<PAGE>   1

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


(MARK ONE)

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarter ended March 31, 2001

                                  OR

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

          For the transition period from __________ to __________

                        COMMISSION FILE NUMBER 000-31687


                              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 NUMBER)


                              259 Cedar Hill Street
                          Marlboro, Massachusetts 01752
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (508) 357-2221
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


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

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: As of April 27, 2001, there
were 11,172,981 shares of common stock outstanding.

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


<PAGE>   2
                              EVERGREEN SOLAR, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2001

                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS
                                                                           Page
                                                                           ----

     Unaudited Consolidated Balance Sheets at December 31, 2000
     and March 31, 2001 .............................................        3

     Unaudited Consolidated Statements of Operations for the Three
     Months Ended March 31, 2000 and March 31, 2001..................        4

     Unaudited Consolidated Statements of Cash Flows for the Three
     Months Ended March 31, 2000 and March 31, 2001..................        5

     Notes to Unaudited Consolidated Financial Statements............        6

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS ...................................        7

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK....       21

PART II - OTHER INFORMATION

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS....................       21

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.............................       21

SIGNATURES...........................................................       22

EXHIBIT INDEX


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PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              Evergreen Solar, Inc.
                          Consolidated Balance Sheets
                        (in thousands, except share data)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,    MARCH 31,
                                                                              2000          2001
                                                                          ------------   -----------
<S>                                                                        <C>           <C>
ASSETS
Current assets:
    Cash and cash equivalents                                              $ 13,171      $ 24,405
    Short-term investments                                                   32,823        14,013
    Accounts receivable, net of allowance for doubtful accounts of $13
      at December 31, 2000 and March 31, 2001                                   850         1,128
    Unbilled grant receivable                                                    99           142
    Interest receivable                                                         200           269
    Inventory                                                                   408           546
    Other current assets                                                        145           250
                                                                           --------      --------
        Total current assets                                                 47,696        40,753

Restricted cash                                                                 464           464
Fixed assets, net                                                             7,623        12,231
                                                                           --------      --------
        Total assets                                                       $ 55,783      $ 53,448
                                                                           ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                       $    661      $    791
    Accrued expenses                                                            931           507
    Deferred Revenue                                                             --           149
    Accrued warranty                                                             48            47
                                                                           --------      --------
        Total current liabilities                                             1,640         1,494

Stockholders' equity:
    Common stock, $0.01 par value, 30,000,000 shares authorized,
    11,170,327 and 11,172,981 issued and outstanding at December 31,
    2000 and March 31, 2001, respectively                                       111           111
    Additional paid-in capital                                               70,671        70,675
    Other comprehensive income                                                   --           122
    Accumulated deficit:
      Cumulative net income (loss) since inception                          (15,680)      (18,069)
      Deferred compensation                                                    (959)         (885)
                                                                           --------      --------
        Total stockholders' equity                                           54,143        51,954
                                                                           --------      --------
        Total liabilities and stockholders' equity                         $ 55,783      $ 53,448
                                                                           ========      ========
</TABLE>

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

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<PAGE>   4

                              Evergreen Solar, Inc.
                     Consolidated Statements of Operations
                      (in thousands, except per share data)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                   MARCH 31,
                                                                              2000          2001
                                                                            --------      --------

<S>                                                                         <C>           <C>
Revenues:
    Product revenues                                                        $     23      $    146
    Research revenues                                                            519           331
                                                                            --------      --------
        Total revenues                                                           542           477

Operating expenses:
    Cost of product revenues (excluding stock-based compensation of
      $2 for the three months ended March 31, 2000, and $17
      for the three months ended March 31, 2001, respectively)                   300         1,440
    Research and development expenses, including costs of research
      revenues (excluding stock-based compensation of $16 for the three
      months ended March 31, 2000 and $37 for the three months
      ended March 31, 2001, respectively)                                        866           883
    Selling, general and administrative expenses (excluding
      stock-based compensation of $19 for the three months ended
      March 31, 2000 and $20 for the three months ended
      March 31, 2001, respectively)                                              262         1,108
    Stock-based compensation expense                                              37            74
                                                                            --------      --------
        Total operating expenses                                               1,465         3,505
                                                                            --------      --------
        Operating income (loss)                                                 (923)       (3,028)
Interest income                                                                  259           639
                                                                            --------      --------
Net income (loss)                                                               (664)       (2,389)
Accretion of redeemable convertible preferred stock                              620            --
                                                                            --------      --------
Net income (loss) attributable to common stockholders                       $ (1,284)     $ (2,389)
                                                                            ========      ========
Other comprehensive income (loss):
    Unrealized gain on investments                                                --           122
                                                                            --------      --------
Comprehensive income (loss)                                                 $ (1,284)     $ (2,267)
                                                                            ========      ========
Net income (loss) per common share (basic and diluted)                      $  (1.60)     $  (0.21)
Weighted average shares used in computing basic and diluted
  net income (loss) per common share                                             805        11,173

</TABLE>


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



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<PAGE>   5

                             Evergreen Solar, Inc.
                            Statements of Cash Flows
                                 (in thousands)
                                  (unaudited)


                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                           2000          2001
                                                         --------      --------

Cash flows for operating activities:
    Net income (loss)                                    $   (664)     $ (2,389)
    Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
      Depreciation expense                                     50            89
      Compensation expense associated with employee
        stock options                                          37            74
      Changes in operating assets and liabilities:
        Inventory and other current                            73          (243)
        Interest receivable                                    --           (69)
        Accounts receivable and unbilled grants
          receivable                                          152          (173)
        Accounts payable and accrued expenses                (211)         (294)
                                                         --------      --------

        Net cash used in operating activities                (563)       (3,005)
                                                         --------      --------

Cash flow for investing activities:
    Purchases of fixed assets                                (827)       (4,697)
    Purchases of investments                               (2,848)       (7,408)
    Proceeds from sale and maturity of investments          1,420        26,340
                                                         --------      --------
        Net cash provided by (used in) investing
        activities                                         (2,255)       14,235
                                                         --------      --------

Cash flow from financing activities:
    Restricted cash                                          (464)           --
    Convertible preferred stock                             5,631            --
    Proceeds from the exercise of stock options                --             4
                                                         --------      --------

Net cash flow provided by financing activities              5,167             4
                                                         --------      --------

Net increase in cash and cash equivalents                   2,349        11,234

Cash and cash equivalents at beginning of period            1,466        13,171
                                                         --------      --------

Cash and cash equivalents at end of period               $  3,815      $ 24,405
                                                         ========      ========
Supplemental cash flow information:
Noncash transactions:
    Deferred compensation                                $    390      $     --


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



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<PAGE>   6

1.   BASIS OF PRESENTATION

     The accompanying consolidated interim financial statements of Evergreen
     Solar, Inc. ("Evergreen Solar" or the "Company") are unaudited and have
     been prepared on a basis substantially consistent with the Company's
     audited financial statements for the year ended December 31, 2000. The
     consolidated financial statements have been prepared in accordance with
     generally accepted accounting principles for interim financial information.
     Consequently, these statements do not include all disclosures normally
     required by generally accepted accounting principles for annual financial
     statements. These consolidated interim financial statements should be read
     in conjunction with the Company's audited consolidated financial statements
     for the year ended December 31, 2000, which are contained in Evergreen's
     Annual Report on Form 10-K for the fiscal year ended December 31, 2000,
     which was filed with the Securities and Exchange Commission on April 2,
     2001. The unaudited consolidated interim financial statements, in the
     opinion of management, reflect all adjustments (consisting only of normal
     recurring accruals) necessary for a fair presentation of the financial
     position at March 31, 2001, the results of operations for the three month
     periods ended March 31, 2001 and 2000, and the cash flows for the three
     month periods ended March 31, 2001 and 2000. The balance sheet at December
     31, 2000 has been derived from audited consolidated financial statements as
     of that date. The results of operations for the interim periods are not
     necessarily indicative of the results of operations to be expected for any
     other interim period or for the full fiscal year ending December 31, 2001.

2.   NET INCOME (LOSS) PER COMMON SHARE

     The Company computes net loss per common share in accordance with SFAS No.
     128, "Earnings Per Share" ("SFAS 128"), and SEC Staff Accounting Bulletin
     No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic net
     loss per common share is computed by dividing net loss attributable to
     common stockholders by the weighted average number of common shares
     outstanding. The calculation of diluted net loss per common share for the
     three month periods ending March 31, 2001 and 2000 does not include
     1,451,019 and 7,816,537 potential shares of common stock equivalents,
     respectively, as their inclusion would be antidilutive.

3.   INVENTORY

     Inventory consisted of finished goods of $178,000 and $154,000, and raw
     materials and work in process of $230,000 and $392,000 at December 31, 2000
     and March 31, 2001, respectively.

4.   DEFERRED COMPENSATION AND EQUITY RELATED CHANGES

     For the three months ended March 31, 2000 and 2001, the Company recorded
     $390,000 and $0, 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 $37,000 and
     $74,000 for the three months ended March 31, 2000 and 2001, respectively.

5.   SEGMENT INFORMATION

     For the three months ended March 31, 2000 and 2001, revenues generated from
     within the United States represented $532,000 and $477,000, respectively;
     and revenues generated from outside the United States represented $10,000
     and $0, respectively.

     For the three months ended March 31, 2000 and 2001, revenues from The
     Commonwealth of Massachusetts accounted for 13% and 0% of total revenues,
     respectively; revenues from the



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<PAGE>   7

     National Institute of Standards and Technology accounted for 7% and 38% of
     total revenues, respectively; revenues from the National Renewable Energy
     Laboratory accounted for 76% and 31% of total revenues, respectively; and
     revenues from the one distributor accounted for 0% and 30% of total
     revenues, respectively.

6.   RECENT ACCOUNTING 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 deferred the effective date of SFAS No. 133 to fiscal years beginning
     after June 15, 2000. The Company does not currently hold any derivative
     instruments and does not currently engage in hedging activities,
     accordingly, the adoption of SFAS No. 133 did not have a material impact on
     our financial position or operating results.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     We caution readers that statements in this Quarterly Report on Form 10-Q
that are not strictly historical statements constitute forward-looking
statements which are made pursuant to the safe harbor provisions of Section 21E
of the Securities Exchange Act of 1934. 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 Quarterly 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
Quarterly Report, which speak only as of the date of this Report.

OVERVIEW

     We develop, manufacture and market solar power products for the global
marketplace. Solar cells are semiconductor devices, which 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, 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 facility to permit greater manufacturing capacity. We recognize product
revenues upon shipment.

     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.



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<PAGE>   8

     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.

     Interest income. 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.

COMPARISON OF THREE MONTHS ENDED March 31, 2001 AND 2000

     Revenues. Our product revenues for the three months ended March 31, 2001
were $146,000, an increase of $123,000, or 535%, from $23,000 for the same
period in 2000. Our increase in product revenues was due to capacity expansions
at our pilot manufacturing facility in Waltham, Massachusetts and our increased
marketing and sales activities. Research revenues for the three months ended
March 31, 2001 were $331,000, a decrease of $188,000, or 36%, from $519,000 for
the same period in 2000. The decline in research revenues reflects reduced
revenues received under our research contracts, as one of our multi-year
contracts was completed in 2000 and a second neared completion.

     Cost of product revenues. Our cost of product revenues for the three months
ended March 31, 2001 was $1.4 million, an increase of $1.1 million, or 380%,
from $300,000 for the same period in 2000. Approximately 40% of the increase was
caused by increases in materials expense, 40% by increases in salary expense and
15% by increases in consulting fees. These increases were associated with the
expansion of our pilot manufacturing operations, and the relocation, preparation
and start-up of our manufacturing operations in our new Marlboro facility.

     Research and development expenses, including cost of research revenues. Our
research and development expenses, including cost of research revenues, for the
three months ended March 31, 2001 were $883,000, an increase of $17,000, or
2.0%, from $866,000 for the same period in 2000. The increase in our research
and development expenses was principally caused by higher salary expense from
both higher salaries and additional personnel.

     Selling, general and administrative expenses. Our selling, general and
administrative expenses for the three months ended March 31, 2001 were $1.1
million, an increase of $846,000, or 323%, from $262,000 for the same period in
2000. Approximately half the increase was due to increases in professional fees
paid for legal, audit and other consulting services, approximately 20% of the
increase was due to increased salary expense from both higher salaries and
additional administrative personnel, and most of the remainder of the increase
was due to higher rental expense from the addition of our Marlboro facility and
higher insurance premiums for our Directors' and Officers' liability policy.



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<PAGE>   9

     Stock-based compensation expense. As of March 31, 2001, we had 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 are presented as a
reduction of stockholders' equity and will be amortized ratably over the vesting
period of the options, which is generally four years. The amortization resulted
in charges to operations of $74,000 and $37,000 for the three months ended March
31, 2001 and 2000, respectively. We expect to recognize stock-based compensation
expenses for the grants made through March 31, 2001 of approximately $295,000
for each of the years ended December 31, 2001 and December 31, 2002, $292,000
for the year ended December 31, 2003 and $76,000 for the year ended December 31,
2004.

     Interest income. Our interest income for the three months ended March
31, 2001 was $639,000, an increase of $380,000, or 147%, from $259,000 for the
same period in 2000. The increase in interest income was due to higher average
cash balances that resulted from the closing of our initial public offering of
stock completed in November 2000.

     Other comprehensive income. Our other comprehensive income for the three
months ended March 31, 2001 was $122,000, an increase of $122,000 from the same
period in 2000. For the three months ended March 31, 2001, other comprehensive
income included unrealized gains and losses on marketable securities.

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 March 31, 2001, we had net working capital of $39.3 million, and cash, cash
equivalents and short-term investments of $38.4 million.

     Net cash used in operating activities was $3.0 million for the three months
ended March 31, 2001. The increase in net cash used in operating activities for
the three months ended March 31, 2001 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.

     Net cash provided by investing activities was $14.2 million for the three
months ended March 31, 2001. This cash activity 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 $4.7 million for the three months ended March 31,
2001. The capital expenditures for the three months ended March 31, 2001 were
primarily for equipment needed for our new manufacturing facility. As of March
31, 2001, our outstanding commitments for capital expenditures were $2.7
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 with the
proceeds from our initial public offering which closed in November 2000. In
addition to the $4.7 million of capital expenditures in the three months ended
March 31, 2001, we expect to spend an additional $5.3 to $8.3 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.



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<PAGE>   10

     Net cash provided by financing activities was $4,000 for the three months
ended March 31, 2001. The cash provided by financing activities for the three
months ended March 31, 2001 represents proceeds from the exercise of options to
purchase common stock.

     We believe our current cash, cash equivalents and short-term investments,
will be sufficient to satisfy our projected operating and capital expenditures
needs for approximately 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 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.

RECENT ACCOUNTING PRONOUNCEMENTS

     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. We do not currently hold any derivative instruments and do not
currently engage in hedging activities, accordingly, the adoption of FAS No. 133
did not have a material impact on our financial position or operating results.

CERTAIN FACTORS WHICH MAY AFFECT FUTURE RESULTS

We caution readers that statements in this Quarterly Report on Form 10-Q 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; the Company's
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 Section 21E of the Securities Exchange
Act of 1934. 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, including the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
April 2, 2001, 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 Quarterly Report, which speak only
as of the date of this Report. We disclaim any obligation to publicly update or
revise any such statements to reflect any change in our expectations, or events,
conditions, or circumstances on which any such statements may be based, or that
may affect the likelihood that actual results will differ from those set forth
in such forward-looking statements.

                     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



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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 a limited number of solar
power panels as of March 31, 2001 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 $2.4 million for the three months ended March 31, 2001. As a result of
ongoing operating losses, we had a cumulative net loss of $18.1 million as of
March 31, 2001. 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.

             RISKS RELATING TO OUR INDUSTRY, PRODUCTS AND OPERATIONS



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<PAGE>   12

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;



                                       12
<PAGE>   13

     -    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

     -    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 would 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 Marlborough,
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 also use custom-built equipment that 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.



                                       13
<PAGE>   14

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. We expect that a substantial portion of our product
revenues for the foreseeable future will 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 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 March 31, 2001, 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 March 31, 2001, approximately 38% 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.



                                       14
<PAGE>   15

     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 March 31, 2001, our three largest resellers
accounted for approximately 65% 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:

     -    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.


                                       15
<PAGE>   16

     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 105
employees as of March 31, 2001, 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. 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.

OUR MANAGEMENT TEAM MAY NOT BE ABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS
STRATEGIES BECAUSE IT HAS LIMITED EXPERIENCE MANAGING A RAPIDLY GROWING COMPANY.

     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 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



                                       19
<PAGE>   17

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.

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;



                                       17
<PAGE>   18

     -    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, 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.



                                       18
<PAGE>   19
\
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 69% for the three months ended
March 31, 2001. We currently have three active research contracts with total
estimated revenues of approximately $6.4 million, $5.0 million of which has been
authorized by the sponsoring agency and $4.6 million of which has been recorded
as revenue as of March 31, 2001. The remaining $1.8 million of revenue will be
recognized over the remaining life of these contracts which expire at various
dates between May 21, 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.

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.



                                       19
<PAGE>   20

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 46% OF OUR COMMON STOCK AND MAY BE ABLE TO
SIGNIFICANTLY INFLUENCE CORPORATE ACTIONS.

     As of April 10, 2001, our executive officers, directors and entities
affiliated with then controlled approximately 46% 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.

WE ARE SUBJECT TO ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS AND UNDER
DELAWARE LAW THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR COMPANY, EVEN IF
THE ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

     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



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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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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.

PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND 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 approximately $1,300,000, was approximately $37.7 million. Through
March 31, 2001, 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.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

EXHIBIT NO.                              DESCRIPTION
-----------                              -----------

     None

(b)  Reports on Form 8-K:

One report on Form 8-K was filed with the Securities and Exchange Commission on
February 28, 2001 reporting the issuance of a press release by the Company.



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                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    EVERGREEN SOLAR, INC.

Date:  May 15, 2001                 By: /s/ Richard G. Chleboski
                                        -----------------------------
                                        Richard G. Chleboski
                                        Chief Financial Officer,
                                        Treasurer and Secretary
                                        (Principal Financial Officer)



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