized during any of the
         periods presented.

         Cash and investments are financial instruments which potentially
         subject the Company to concentrations of credit risk.

         INVENTORY
         Inventory is stated at the lower of cost (determined on a first-in,
         first-out basis) or market.


                                      F-7
<PAGE>   38
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

         FIXED ASSETS
         Fixed assets are recorded at cost. Provisions for depreciation are
         based on their estimated useful lives using the straight-line method
         over three to seven years for all laboratory and manufacturing
         equipment, computers, and office equipment. Leasehold improvements are
         depreciated over the shorter of the remainder of the lease's term or
         the life of the improvements. Upon retirement or disposal, the cost of
         the asset disposed of and the related accumulated depreciation are
         removed from the accounts and any gain or loss is reflected in income.

         IMPAIRMENT OF LONG-LIVED ASSETS
         The Company evaluates the recoverability of its long-lived assets,
         primarily fixed assets, in accordance with Statement of Financial
         Accounting Standards No. 121 "Accounting for the Impairment of
         Long-Lived Assets to be Disposed of." SFAS 121 requires recognition of
         impairment of long-lived assets in the event the net book value of such
         assets exceeds the estimated future undiscounted cash flows
         attributable to such assets. No impairments were required to be
         recognized during the years ended December 31, 1998, 1999 and 2000.

         REVENUE RECOGNITION
         The Company's revenue recognition policy complies with SAB 101.
         Research grant revenue is recognized as the services are performed.
         Research contract revenue is recognized on the percentage of completion
         method based on the ratio that total cost incurred to date bears to
         total estimated cost at completion. For all periods presented, costs of
         research contract revenues equaled research revenues. Revenue from
         product sales is recognized at shipment provided that no significant
         obligations remain outstanding and the resulting receivable is
         reasonably assured. Unbilled grant receivable relates to work that has
         recently been performed for which no invoice has been made as of period
         end. While the Company's accounting for research contract costs are
         subject to audit by the sponsoring agency, in the opinion of
         management, no material adjustments are expected as a result of such
         audits.

         RESEARCH AND DEVELOPMENT
         All research and development costs are expensed as incurred.

         INCOME TAXES
         The Company accounts for income taxes under the liability method, which
         requires recognition of deferred tax assets, subject to valuation
         allowances, and liabilities for the expected future tax consequences of
         events that have been included in the financial statements or tax
         returns. Deferred income taxes reflect the net tax effects of temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting and income tax purposes. A valuation allowance is
         established if it is more likely than not that all or a portion of the
         net deferred tax assets will not be realized.

         COMPREHENSIVE LOSS
         The Company adopted SFAS No. 130, "Reporting Comprehensive Income,"
         effective January 1, 1998. There are no differences between net loss
         and comprehensive loss.

         STOCK-BASED COMPENSATION
         The Company applies the accounting provisions of Accounting Principles
         Board ("APB") Opinion 25 and related interpretations and has elected
         the disclosure-only alternative permitted under Statement of Financial
         Accounting Standards Board ("SFAS") No. 123, Accounting for Stock-Based
         Compensation. The Company has disclosed herein pro forma net income in
         the footnotes using the fair value based method. All stock-based awards
         to nonemployees are accounted for at their fair market value, as
         calculated using the Black-Scholes model in accordance with SFAS No.
         123.

         NET INCOME (LOSS) PER COMMON SHARE
         The Company computes net income (loss) per common share by dividing net
         income (loss) attributable to common stockholders by the weighted
         average number of common shares outstanding. The calculation of diluted
         net income (loss) per common share for the years ended December 31,
         1998, 1999 and 2000 does not include 4,665,385, 7,346,308 and 8,574,695
         potential shares of common stock equivalents, respectively, as their
         inclusion would be antidilutive. Common stock equivalents include
         outstanding common stock options, common stock warrants and redeemable
         convertible preferred stock.

         SEGMENT REPORTING
         The Company operates in a single segment: the sale of solar energy. The
         Company has no organizational structure dictated by product lines,
         geography or customer type. Major customer and geographic area revenue
         disclosures are presented in Note 12.


                                      F-8
<PAGE>   39
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

         RECENT PRONOUNCEMENTS
         In June 1998, the Financial Accounting Standards Board, ("FASB") issued
         SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities." The standard established accounting and reporting
         standards requiring the recognition of all derivative instruments as
         either assets or liabilities in the statement of financial position and
         the measure of those instruments at fair value. In June 1999, the FASB
         issued SFAS No. 137, which defers the effective date of SFAS No. 133 to
         fiscal years beginning after June 15, 2000. Because the Company does
         not currently hold any derivative instruments and does not currently
         engage in hedging activities, the adoption of SFAS No. 133 will not
         have a material impact on our financial position or operating results.

3.       INVENTORY

         Inventory consists of finished goods of $124,000 and 178,000 and raw
         materials of $10,000 and $230,000 at December 31, 1999 and 2000,
         respectively.


                                      F-9
<PAGE>   40
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

4.       FIXED ASSETS

         Fixed assets consisted of the following at December 31, 1999 and 2000
         (in thousands):

<TABLE>
<CAPTION>
                                                           USEFUL                       DECEMBER 31,
                                                            LIFE                     1999         2000
<S>                                           <C>                                   <C>        <C>
         Laboratory and manufacturing

           equipment                                      3-7 years                 $1,241     $  4,441
         Computer and office equipment                    3-7 years                     79          168
         Leasehold improvements               Lesser of 3-5 years or lease term        123          117
         Assets under construction                                                     269        4,080
                                                                                    ------     --------

                                                                                     1,712        8,806
         Less accumulated depreciation                                                (903)      (1,183)
                                                                                    ------     --------

                                                                                    $  809     $  7,623
                                                                                    ======     ========
</TABLE>

         Depreciation expense for the years ended December 31, 1998, 1999 and
         2000 was $320,000, $246,000 and $286,000, respectively. As of December
         31, 2000, the Company had outstanding commitments for capital
         expenditures of $5.0 million.

5.       INCOME TAXES

         Income taxes computed using the federal statutory income tax rate
         differ from the Company's effective tax rate primarily due to the
         following for the years ended December 31, 1998, 1999 and 2000 (in
         thousands):

<TABLE>
<CAPTION>
                                                                           1998        1999         2000
<S>                                                                       <C>         <C>         <C>
         Income tax expense (benefit) at
           US federal statutory tax rate                                  $ (855)     $ (997)     $ (1,770)
         State income taxes, net of federal
           tax effect                                                       (221)       (313)         (162)
         Permanent items                                                       7           2            77
         Other                                                               (41)       (160)         (147)
         Change in deferred tax asset valuation allowance                  1,110       1,468         2,002
                                                                          ------      ------      --------

         Provision for income taxes                                       $    -      $    -      $      -
                                                                          ======      ======      ========
</TABLE>

         At December 31, 2000, the Company has federal and state net operating
         loss carryforwards of approximately $14,756,000 and $14,590,000
         available to reduce future taxable income and which expire at various
         dates between 2001 through 2015. The Company also has federal and state
         research and development tax credit carryforwards of approximately
         $602,500 and $368,000, respectively, available to reduce future tax
         liabilities and which expire at various dates between 2003 and 2015.
         Under the provisions of the Internal Revenue Code, certain substantial
         changes in the Company's ownership may result in a limitation on the
         amount of net operating loss carryforwards and research and development
         credit carryforwards which can be used in future years.

         Management of the Company has evaluated the positive and negative
         evidence bearing upon the realizability of its deferred tax assets.
         Management has considered the Company's history of losses and, in
         accordance with the applicable accounting standards, has fully reserved
         the deferred tax asset.

         Deferred tax assets consist of the following at December 31, 1999 and
         2000 (in thousands):


                                      F-10
<PAGE>   41
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

<TABLE>
<CAPTION>
                                                                                    1999          2000
<S>                                                                               <C>           <C>
         Net operating loss carryforwards                                         $  4,175      $  5,932
         Research and development credit carryforwards                                 818           846
         Other                                                                          52           269
                                                                                  --------      --------

         Deferred tax assets                                                         5,045         7,047
         Deferred tax valuation allowance                                           (5,045)       (7,047)
                                                                                  --------      --------

                                                                                  $      -      $      -
                                                                                  --------      --------
</TABLE>

6.       STOCKHOLDERS' EQUITY

         The Company has two classes of capital stock: common and preferred. At
         December 31, 2000, 713,646 shares of common stock were authorized for
         issuance under the Company's 1994 Stock Option Plan pursuant to
         outstanding options and 1,650,000 shares were authorized for issuance
         under the Company's 2000 Stock Option and Incentive Plan. In August
         2000, 120,000 shares were authorized for issuance under the Company's
         2000 Employee Stock Purchase Plan. No shares were issued under the
         Employee Stock Purchase Plan in the year ended December 31, 2000.

         In November 2000, the Company completed an initial public offering of
         3,000,000 common shares at $14.00 per share. After deducting
         underwriting commissions and other offering expenses totaling $4.3
         million, the Company received net proceeds of $37.7 million from this
         offering. Upon the closing of the initial public offering, the Company
         increased the authorized common stock to 30,000,000.

         From December 1999 to February 2000, the Company closed its Series D
         Redeemable Convertible Preferred Stock financing of 10,000,000
         authorized shares, resulting in the issuance of 7,343,323 shares at
         $2.50 per share for $18,358,308 cash proceeds. As part of the December
         financing described above, Kawasaki Heavy Industries, Ltd. ("Kawasaki")
         (also see Note 10) purchased 2,000,000 shares of Series D Redeemable
         Convertible Preferred Stock at $2.50 per share. In 1998, 3,442,547
         shares of Series C Redeemable Convertible Preferred Stock were issued
         at $2.00 per share. In 1996, 2,781,666 shares of Series B Redeemable
         Convertible Preferred Stock were issued at $1.50 per share. Upon the
         closing of the initial public offering the preferred stockholders
         authorized the conversion of all shares of preferred stock into common
         stock.


                                      F-11
<PAGE>   42
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

         At December 31, 1999 and 2000 total redeemable convertible preferred
         stock was comprised as follows:

<TABLE>
<CAPTION>
                                                                                          1999         2000
         Redeemable convertible preferred stock:
<S>                                                                                      <C>           <C>
           Series A redeemable convertible preferred stock, $0.01 par value,
             2,124,968 and no shares authorized, issued and outstanding at
             December 31, 1999 and 2000, respectively
           Series A paid-in-capital                                                      $ 2,125       $  -
           Accretion to redemption value                                                     889          -
                                                                                         -------       ----

                                                                                           3,014          -

           Series B redeemable convertible preferred stock, $0.01 par value,
             2,781,666 and no shares authorized, issued and outstanding
              at December 31, 1999 and 2000, respectively
           Series B paid-in-capital                                                        4,173          -
           Accretion to redemption value                                                   1,268          -
                                                                                         -------       ----

                                                                                           5,441          -

           Series C redeemable convertible preferred stock, $0.01 par value,
              3,442,547 and no shares authorized, issued and outstanding at
              December 31, 1999 and 2000, respectively
           Series C paid-in-capital                                                        6,812          -
           Accretion to redemption value                                                     966          -
                                                                                         -------       ----

                                                                                           7,778          -

           Series D redeemable convertible preferred stock, $0.01 par value,
            10,000,000 shares authorized and 5,243,323 issued and
             outstanding at December 31, 1999 and
              no shares authorized, issued and outstanding at December 31, 2000
           Series D paid-in-capital                                                      $13,048       $  -
           Accretion to redemption value                                                      12          -
                                                                                         -------       ----

                                                                                          13,060          -
                                                                                         -------       ----

                    Total redeemable convertible preferred stock                         $29,293       $  -
                                                                                         =======       ====
</TABLE>


7.       STOCK OPTION PLANS

         On October 24, 1994, the Board of Directors approved the Company's 1994
         Stock Option Plan (the "Plan"), whose purpose is to encourage employees
         and other individuals who render services to the Company, by providing
         opportunities to purchase stock in the Company. The Plan authorizes the
         issuance of incentive stock options and nonqualified stock options. The
         Plan was terminated as to all new issuances of options effective as of
         the closing of the IPO. All options granted will expire ten years from
         their date of issuance. Incentive stock options granted generally have
         a four-year vesting period from their date of issuance and nonqualified
         options granted vest immediately upon their issuance.

         In August 2000, the Board of Directors and stockholders approved the
         Company's 2000 Stock Option and Incentive Plan (the "Plan") which
         became effective on the closing of the Company's initial public
         offering. The purpose is to encourage employees and other individuals
         who render services to the Company, by providing opportunities to
         purchase stock in the Company. The Plan authorizes the issuance of
         incentive stock options and nonqualified stock options. All options
         granted will expire ten years from their date of issuance. Incentive
         stock options granted generally have a four-year vesting period from
         their date of issuance and nonqualified options granted vest
         immediately upon their issuance.

                                      F-12
<PAGE>   43
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

         The following is a summary of stock option activity:


<TABLE>
<CAPTION>
                                                                                       WEIGHTED-
                                                                                        AVERAGE
                                                                       SHARES        EXERCISE PRICE
<S>                                                                  <C>             <C>
         Outstanding at December 31, 1997                               96,741          $0.48
           Granted                                                      76,204           0.87
                                                                     ---------

         Outstanding at December 31, 1998                              172,945           0.65
           Granted                                                     265,100           0.87
           Terminated                                                   (6,002)          0.80
                                                                     ----------

         Outstanding at December 31, 1999                              432,043           0.78
           Granted                                                     427,153           7.52
           Exercised                                                  (119,550)          0.86
                                                                     ----------

         Outstanding at December 31, 2000                              739,646           4.66
                                                                     ---------
</TABLE>


         Summarized information about stock options outstanding is as follows:

<TABLE>
<CAPTION>
                                                                 OPTIONS OUTSTANDING
                                                              ------------------------
                                                               WEIGHTED                       OPTIONS EXERCISABLE
                                                                                           ------------------------
                                                                AVERAGE       WEIGHTED                     WEIGHTED
                                                               REMAINING       AVERAGE                      AVERAGE
                               EXERCISE         NUMBER        CONTRACTUAL     EXERCISE        NUMBER       EXERCISE
                                 PRICE        OUTSTANDING      LIFE(YEARS)      PRICE       EXERCISABLE      PRICE
<S>                            <C>            <C>             <C>             <C>           <C>            <C>
                                $ 0.22            1,383          4.43          $ 0.22           1,383       $ 0.22
                                  0.43            6,463          5.10            0.43           6,463         0.43
                                  0.65           15,127          6.01            0.65          14,088         0.65
                                  0.87          296,439          8.42            0.87          75,069         0.87
                                  2.17          140,412          9.03            2.17          36,486         2.17
                                  4.55           48,941          9.41            4.55          10,617         4.55
                                  6.00           20,000          9.95            6.00               0         6.00
                                  6.50           61,862          9.75            6.50          13,841         6.50
                                  7.88            6,000          9.95            7.88           6,000         7.88
                                 14.00          127,019          9.85           14.00               0        14.00
                                 19.00           16,000          9.84           19.00           6,000        19.00
                                 -----          -------                         -----         -------        -----

         December 31, 2000      $0.22-19.00     739,646          8.96          $ 4.66         169,947       $ 2.68
                                ===========     =======                                       =======
</TABLE>

         At December 31, 1998, 1999 and 2000, options exercisable were 60,133,
         106,996, and 169,947, respectively. Estimated weighted average fair
         value of options granted in fiscal years 1998, 1999 and 2000 were
         $0.37, $1.47 and $9.97, respectively, on the date of grant.


                                      F-13
<PAGE>   44
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================


         The Company applies APB Opinion No. 25 and related interpretations in
         accounting for its stock option plan. Had compensation expense for the
         employee stock option plan been determined based on the fair value at
         the grant dates for options granted under the plan consistent with the
         method of SFAS 123, the net income (loss) would have been as follows
         (in thousands):

<TABLE>
<CAPTION>
                                        1998                             1999                          2000
                             NET INCOME                      NET INCOME                      NET INCOME
                               (LOSS)        NET INCOME         (LOSS)        NET INCOME       (LOSS)       NET INCOME
                            ATTRIBUTABLE     (LOSS) PER      ATTRIBUTABLE     (LOSS) PER    ATTRIBUTABLE    (LOSS) PER
                             TO COMMON         COMMON         TO COMMON        COMMON        TO COMMON        COMMON
                            STOCKHOLDERS       SHARE        STOCKHOLDERS        SHARE       STOCKHOLDERS       SHARE
                                                      (In thousands, except per share data)
<S>                         <C>              <C>            <C>               <C>           <C>             <C>
         As reported          $(3,475)         $(4.33)        $(4,163)         $(5.18)        $(7,488)         $(2.96)
         Pro forma            $(3,485)         $(4.34)        $(4,181)         $(5.21)        $(7,675)         $(3.03)
</TABLE>

         The fair value of employee options at the date of grant were estimated
         using the minimum value option pricing model with the following
         assumptions for the years ended December 31, 1998, 1999 and 2000.

<TABLE>
<CAPTION>
                                                          1998                   1999                   2000
<S>                                                       <C>                    <C>                <C>
         Expected options term                             10                     7                      7
         Risk-free interest rate                          5.8%                   5.4%                5.0 - 6.4%
         Expected dividend yield                          None                   None                   None
         Volatility                                       None                   None               None - 125%
</TABLE>

         Because the determination of the fair value of all options granted
         after the Company became a public entity includes an expected
         volatility factor, additional option grants are expected to be made and
         most options will vest over several years, the above effects of
         applying SFAS 123 in this pro forma disclosure are not likely to be
         representative of the effects on reported net income for future years.
         SFAS 123 does not apply to awards granted prior to fiscal year 1996.

         In 1999 and 2000, the Company recorded $318,000 and $953,000,
         respectively, of deferred compensation related to stock option grants
         to employees. The deferred compensation represents differences between
         the estimated fair value of common stock on the date of grant and the
         exercise price. The deferred compensation is being amortized and
         charged to operations over the vesting period of the related options.
         Total employee stock option-related compensation expense was $18,000
         and $294,000 for the years ended December 31, 1999 and 2000,
         respectively.

8.       WARRANTS

         On April 30, 1998 and May 29, 1998, pursuant to the Series C Redeemable
         Convertible Preferred Stock financing, the Company granted the
         purchasers of Series C Redeemable Convertible Preferred Stock warrants
         to purchase an aggregate of 636,027 shares of common stock at a ratio
         of one warrant for every $10.83 invested. The warrants are exercisable
         at $4.33 per share. The warrants expire on December 22, 2002.

9.       EMPLOYEES' SAVINGS PLAN

         The Company established a 401(k) plan in 1996 for eligible employees.
         Under the provisions of the plan, eligible employees may voluntarily
         contribute up to 15% of their compensation up to the statutory limit.
         In addition, the Company can make a matching contribution at its
         discretion. The Company has not made any contribution to the plan.

10.      COMMITMENTS

         DISTRIBUTION AND MARKETING RELATIONSHIP
         In December 1999, the Company formed a strategic distribution and
         marketing relationship with Kawasaki Heavy Industries ("Kawasaki")
         whereby Kawasaki has agreed to exclusively distribute the Company's
         solar power products in


                                      F-14
<PAGE>   45
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

         Japan and integrate the Company's solar panels into solar systems that
         Kawasaki will design, market and install. In addition, the Company has
         agreed to sell solar power products in Japan exclusively through
         Kawasaki. During the year ended December 31, 2000, the Company sold,
         and received full payment for, $372,000 of products through Kawasaki.

         LEASE

         The Company currently leases its office and laboratory facility under
         an operating lease extending to June 30, 2001. Lease expense for the
         facility was $111,000, $141,000, and $141,000 for the years ended
         December 31, 1998, 1999 and 2000, respectively. The annual future
         minimum lease and rental commitments as of December 31, 2000 under the
         aforementioned lease is 117,500 in 2001.

         On March 13, 2000, the Company entered into a ten-year lease commencing
         July 1, 2000, for office and manufacturing space in Marlboro,
         Massachusetts. Pursuant to the terms of the lease agreement, the
         Company will pay annual rent ranging from $464,000 in the first year to
         $534,000 during the last year of the lease. Rent is payable on the
         first day of each month and is collateralized by a $464,000 standby
         letter of credit that was paid subsequent to year-end. In connection
         with this arrangement, the Company invested in a certificate of deposit
         pledged to a commercial bank. This certificate of deposit was
         classified as "restricted cash" on the December 31, 2000 balance sheet.

         LICENSE AGREEMENT

         In September 1994, the Company signed an agreement to license String
         Ribbon technology from a professor at Massachusetts Institute of
         Technology. Concurrently, the Company hired the professor as a
         consultant. This agreement provides the Company, its successors,
         assigns, and legal representatives an irrevocable, worldwide right and
         license in and to the technology and licensed patents, including the
         right to make, have made, use, lease, sub-license, and sell products
         and to enforce any of the patent rights of the licensed patents. The
         license is exclusive except for rights to the licensed patents held by
         the U.S. Department of Energy. In exchange for these rights, the
         consultant will earn royalties on sales of products through 2004. The
         Company incurred $5,000, $6,000 and $15,000 in royalty expense for the
         years ended December 31, 1998, 1999 and 2000, respectively. The Company
         can, at any time, cease utilization of the technology with no further
         royalty payments.

11.      INTEREST INCOME

         Interest income was $223,000, $163,000 and $1,305,000 for the years
         ended December 31, 1998, 1999 and 2000, respectively. Interest expense
         was $58,000 for the year ended December 31, 1998 and none for the years
         ended December 31, 1999 and 2000.

12.      SEGMENT INFORMATION

         For the years ended December 31, 1998, 1999 and 2000, revenues
         generated from within the United States represented $1,520,000,
         $2,265,000 and $1,776,000 and revenues generated from outside the
         United States represented $38,000, $37,000 and $394,000, respectively.

         For the years ended December 31, 1998, 1999 and 2000 revenues from The
         Commonwealth of Massachusetts, National Institute of Standards and
         Technology, and National Renewable Energy Laboratory accounted for 41%,
         21% and 22%; 19%, 21% and 53%; and 15%, 22%, and 41% of total revenues,
         respectively.

13.      QUARTERLY RESULTS

         The following tables set forth unaudited selected financial information
         for the periods indicated. This information has been derived from
         unaudited consolidated financial statements which, in the opinion of
         management, include all adjustments (consisting only of normal
         recurring adjustments) necessary for a fair presentation of such
         information. This information has not been audited by the Company's
         independent accountants. The results of operations for any quarter are
         not necessarily indicative of the results to be expected for any future
         period.

                                      F-15
<PAGE>   46
EVERGREEN SOLAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                        QUARTERLY STATEMENT OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                    UNAUDITED


<TABLE>
<CAPTION>
                                       MAR 31    JUN 30    SEP 30    DEC 31     MAR 31     JUN 30     SEP 30     DEC 31
                                       1999      1999       1999      1999       2000       2000       2000       2000
                                      ---------------------------------------------------------------------------------
<S>                                  <C>        <C>       <C>       <C>        <C>        <C>        <C>        <C>
Revenues:
          Product revenues            $    7    $   74    $   40    $    68    $    23    $    74    $   109    $   213
          Research revenues              469       601       670        373        519        489        420        325
                                      ---------------------------------------------------------------------------------
                Total revenues           476       675       710        441        542        563        529        538

Operating expenses:
          Cost of product revenues       213       234       159        385        300        670        683      1,104
          Research and development
          expense                        634       700       888        863        866        816        766        818
          Selling, general and
          administrative expenses        261       320       307        415        262        471        520      1,112
          Stock-based compensation
          expense                         --        --        --         18         37         73        110         74
                                      ---------------------------------------------------------------------------------
                Total operating
                expenses               1,108     1,254     1,354      1,681      1,465      2,030      2,079      3,108
                                      ---------------------------------------------------------------------------------
                Operating income
                (loss)                  (632)     (579)     (644)    (1,240)      (923)    (1,467)    (1,550)    (2,570)

Net interest income                       54        44        34         31        259        256        231        559
                                      ---------------------------------------------------------------------------------
Net income (loss)                       (578)     (535)     (610)    (1,209)      (664)    (1,211)    (1,319)    (2,011)

Accretion of redeemable convertible
preferred stock                          305       305       305        316        620        636        797        230
                                      ---------------------------------------------------------------------------------
Net income (loss) attributable to
common stockholders                   $ (883)   $ (840)   $ (915)   $(1,525)   $(1,284)   $(1,847)   $(2,116)   $(2,241)
                                      =================================================================================
Net income (loss) per common share
(basic and diluted)                   $(1.10)   $(1.05)   $(1.14)   $ (1.90)   $ (1.60)   $ (2.29)   $ (2.45)   $ (0.29)

Weighted average shares used in
  computing basic
  and diluted net income (loss) per
    common share                         803       803       803        803        805        807        864      7,603
</TABLE>


                                      F-16
<PAGE>   47

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                       Balance at
                                                        beginning         Charged to                     Balance at
Description                                             of period         operations     Deductions     end of period
---------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>            <C>            <C>
YEAR ENDED DECEMBER 31, 1998

Reserves and allowances deducted from
  assets accounts:
  Valuation allowance for deferred taxes ...........   $2,467,000          1,110,000          --          3,577,000
  Accrued warranty reserve .........................           --             10,000          --             10,000

YEAR ENDED DECEMBER 31, 1999
Reserves and allowances deducted from
  assets accounts:
  Valuation allowance for deferred tax assets ......    3,577,000          1,486,000          --          5,045,000
  Allowance for doubtful accounts ..................           --             10,000          --             10,000
  Accrued warranty reserve .........................       10,000             12,000          --             22,000

YEAR ENDED DECEMBER 31, 2000
Reserves and allowances deducted from
  assets accounts:
  Valuation allowance for deferred tax assets ......    5,045,000          2,002,000          --          7,047,000
  Allowance for doubtful accounts ..................       10,000              3,000          --             13,000
  Accrued warranty reserve .........................       22,000             26,000          --             48,000
</TABLE>


                                      F-17
<PAGE>   48
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned on this 2nd day of April, 2001, thereunto duly
authorized.

                                  EVERGREEN SOLAR, INC.

                                  By:    /s/ Mark A.  Farber
                                       -----------------------------------------
                                       Mark A.  Farber Chief Executive Officer,
                                       President and Director


                        POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Evergreen Solar, Inc., hereby
severally constitute and appoint Mark A. Farber and Richard G. Chleboski, and
each of them singly, our true and lawful attorneys, with full power to both of
them and each of them singly, to sign for us and in our names in the capacities
indicated below, any amendments to this Annual Report on Form 10-K, and
generally to do all things in our names and on our behalf in such capacities to
enable Evergreen Solar, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all the requirements of the Securities and
Exchange Commission.

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

<TABLE>
<CAPTION>
              Name                                       Title                                 Date
              ----                                       -----                                 ----
<S>                                         <C>                                         <C>
/s/ Mark A.  Farber                         Chief Executive Officer,                    April 2, 2001
------------------------------------
Mark A.  Farber                             President and Director
                                            (Principal Executive Officer)

/s/ Richard G.  Chleboski                   Chief Financial Officer,                    April 2, 2001
------------------------------------
Richard G.  Chleboski                       Treasurer, Secretary and
                                            Director (Principal Financial
                                            Officer)

/s/ Gordon B.  Baty                         Director                                    April 2, 2001
------------------------------------
Gordon B.  Baty

/s/ William C.  Osborn                      Director                                    April 2, 2001
------------------------------------
William C.  Osborn

/s/ Robert W.  Shaw, Jr.                    Chairman of the Board of Directors          April 2, 2001
------------------------------------
Robert W.  Shaw, Jr.

/s/ William P.  Sommers                     Director                                    April 2, 2001
------------------------------------
William P.  Sommers

/s/ Brown F.  Williams                      Director                                    April 2, 2001
------------------------------------
Brown F.  Williams

/s/ Mason Willrich                          Director                                    April 2, 2001
------------------------------------
Mason Willrich
</TABLE>


                                      II-1
<PAGE>   49
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                                 DESCRIPTION
<S>           <C>
 3.1 (1)      Third Amended and Restated Certificate of Incorporation of the Registrant.  (Exhibit 3.2)
 3.2 (1)      Second Amended and Restated By-laws of the Registrant.  (Exhibit 3.4)
10.1 (1)*     1994 Stock Option Plan.  (Exhibit 10.1)
10.2 (1)*     2000 Stock Option and Incentive Plan.  (Exhibit 10.2)
10.3 (1)*     2000 Employee Stock Purchase Plan.  (Exhibit 10.3)
10.4 (1)      Lease between Registrant and 211 Second Avenue Realty L.P.  dated as of September 15, 1995, as
              amended.  (Exhibit 10.4)
10.5 (1)      Lease Agreement between Registrant W9/TIB Real Estate Limited Partnership dated as of January 31,
              2000, as amended (Exhibit 10.5)
10.6 (1)+     Distribution and Marketing Agreement between Registrant and Kawasaki Heavy Industries, Ltd.
              dated as of December 24, 1999.  (Exhibit 10.6)
10.7 (1)+     Agreement between Registrant and Emanuel M.  Sachs dated as of September 30, 1994, as amended.
              (Exhibit 10.7)
10.8 (1)      Series D Preferred Stock Purchase Agreement dated as of December 28, 1999.  (Exhibit 10.8)
10.9 (1)      Form of Indemnification Agreement between Registrant and each of its directors and executive
              officers. (Exhibit 10.9)
21.1          Subsidiaries of the Registrant. (filed herewith)
23.1          Consent of Pricewaterhouse Coopers LLP, independent accountants.  (filed herewith)
24.1          Power of Attorney.  (included on Page II-2)
</TABLE>


+ 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
         Registration Statement on Form S-1, as amended (file No. 333-43140).
         The number given in parenthesis indicates the corresponding exhibit in
         such Form S-1.


                                      II-2